You’ve heard of blockchain, but how well do you understand it? This technology affects every facet of finance, so pay close attention: It’s going to impact your career.
Blockchain is way bigger than cryptocurrency
Chances are you associate blockchain technology with bitcoin and other cryptocurrencies. But while all cryptoassets rely on blockchain, not every blockchain is tied to cryptoassets. So, what is it?
A blockchain is a digital ledger that stores information. What makes this ledger unique is that it doesn’t record and store data in one place or across a few decentralized locations. Instead, the data is shared across a vast network of devices. Each device houses a duplicate of the original data; this data is the “block,” and the devices make up the “chain.”
Blockchain pairs peer-to-peer technology with cryptography to ensure that no single block can be altered without first updating every previous entry in the chain. This prevents unauthorized changes to the original data, be they accidental or malicious. It’s the most secure method of recording transactions.
Given the versatility and security of the technology, it will soon be everywhere. If you want to future-proof yourself, it’s not enough to learn the blockchain basics — you need to lead the charge for adoption. Here’s where you start.
1. Leverage blockchain in your tax practice
The potential tax applications of blockchain are game-changing. If an organization uses blockchain for their balance sheets, for example, they could then share these financial records with tax administrators. With the ownership and history of assets confirmed in real time, taxes could be automatically calculated and deducted.
Whether you’re dealing with a Fortune 500 company or an individual taxpayer, the principle remains the same: Blockchain produces records that are more detailed and easier to access than any previous method.
Since blockchain entries can’t be doctored, there will be a massive reduction in both delays and fraud. Without having to reconcile ledgers and weed out human error, your efficiency will rise as your costs drop. You’ll have fewer administrative tasks to perform, freeing you up for more valuable work.
2. Become a smart contract savant
A smart contract is just what it sounds like: An agreement carried out by machines, with terms written in code. Upon verifying that conditions are met, the program takes the appropriate action. For example, transferring a digital asset between parties after electronic signatures are applied to a certain field.
Smart contracts are executed and recorded via blockchain, preventing any sort of human interaction. This eliminates the potential of human error or fraud, but where do you come in?
As a finance professional, you can provide assurance that a smart contract is properly implemented. You can also act as an arbitrator since the terms of smart contracts are negotiated by people, not programs. Become familiar with blockchain technology and you’ll create limitless opportunities for yourself.
3. Oversee the operation
Technology is only as effective as the people implementing it. If you study blockchain and accounting, you’re uniquely positioned to fill valuable roles.
For example, you could become the access-granting administrator of a privately owned blockchain. Users need to know they can trust the organization that owns the blockchain, as well as the technology itself. As an accounting professional, you can put their minds at ease by confirming that the rules of the blockchain are enforced.
Some businesses are developing consortium blockchains. These will be blockchains that other organizations pay to use, and they’ll require service auditors. If you understand the architecture, you can provide assurance that the blockchain’s controls are effective.
4. You still have time to adapt and adopt
Blockchain is reshaping the nature of accounting. The good news for you is that universal adoption is still a few years off. Enormous databases and powerful systems are essential to launching taxpayer blockchains, and most countries aren’t there yet. China is strongly pursuing the technology, however, and as early as 2023 we may see nations putting it into action.
This will raise the demand for guidance, both globally and on a nation-by-nation level. Initial compliance will be especially complex, as adjustments must be made for individuals and corporations.
As with every aspect of blockchain, many finance professionals will view this as a serious challenge. If you embrace blockchain technology, it will be another opportunity to make yourself indispensable. Get started today.
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