Cryptocurrencies are almost without a clear definition. Are they a true form of currency, a hyped asset in a bubble or something else? Dozens of cryptocurrencies have spawned over the years sparking massive debate, though they are still rarely used in daily life. However, the technology behind cryptocurrencies – Blockchain – is being adopted widely. Here are a few ways how Blockchain will change accounting as we know it.
Blockchain allows you to issue digital asset tracking certificates that follow assets. This works whether you’re selling stocks, bonds, property or derivatives. We’re starting to see Blockchain used to track assets like stocks and ownership stakes as they are bought and sold. Now you don’t have to worry about the mortgage backed securities being made worthless because no one can connect them to the mortgages they are supposedly backed by. Titles and deeds are already being tracked via Blockchain in some areas, and it has the potential to spread to far more types of inventory. Fraud and asset thefts become much more difficult. The ability to verify and validate certificates is so valuable that institutions ranging from K-12 public schools to online masters of accounting programs are tying their certifications to Blockchain so that employers and other institutions can verify that the degree holder has a valid degree.
Blockchain is essentially impossible to crack, hack or duplicate. Now you can digitally sign a document backed and verified by a Blockchain algorithm, knowing no one can copy that signature and put it on something else. For example, it ensures no one can scan a signed check, paste it on another document and claim you signed that. With widespread implementation, people may be digitally signing checks for deposit, forms to prove the received goods or legal contracts.
Another way Blockchain is altering accounting is the automated reporting and reconciliation built into Blockchain. Because every transaction is recorded in one place in full detail, you don’t have to maintain a separate ledger if everything is managed via Blockchain.
This doesn’t eliminate the need for enterprise resource planning software to determine how much inventory you need to meet a production schedule and when you need to buy items to support manufacturing schedules. It won’t eliminate the need to run inventory of low value items that might have been stolen or lost or run calculations to determine the ideal price point.
However, much of the day to day “book-keeping” accountants do is dramatically reduced if everything is handled via Blockchain and software that generates reports by mining real time transaction information. If you’re earning a master’s degree in accounting, you’ll soon find that the process of assigning the Blockchain to an asset or pulling reports based on that information will become a standard part of your job.
Blockchain technology is set to affect the accounting field in more ways than one. It supports real time asset tracking for everything that has an ID and appropriate information tied to it. Asset ownership verification becomes more reliable and can be adopted for assets that previously suffered for its lack such as title transfers and saleable debt. Digital signatures become safe and unstoppable with Blockchain, enabling digital contracts and far faster financial transactions.