CPA Practice Advisor

AUG 2018

Today's Technology for Tomorrow's Firm.

Issue link:

Contents of this Issue


Page 4 of 43

AUGUST 2018 ■ 5 FROM THE TRENCHES • Resistant to Influence from Governments and Institutions. The power of the system comes from the people using it. This can help prevent external manipulation and minimize inflation. • Unalterable. In theory, transactions committed to the blockchain cannot be altered by anybody at anytime for any reason. Every transaction in the blockchain is absolutely permanent. • Speed. Admittedly, there are some growing pains, but the overall speed of transaction processing is fast compared to traditional mechanisms, but may not be fast enough today to be used for high volume transactions like global credit card processing. • Independent. All users are independent and disinterested parties on most public blockchains. There is no one single entity or person that can control the future direction of the technology. • Transparent & Verifiable. All transactions and accounts in public blockchains are open for examination and verification at any time. • Cost. It is relatively inexpensive to process a transaction through a blockchain when compared to traditional systems. It requires no direct hardware expenditure to participate and offers low (sometimes no) transaction fees. How? So how do blockchain approaches work? • Currently, most people use a trusted middleman (e.g. a bank, American Express, etc.) to process a transaction. • Blockchains allow the consumer and supplier to connect directly instead. • Using cryptography to keep things secure, a blockchain provides a decentralized database or ledger that everybody on the network can examine. All aspects of a transaction (e.g. date, addresses, amounts, etc.) are public. • All transactions must be approved by all users (e.g. consensus) before a transaction can be added to the ledger. • Once a transaction is committed to the blockchain, it is permanent and can never be modified. What does this mean to the practice of accounting and to accountants? We have several working examples available: • QuickBooks Online payment processing o You can accept Bitcoin right inside of QuickBooks online! o Low Fees. Starting from 0% to get paid in settlement currency. No additional surcharges or foreign transaction fees. o No Chargebacks. Bitcoin transactions are irreversible. It guarantees on-time funds availability and reduces fraud. o Quick Deposits. Bitcoin transactions are completed instantly, and local payouts occur the next-day. o No Exchange Risk. You can choose to receive the exact invoice amount in settlement currency. No currency conversion risk. o • Credit Card Transactions by Monaco o A real-world credit card backed by virtual cryptocurrency. o It will allow you to purchase real world items using cryptocurrency holdings. o They will offer a variety of cards for every budget and spending habit, from high rollers to budget spenders. o Low transaction fees and cash back on all purchases. o • Predicting and forecasting by Augur o Augur combines the magic of prediction markets with the power of a decentralized network to create a stunningly accurate forecasting tool - and the chance for real money trading profits o • Digital Storage by Sia and Filecoin o Sia and Filecoin are decentralized storage platforms secured by blockchain technology. o Sia and Filecoin leverage underutilized hard drive capacity around the world to create a data storage marketplace that is more reliable and lower cost than traditional cloud storage providers. o In a nutshell, you can rent out part of your hard drive space to Sia or Filecoin and get paid for its use. o Alternatively, you could store information in either blockchain and have it available on any other device. o or • Digital Identity Management by Civic o Civic’s Secure Identity Platform (SIP) uses a verified identity for multi-factor authentication on web and mobile apps without the need for usernames or passwords. o Civic creates a digital identity of a user and stores that information on a public blockchain. That identity can then be used to interact with other 3rd parties. o That identity can then be used to sign contracts, purchase goods online, sign up for websites, store medical records and much more. o Currently, there are no major accounting applications that directly utilize blockchain for ledger purposes. The best example of tools for accounting that are working today is what is being done by the AuditChain organization. However, blockchain could be advantageous in accounting for many reasons: • It would allow auditors to verify large portions of important data behind financial statements automatically. • As all changes to the blockchain are permanent and irreversible, this would be good for sensitive record keeping. • Blockchain would be good for tracking transactions between organizations. The transactions would be verifiable from both sides of the transaction. • One concern is the impact of GDPR regulation on the “right to be forgotten”. Here’s a summary of what you need to know about blockchain: Implementing blockchain capture and processing into meaningful information is still complex and needs to be simpler. Recommended Next Steps Consider what would be meaningful information to secure at the transaction level for your firm or your clients. Don’t be too restricted in your thinking since we believe almost every type of transaction can be secured or augmented with a blockchain. Applications will need to provide a way to satisfy this need. You can follow blockchain developments in various industries directly, or what is happening broadly through the consortiums. Blockchain processing for businesses still needs some breakthrough applications to make the technology practical and useful. While most applications of blockchains available today have been used with cryptocurrencies, the broader applications in supply chain, serialization, food provenance, medical records, accounting, payment processing, predicting and forecasting, digital storage, supercomputing and research, digital identity management, Internet of Things, real estate, video games, as well as gambling and betting have a great promise for the future. You’ll want to be ready when vendors are with their products. The time to learn is now, but don’t part with your money for applications too soon unless you want to be a pioneer. And you know the old saying, pioneers take a lot of arrows!■ Key Information TECHNOLOGY: Blockchain Why is the new technology better? Immutable, distributed, secure How can you do this today? Bitcoin, BlockOne IQ, Ethereum Risks High costs to mine, susceptible to theft Where/when to use Any transaction that needs to have validation How much? No cost to use in most models When expected in mainstream Arriving now outside of U.S., more presence in 3-5 years Displaced technology or service Abstracts and titles, business contracts, currencies, medical records Other resources Accounting Today, CPA Practice Advisor

Articles in this issue

Links on this page

Archives of this issue

view archives of CPA Practice Advisor - AUG 2018