Created by the mysterious Satoshi Nakamoto in 2008 to power the cryptocurrency Bitcoin, in recent years blockchain has emerged as a hot topic across industries.
Most people are familiar with Bitcoin, blockchain’s most prevalent application, but aren’t well versed in what the underlying ledger technology does, and what it could mean for our social and economic systems in the future. Many get confused, thinking that Bitcoin and blockchain are the same thing. It’s understandable; cryptocurrencies are a far more alluring topic to the public (and thus, media outlets)—that’s where people became instant millionaires, almost by accident. Not to mention that cryptocurrency sounds just enough like science fiction to capture the imagination. While the validity of cryptocurrencies is an important discussion (one best left to the finance and economics majors), as future CPAs, we should be diving into the long-term game changer: blockchain.
So, what is blockchain?
Blockchain is the distributed digital ledger technology powering cryptocurrency. The technology uses a peer-to-peer network to validate a transaction and uses cryptography to securely record and store that transaction as a new block in the existing chain. The resulting blockchain is a record of verified transactions that cannot be altered and is visible to anyone with access to the system.
I won’t get into the details, because there’s a plethora of online sources able to do it much better than I can. For instance, this video from WIRED gives a quick explanation of blockchain and its potential applications (despite calling us accountants “boring”). For something a bit more detailed, check out this video. If you’re interested in delving deeper, head to this article at blockgeeks.com.
Because blockchains are incorruptible, verified records, the potential applications go far beyond cryptocurrency. It could eliminate the need for third party trust organizations, revolutionize the voting process, change the way healthcare records are stored, or alter the way we enter into contracts (just to name a few).
If blockchain is so revolutionary, why isn’t it everywhere? Marco Iansiti and Karim R. Lakani’s piece “The Truth About Blockchain,” in Harvard Business Review posits that it will likely take years for blockchain to transform business and government because, “blockchain is not a ‘disruptive’ technology which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. Blockchain is a ‘foundational’ technology: it has the potential to create new foundations for our economic and social systems.”
There are a lot of speed bumps to the adoption of blockchain technology, including but not limited to, security, regulation, and privacy. There’s the difference between public and private blockchains, and the need to ensure that blockchains work properly, and continue to do so. This is where public accounting firms come in. A few weeks ago, PwC unveiled a new offering focused on the design, development, implementation, and monitoring of blockchain solutions (see this WSJ article), and if you name an accounting firm, they’ve at least published something on the topic (see: EY, Deloitte, RSM, KPMG).
It may take a while for us to see the effects of the technology, but most experts agree: keep your eye on blockchain.