The first relates to the centralisation of computing power, also called the “51% attack risk”, which can happen when most of the computing power in a blockchain’s network is centralised. In this case, whoever controls that power can, with impunity, discard a valid link in the chain or substitute an invalid block for a valid one. The second risk is transaction malleability, which occurs when an attacker copies a transaction and modifies it to receive tokens (payment) profitability index pi rule definition then claims that no tokens were ever received. The third risk relates to flawed smart contracts that can hide malicious code or another contract with a weakness. This risk highlights the need for independent external auditors to approve transactions before the contract enters the blockchain. In short, the ability of blockchain to store records makes it a target for potential cyberattacks.
How Blockchain Will Support Accountants
- However, with the blockchain comes a number of additional demands, especially as it becomes more and more embedded within mainstream finance.
- Interesting, even over such a short period, interest in some topics is already waning, e.g. “FinTech in banking”, “cryptocurrencies and cryptoassets”, and “blockchain and taxation”.
- Blockchain represents an opportunity, not a threat, with future accounting and auditing services likely to include some consideration of blockchain.
- In these circumstances, the role of a structured literature review (SLR) of emerging research of blockchain in accounting should be a helpful tool (Cai et al., 2019; Moro et al., 2015).
First, we looked at the terms listed against each topic, then we read the most representative articles for each group identified by the model. One author then developed a descriptive title, which was reviewed and perhaps modified before being approved by the remaining authors. The final topic names are listed in Table 2, along with the 20 most important words for each topic and the marginal distribution of each topic. Massaro et al. (2016, p. 2) characterise an SLR as “a method for studying a corpus of scholarly literature, to develop insights, critical reflections, future research paths and research questions”. If an organization modifies a transaction’s data in the blockchain, it’ll affect the hash value. Blockchain’s immutable nature comes from the fact that once a public consensus validates a transaction into the blockchain, it’s virtually impossible to alter or delete the transaction.
Blockchain in accounting
• Being a service auditor for a blockchain used by a consortium of companies to ensure the controls on a blockchain. The results of Table 4 allow us to confirm our choice of the topics for further analysis. The top 10 papers with the highest citations per year belong to one of the four research topics that have the marginal distribution over 10% represented in Table 2 and account for more than a half of the overall distribution.
Blockchain Technology and Its Core Features
To gain real efficiencies in the use of blockchain or any technology, there is a need to reengineer, rather than just automate, existing processes. Unfortunately, many of the proposals for the use of blockchain are aimed at automating existing processes, typically in an approach to leverage the immutability and digitisation of paper, but generally do not propose or use changes in the processes. The disruptive potential of accounting technologies can only be fully realised with a similarly profound revolution in accounting thinking. Without an accompanying “mental revolution”, new technologies may result in incremental as opposed to step change. The possibilities that blockchain brings to information disclosure, fraud detection and overcoming the threat of shadow dealings in developing countries all contribute to the importance of further investigation into blockchain in accounting.
The Future Of Blockchain In Accountancy
Therefore, we assume that automating data collection and storage using blockchain will not mean the auditing profession disappears. Rather, we see it evolving into a new role within companies and the ecosystem of blockchain accounting. The agile design of Deloitte COINIA also means it can be used today not only for crypto assets but also for a broader base of digital assets, and beyond, as they are supported by the business community in the future.
Schools and big accounting firms like Deloitte are already educating on blockchain accounting. Inside each block header, the Merkle root represents a summary of all the transactions included in the block in the form of a hash. To create the Merkle root, hashes of two records are hashed together to produce a hash of the combination, and then the process is repeated moving up the tree until all the records in the block are represented in one hash. Figure 5 illustrates this process for four transactional records (Trans1, Trans2, Trans3 and Trans4). Users control the addition of millions of transactions trying to post a sync at once by grouping these into blocks and adding blocks one at a time, in sequence.
If the result is less than the target value (pattern), the computed hash solved the proof and the block is added to the blockchain. When conducting an SLR, it is important to assemble a proper body of literature so as not to bias the results (Massaro et al., 2016). We selected the research articles for this study following a three-phase procedure.
We expect that blockchain will involve more multi-tasked teams with diverse knowledge and skills to generate additional synergies. Therefore, future research may analyse the characteristics of teams and government bodies that work better together for the most efficient implementation and decision-making using blockchain. Essential roles for auditors in the future will be assuring the reliability, credibility and authorisation process of blockchain transactions. Accountants can also work as advisers to companies considering joining blockchains themselves, providing advice on weighing the costs and advantages of the new system.