Why and How Accountants Should “Think Blockchain”

“Blockchain is an accounting system and we are accountants.”

Masotti and Masotti LLC CPAs and Consultants, a nearly 60-year old CPA firm recently registered that as the Trademark of their newly launched Blockchain Advisory Services. It says almost everything about why Blockchain is redefining accounting and the new opportunities it brings to the profession.

What is Blockchain?

Blockchain is a distributed, secure ledger (database) that uses cryptography over a peer-to-peer network technology to group transactions into BLOCKS and store them in a tamper-evident, interlinked CHAIN.

For accountants, the two key important words in the above description are “ledger” and “technology”. Accountants have deeply understood ledgers for centuries. They have been leveraging technologies for decades. Therefore, Blockchain, is not a challenge or threat to the profession but it is a phenomenal new opportunity that accountants must prepare for because the sheer transformative – and hence disruptive – impact of this technology is far too important for any accountant to ignore.

Blockchain and the accounting profession:

The key things to keep in mind concerning blockchain are:

  • Blockchain enables transactions data to be exchanged securely without going through a central third party
  • Unless there is (enough) verification and consensus by participating entities, no transaction enters Blockchain
  • It is enormously expensive and difficult to tamper with the data on Blockchain

It means the time, effort and cost required to create books for each business and reconcile them can be drastically minimized. At the same time, the need to audit business transactions data can be nearly obviated. These two fundamental impacts of Blockchain are of extreme significance for the “work” that accounting and audit firms will do in the future. Blockchain will, therefore, require transformative “de-skilling” and “re-skilling” of the traditional accountant, CFO and auditor roles.

Accountants need to evaluate the impact of Blockchain on their own internal processes and more importantly, how their clients and prospects are adapting / will adapt to the Blockchain opportunities in their industries/professions.

Blockchain to trigger changes on the immediate horizon

  • Cryptocurrency+Smart Contracts: Big Four firms are leading the way in the race to adopt Blockchain. Accepting Bitcoins as a payment method was just the start that Big Four kicked off. Blockchain Advisory and Auditing services are already a reality even if it is not a profession-wide experience so far. Smart contracts are already proving their ability to minimize “payments management and reconciliation” work.
  • IoT+Blockchain: Internet of Things (IoT) is revolutionizing manufacturing, supply chain, and other industries. IoT combined with Blockchain is leading to what is being called the “Internet of Trusted Things” (IoTT). The difference is subtle but immense. It is because IoT is still not an inter-connected network within or across industries and hence expensive to establish identity (trust) among “transacting” parties and “exchanging” (interactions) data in trusted ways. IoTT reduces these costly “trust, transaction, interactions” requirements from the business. Imagine the velocity at which accounting data will be available to accountants.
  • Cybersecurity: While Blockchain technology itself potentially increases cyber-defense capabilities, it does not address the proven weaknesses in “access” to any technology/network that cyber-criminals exploit. Cybersecurity services and Blockchain system access audits – including auditing what “value” was tokenized to represent it on Blockchain are two promising, emerging new revenue segments for the accounting profession.
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