Blockchain distributed ledger technology: An introduction and focus on smart contracts

• Published date: 01 April 2020
• Date: 01 April 2020
• DOI: http://doi.org/10.1002/jcaf.22421

BLIND PEER REVIEW

Blockchain distributed ledger technology: An introduction

and focus on smart contracts

Marc Hamilton

Masters of Tax Accounting, University of

Alabama, CFO & Treasurer, CDG Engineers

and Associates, Inc.

Correspondence

Marc Hamilton, CFO & Treasurer, CDG

Engineers and Associates, Inc., Andalusia,

Alabama.

Email: marc.hamilton@cdge.com.

Abstract

The rapid evolution of the blockchain and distributed ledger technology and the

associated applications will require many changes in the way business is transacted

and how transactions are recorded. Significant R&D investments in blockchain

environments and the maturation of application uses of “smart contracts”and other

types of self-executing tools are establishing frameworks for expanded use, infra-

structure growth, and further development. The realization of the impact of these

investments is currently changing entire business processes, transforming indus-

tries, and impacting governments globally. This global disruptive impact is a major

technology evolution and will be transformational to society over the next several

decades much as the Internet has been over the last 30 years. As these changes will

be especially transformational to fundamental accounting processes, tools, and

methodologies of today, accounting and finance professionals would be wise to

embrace the technological challenges associated with blockchain technology.

KEYWORDS

blockchain, smart contract, transformational technology

1|INTRODUCTION

Just over ten years have passed since Satoshi Nakamoto

released the original Bitcoin whitepaper, Bitcoin: A Peer-to-

Peer Electronic Cash System and introduced the world to one

of the most promising technologies for the future—the

blockchain distributed ledger technology (Nakamoto, 2008).

The impact of blockchain technology has alreadyand will con-

tinue to change the accounting profession and corporate

finance in many ways. Specifically, the rapid evolution of the

blockchain and distributed ledger technology (DLT) as well as

associated applications will require many changes in the way

business is transacted and how we account for transactions.

Most importantly, due to the trustless or self-governing nature

of the blockchain network structure, many of our professional

job roles and responsibilities—such as auditing and assurance

services, banking, finance and treasury management, logistics

and risk management—are likely to be completely redefined.

Currently, according to Forbes, five of the top 10 companies

investing in blockchain are from the United States and include

JPMorgan Chase, Berkshire Hathaway, Bank of America,

Wells Fargo, and Apple (Del Castillo, 2018). With the recent

announcementof a majorinvestment in blockchain by Ernst &

Young (Multimillion-dollar investment in EY Blockchain

Analyzer 2019), all four of the top accounting and audit firms

are now heavilyinvesting in DLT developments.

2|BLOCKCHAIN: AN ADAPTABLE

DATABASE TOOL

In its simplest sense, blockchain technology represents a

new adaptable database that offers a method for creating

transaction ledger entries, vetting and validating the transac-

tion entries, and storing them in a tamper-proof ledger. The

unique value created by use of this tool is that after posting

an entry to the blockchain ledger, the technology transforms

what is required to trust the validity of the change in the bal-

ance in the ledger. Historically, accountants and finance

Received: 7 October 2019 Accepted: 13 October 2019

DOI: 10.1002/jcaf.22421

J Corp Acct Fin. 2020;31:7–12. wileyonlinelibrary.com/journal/jcaf © 2020 Wiley Periodicals, Inc. 7