Blockchain—Opportunities and challenges for accounting professionals

• Author: Soma Sinha
• Date: 01 April 2020
• Published date: 01 April 2020
• DOI: http://doi.org/10.1002/jcaf.22430

BLIND PEER REVIEW

Blockchain—Opportunities and challenges

for accounting professionals

Soma Sinha

Plante Moran PLLC, Southfield, Michigan

Correspondence

Soma Sinha, Plante Moran PLLC, 3000

Town Center, Suite 300, Southfield, MI

48075.

Email: soma.sinha@plantemoran.com

Abstract

Everybody is talking about blockchain, which is being positioned as the

solution for all business ills. Blockchain is a revolutionary technology, but its

power and efficacy are only as good as its application. Blockchain has the

potential to transform or even eliminate some of the accounting functions that

are currently taken for granted, but it also creates risks of its own that must be

considered. The technology is still in its formative stage and is certain to

undergo meaningful changes in the future. Entities using this technology will

have to weigh its benefits, but also build safeguards to protect against its

vulnerabilities.

KEYWORDS

blockchain challenges, blockchain opportunities, blockchain technology

1|HOW DOES BLOCKCHAIN

TECHNOLOGY WORK?

A blockchain is a database of records, transactions, or

events that is public, and has been shared among partici-

pating parties (that is, a public ledger). The basis of the

technology is “blocks”and “chains”—hence the name.

Each block is a set of recorded transactions that can be

an exchange of value, a change of role, a confirmation of

a particular event, and so on. Every time a block is cre-

ated, it is added to an existing chain of blocks.

2|WHAT MAKES BLOCKCHAIN

A SUPERIOR TECHNOLOGY?

The primary advantage of a blockchain system is its

immutability achieved through the following features:

•Hash signatures

As each block is added to the chain, it is cryptographi-

cally converted to a unique hash signature. Any change

in data on a block will change its hash signature. It is this

feature that creates the immutable quality of blockchain.

Here is how it works. Each block contains in its header

the hash of the preceding block (except the first block on

the chain, also referred to as Block 0 or the Genesis

Block). If the hash signature of a block changes (because

the data on the block was tampered with), it will no lon-

ger match the hash signature of the next block. This

anomaly is easily identified on a blockchain, thereby

making unauthorized changes quickly detectable.

•Peer-to-peer networks

A typical blockchain is shared across a peer-to-peer

network of individual computers called nodes. A network

can be either permissioned (restricted to authorized

users) or permissionless (unrestricted), or even a hybrid,

or both. Each node has an up-to-date copy of the ledger of

transactions, and every time a block is added to the chain,

the nodes collaborate together to achieve what is called

“consensus.”Therefore, changing the blockchain ledger

on just one node is virtually impossible. In addition to

supporting the quality of immutability, the peer-to-peer

Received: 11 November 2019 Accepted: 14 November 2019

DOI: 10.1002/jcaf.22430

J Corp Acct Fin. 2020;31:65–67. wileyonlinelibrary.com/journal/jcaf © 2020 Wiley Periodicals, Inc. 65