Some issues in blockchain for accounting and the supply chain, with an application of distributed databases to virtual organizations

• Date: 01 July 2019
• Author: Daniel E. O'Leary
• Published date: 01 July 2019
• DOI: http://doi.org/10.1002/isaf.1457

RESEARCH ARTICLE

Some issues in blockchain for accounting and the supply chain,

with an application of distributed databases to virtual

organizations

Daniel E. O'Leary

University of Southern California, Los Angeles,

CA, USA

Correspondence

Daniel E. O'Leary, University of Southern

California, Los Angeles, CA, USA.

Email: oleary@usc.edu

Summary

This paper reviews some recent blockchain‐based applications for information cap-

ture, distribution and preservation. As part of that review, this paper examines two

key concerns with current blockchain designs for accounting and supply chain trans-

actions: data independence and multiple semantic models for the same information

distribution problem. Blockchain applications typically integrate database, application

and presentation tiers all in the same ledger. This results in a general inability to query

information in the ledger and other concerns. Further, since most applications appear

to be private blockchain applications, there is a concern of agents needing to accom-

modate multiple blockchains depending on who their trading partners are and what

they request. Finally, this paper uses a distributed database to design a ‘blockchain‐

like’system for virtual organizations.

KEYWORDS

Arrow's impossibility theorem, BigchainDB, blockchain, dataindependence, design science,

distributed database, private processes, public processes,semantic models, virtual organizations

1|INTRODUCTION

Nakamoto (2008) generated two basic ideas that have had a substantial

recent impact. The first idea was capturing a chronological set of trans-

actions, using an append‐only approach, in the context of a public

ledger in a distributed peer‐to‐peer computing environment. This

approach provides two key controls that have garnered the attention

of many commenters: immutability of the transaction set and peer vot-

ing on transactions to provide a measure of trust. The second idea was

to use this public ledger as the basis of a market for a cyber‐currency:

bitcoin. Our concern is primarily with the first idea, the public ledger.

There has been substantial positive hype about blockchain and

accounting and the supply chain, and how blockchain would change

the world (Roberts, 2017). In 2017, Gartner characterized ‘Blockchain

and distributed ledgers’as a ‘Top ten strategic technology trend’.

Along with that hype, Carlozo (2017) called blockchain ‘a lightning

rod for highly charged opinion, confusion, and even fear’. Ovenden

(2017) and others have argued that blockchain will make accountants

and auditors ‘irrelevant’because all transactions would be logged on

the blockchain and the immutability would make changing information

impossible. Patil (2017) and other commentators have suggested that

accountants will ‘go away’because of the advent of blockchain in

accounting. Blockchain has driven similar expectations in the supply

chain. Dickinson (2016) has argued that the blockchain will ‘revolu-

tionize’the supply chain, and other commenters have called

blockchain a ‘game changer’.

Unlike those commentators, this paper focuses on existing applica-

tions and other settings where the ‘information distribution environ-

ments’are aligned with ‘blockchain‐like’capabilities. Further, this

paper is concerned with those emerging designs and the overall lack

of data independence in those designs and limited database capabili-

ties of ledgers, which are typically equivalent to flat files. In addition,

I would like to thank the referees for their comments on an earlier version of this paper. Por-

tions of this paper were previously presented at the Rutgers University, World Continuous

Auditing and Reporting Symposia, November 2018. I would like to thank the participants

for their comments.

DOI: 10.1002/isaf.1457

Intell Sys Acc Fin Mgmt. 2019;26:137–149. © 2019 John Wiley & Sons, Ltd.wileyonlinelibrary.com/journal/isaf 137