What is Blockchain -Accounting technology

What is Blockchain -Accounting technology

Blockchain is used accounting technology and it has been dramatically changed in the last few decades around the globe. The profession of accounting largely considered to analysis and financial data. The reason for it is the invention of some great technology. Blockchain technology is one of the greatest inventions. Though blockchain technology was primarily devised for the digital currency, such as Bitcoin, now the tech community is now trying to find other potential uses for the technology.

What Is Blockchain?

A blockchain is a public digital ledger that is decentralized, distributed and used to make a record of the transactions across many computers so that no involved record can be altered, without changing of all following blocks. It allows the participants to check transactions independently. A blockchain database is devised autonomously for using a peer-to-peer network and a timestamping server that is distributed. They are established as valid by mass collaboration which is powered by collective self-interests. This kind of design facilitates strong workflow where participants’ uncertainty as to marginal data security. The uses of blockchain remove the characteristic of infinite remake ability from a digitalized asset. It confirms that it plays an important role in solving the long-standing problem of double spending. A blockchain is usually described as a value-exchange protocol. Blockchain gives a record that forces offer and acceptance.

what-is-blockchain

Blockchain Technology

Block holds batches of transactions that are valid, hashed and encoded into a Merkle tree. All blocks include the cryptographic hash of the previous block in the blockchain, which links the two. The linked blocks make a chain. This is called iterative process and confirms the integrity of the prior block, all the way back to the genuine genesis block.

Sometimes unrelated blocks can be devised concurrently, making a temporary fork. In addition, a secure hash-based history, all blockchains have a specified algorithm to score various versions of the history so that one with a higher value can be chosen over others. Blocks that are not selected for inclusion in the chain are called orphan blocks. Peers supporting-databases have other versions of the history from time to time. They only keep the highest-scoring version of the database which is known to them. Whenever a peer accepts a higher-scoring version, it extends or overwrites its own database and retransmits the improvement to its peers. There is no absolute guarantee that distinguished entry will remain in the best version of the history. Blockchains are typically made to add the score of new blocks onto previous blocks and are provided incentives to extend with new blocks rather than overwrite old blocks. Therefore, the probability of an entry becoming superseded reduces exponentially as more blocks are devised on top of it, eventually becoming very low. For example, bitcoin usually uses a proof-of-work system, where the chains with the most cumulative proof-of-work are considered the valid one by the network. A huge number of methods that can be used to demonstrate in enough level of computation. Within a the blockchain the computation is occurred which creates redundancy rather than in the traditional separated manner.

Blockchain And Cryptocurrency

Many cryptocurrencies adopt blockchain technology to record their transactions. For example, the bitcoin network and Ethereum network are both built up based on the blockchain. On May 8, 2018, Facebook, a popular social network site, confirmed that it is going to open a new blockchain group which will be headed by David Marcus who previously was in charge of Messenger, a social networking application. According to The Verge, an American news media which focuses on technology, Facebook is planning to launch its own cryptocurrency to facilitate payments on the platform. If that happens, it would really be a great measure.

Cryptocurrency

What Is Blockchain Used For

Blockchain technology can be adopted in various areas. The primarily the blockchains t is used today as a distributed ledger for cryptocurrencies, notably bitcoin. A few operational products are available for maturing from proof of concept by last 2016.

As of 2016, some observers were skeptical. Steve Wilson, an official of Constellation Research, believes the technology has been hyped with such kinds of claims that are unrealistic. Businessmen are not eager to place blockchain at the core of the business structure for its risks Inventor of Blockchain

Blockchain was devised by a mysterious person named Satoshi Nakamoto in 2008 with a view to serving as the public transaction ledger of the crypotcurrency bitcoin. Mysterious in this sense, he has not disclosed more information about him. He always disguised himself. The reason for this is yet unknown. But he wide-known as the inventor of Bitcoin and author of Whitepaper, an authoritative report or guide which is very closer to a form of marketing presentation, a tool to promote a product or persuade the clients.

On his P2P Foundation, an organization with the aim of studying the impact of peer to peer technology, profile as of 2012, Nakamoto claimed himself as a 37 years old person who lived in Japan, but there is a doubt whether he is a Japanese or not because of his use of English as a Native and his bitcoin software not being documented and labelled in Japanese. It has made it possible for the first time as a digital currency to solve the double-spending problem without the need of a trusted authority or a central server.

Blockchain Wallet

Blockchain wallet is a kind of computer program that helps to monitor and conduct cryptocurrency. A physical item that gathers your currency as a regular wallet does.

To conceive it, you have to be familiar with the concept of the blockchain. The cryptocurrency of any kind doesn’t exist without a ledger that is transparent and distributed that makes all the transactions possible and gathers them without a possibility of alteration.      

Blockchain Meaning

The two words block and chain were primarily used separately by Satoshi Nakamoto in his original paper but were finally popularized as a single word, blockchain. It is defined as a system in which records of transactions made in cryptocurrency such as bitcoin are maintained across several computers that are connected in a peer-to-peer network.

What-is-bitcoin

History

Cryptographically secured d blockchain was first described in 1991 by two prominent persons. They are Stuart Haber and W. Scott Stornetta. They tried to establish a system where it is not possible to temper the timestamps of the documents. In 1992, 3 people named Bayer, Haber and Stornetta established Merkle trees, and it proved its efficiency by allowing some document certificates into one block. It is noted that Merkle Trees is also known as a hash tree.

Blockchain was first conceptualized by a person named Satoshi Nakamoto in 2008. Nakamoto wanted to improve the design in a significant way by using a Hashcash-like technique to gather blocks to the chain without the need of them and be signed by a trust- party. As a core component of the cryptocurrency bitcoin, this design was established in the next year by Nakamoto, Bitcoin is popularly known for its serving as the public ledger for all of the transactions on the network.

 In August 2014, the bitcoin blockchain file size reached 20 GB (gigabytes), including the records of all transactions that occurred on the network. In January 2015, the size had increased to around 30 GB, and from January 2016 to January 2017, the bitcoin blockchain enlarged from e50 GB to 100 GB in size.

IBM started a blockchain innovation research centre in Singapore in the mid of 2016. At the last of 2016, a working group for the World Economic Forum discussed the development of governance models that are related to the blockchain.

According to the diffusion of innovations theory of Accenture,  suggests that Blockchains achieved a 13.5% in terms of adoption rate within financial services in 2016, attaining as the early adopters’ phase. Trade group of the industry joined to establish the Global Blockchain Forum in 2016, it is considered as an initiative of the Chamber of Digital Commerce.

In May 2018, global research and advisory firm Gartner which is officially known as  Gartner Inc. found a few organization used it that is only 1% of CIOs any kind of blockchain taken within the companies, and only 8% of CIOs were in or thinking about the short-term ‘planning of blockchain’.

Decentralization   

The blockchain vanishes a number of risks that come with data at the time of storing data across its peer-to-peer network. The decentralized blockchain may be used as ad-hoc message passing and distributed networking.

Peer-to-peer blockchain networks lack points of vulnerability that is centralized that computer crackers or hackers can exploit; likewise, it has no point of failure. Blockchain security systems ensure the use of public-key cryptography or asymmetric cryptography, a cryptographic system that uses pairs of keys. A public key is an address on the blockchain which includes a long, random-looking string of numbers. Value tokens are sent across the network recorded as belonging to that address. A private key such as a password that provides its owner access to their digitalized assets or the means to otherwise interact with the different kinds of abilities that blockchain now supports. Storing data on the blockchain is usually considered as incorruptible.

All the nodes in a decentralized system have a copy of the blockchain. the qualities of the data are strictly maintained by gigantic database replication and computational trust. There is no centralized “official” copy that exists and no user is “trusted” more than other. All the transactions are broadcast to the network using very strong software. All the messages are sent on a basis of best-effort. Mining node validates transactions and adds them to the block, they build, and then broadcast the completed block to other nodes. Blockchain uses different kinds of time-stamping schemes, such as proof-of-work, to serialize changes. Alternative consensus methods are accepted that include proof-of-stake. Decentralized blockchains are accompanied by the risk of centralization the reasons is the computer resources are needed to process greater amounts of data that are more expensive.

Types of Blockchains

There are 3 types of Blockchains

1.    Public Blockchains

2.    Private Blockchains

3.    Federated Blockchains or Consortium Blockchains

Public Blockchains

Latest public Blockchain protocols are based on Proof of Work (PoW) consensus algorithms which are open source and have not permission. Anyone who wants can participate, without requiring any permission.

 (1) Anyone can download the code as his requirement and run a public node on his/her local device, that validates transactions in the network, consensus process – the process for determining what blocks are involved to the chain and what the present situation is.

(2) Any person in the globe can make transactions through the network and see them included in the blockchain if the transactions are valid.

 (3) Everyone can read transaction on the public block explorer. All the transactions are transparent and clearly defined. For example, Bitcoin, Ethereum, Monero, Dash, Litecoin, Dodgecoin,etc.

Effects: (1) It has the potentiality to disrupt current business models through disintermediation. (2) It has no infrastructure costs: There is no need to maintain server or system admin that is why dramatically reduces the costs of creating and running decentralized applications (dApps).

Private Blockchains

Writing permissions are reserved centralized to one organization. For example, applications including database management, auditing, etc. which are internal to a single company and so public readability may not be necessary at all in many cases. In other cases, public audit capabilities are desired. Private blockchains are a way of taking advantage of blockchain technology by establishing groups and participants who are able to verify transactions internally. This will put you at the risk of security breaches just like in a centralized system, as the contrary to public blockchain which is secured by game theoretic incentive mechanisms. However, private blockchain has its own case, especially when it closes to scalability and describe compliance of data privacy rules and other regulatory issues. Certainly, they have security advantages, and other security disadvantages as described earlier in the passages. For examples: MONAX, Multichain etc.

Effects

(1) decreases transaction costs and data redundancy and replaces the legacy system, simplify document handling and resolve semi-manual compliance mechanisms.

 (2) In that sense, it can be considered as equivalent to SAP in the 1990s: which is popularly known for its reducing costs.

Note

Some people would try to argue that such a system cannot be defined as a blockchain. Also, Blockchain is still considered as it is in its early stages. It is not clear how the technology would be adopted. Many people argue that private or federated Blockchains can face or suffer the fate of Intranets in the 1990s, when private organisations establish their own private LANs or WANs in lieu of using the public Internet and all the services but have been obsolete especially with the great advent of SAAS in the Web2.    

Federated Blockchains or Consortium Blockchains

Federated Blockchain, also known as Consortium Blockchains, operates under the leadership of a group. On the contrary of public Blockchain, it doesn’t allow any person with access to the Internet to participate in the verifying process of transactions. Consortium Blockchain is faster (higher scalability) and ensures more transactions privacy. Consortium blockchains are mostly adopted in the banking sector. A pre-selected set of the node controls the consensus process such as, you can imagine a consortium of 20 financial organisations, each of which operates a node and of which 15 have to sign every block according to the order for the block to be valid. The blockchain may be used as publicly or restrictedly by the participants.  For example R3 (widely used for Banks), EWF (used for Energy), B3ifor Insurance),

Effects

(1) decreases transaction costs and data redundancy and replaces the legacy system, simplify document handling and resolve semi-manual compliance mechanisms.

 (2) In that sense, it can be considered as equivalent to SAP in the 1990s: which is popularly known for its reducing costs.

Note

Some people would try to argue that such a system cannot be defined as a blockchain. Also, Blockchain is still considered as it is in its early stages. It is not clear how the technology would be adopted. Many people argue that private or federated Blockchains can face or suffer the fate of Intranets in the 1990s when private organisations establish their own private LANs or WANs in lieu of using the public Internet and all the services but have been obsolete especially with the great advent of SAAS in the Web2.

Smart contracts

Blockchains, based on smart contracts, are proposed contracts that can be partially or fully adopted without any human interaction. Automated escrow is one of the objectives of a smart contract. A staff discussion of IMF reported that smart contracts that are based on blockchain technology might decrease moral haphazard and increase the optimization the use of contracts in general. But unfortunately, there is no viable smart contract system has yet devised. But their legal status is unclear the reason is the lack of widespread use.

Financial Services                                     

 Most organization of the financial industry are using distributed ledgers in banking and according to an IBM study published in September 2016, this is occurring beyond the expectation.

Banks express their interest in blockchain technology because it has the greater potentiality to boost up back office settlement systems.

Banks such as UBS are going to open new research labs dedicated to blockchain technology in with a view to exploring how blockchain can be used in financial services to enhance efficiency and reduce costs.

A German bank, Berenberg, explained that blockchain is an “overhyped technology” that had a large number of “proofs of concept”, but still has numerous challenges. On the other hand, it has very few success stories.

Blockchain with video games

Some video games organizations are using blockchain technology. Huntercoin, firstly used blockchain technology, was released in February 2014. CryptoKitties, another blockchain game, has been launched in November 2017. By selling a cryptokitty character – an-in game virtual pet for US$100,000. The game made headlines in December 2017. CryptoKitties showed scalability problems for games on Ethereum by creating significant congestion on the Ethereum network.

Cryptokitties also illustrated how blockchains can be used to catalogue game digital assets. To explore alternative uses of blockchains in video gaming,  the Blockchain Game Alliance was formed in September 2018 with the support of Ubisoft and Fig, among others.

Other Uses   

To create a permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payments to content creators, such as wireless users or musicians, Blockchain technology can be used. In 2017, IBM became a partner with ASCAP and PRS for Music with a view to adopting blockchain technology in music distribution. Ever ledger is an inaugural client of IBM’s who adopted blockchain-based tracking service.

Walmart and IBM are using on a trial basis a blockchain-backed system for supply chain monitoring—Walmart administer of all nodes of the blockchain and located on the IBM cloud.

The availability of new distribution methods is evident in the insurance industry such as peer-to-peer insurance, parametric insurance and microinsurance after the adoption of the blockchain. Some other companies like the sharing economy and IoT are ready to take benifit from blockchains because they involve many collaborating peers. Online voting is considered as another application of the blockchain.

Other designs include

•    Hyperledger,  a cross-industry collaborative effort from the Linux Foundation in order to support distributed ledgers based on the blockchain, including Hyperledger Burrow (by Monax) and Hyperledger Fabric (spearheaded by IBM)

•    Quorum is a permission-able private blockchain organization established by JPMorgan Chase with private storage, that is used for contract applications

•    Tezos, used for decentralized voting.

•    Proof of Existence, an online service that verifies the existence of computer files regarding a specific time

Disadvantages of Blockchain Technology

All the things of the globe have merits and demerits. Like others, blockchain technology also has a few demerits. Some of the key disadvantages of blockchain technology are as follows:

1. Extremely Volatile

Blockchain technology-based virtual currencies are highly subjected to extreme volatility. Among them, one good example of that is the fluctuating prices of Bitcoin that vary anytime. One of the causes behind that kind of extreme volatility is the blockchain technology and the virtual currencies both of them are extremely new to the market. This means that the companies, investors, governments, and other stakeholders adopting or not- will greatly affect the volatility.

The Bitcoin price fell $200 on the day when China made a decision to ban on companies from raising ICOs in 2017. This is a huge drop and this kind of volatility made people bothered who are thinking of investing in Bitcoin or any other cryptocurrency for that matter.

2. Crime   

One good example of that is “Silk Road,” a digitalized black market. People accepted this platform to purchase things like illicit transactions using blockchain-based virtual currencies. But, the FBI shut this place down by learning its existence.  Though it was shut down, many people still believe that this blockchain technology is very attractive to lawbreakers.

To sum up, some people believe that it will be very helpful in creating cryptocurrencies which have the potentiality of being a rival to precious metals while other people believe that very soon, it is going to burst like a bubble and nothing more. Nonetheless, blockchain technology is one of the creative inventions in the technology world we have ever seen. So how we will use it is up to us.

The debate regarding its potentiality and challenges are still going on, some companies such as Overstock.com and Tesla already started to accept virtual currencies based on the blockchain. However, it is still not clear what the retail market leaders such as Amazon and eBay would do with the cryptocurrency. But if they accept it positively then it could be possible to transform the global scenario.

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