The business world has been abuzz about blockchain technology across many industries, ranging from finance to healthcare. Blockchain appears to have significant potential to add a new element to the revered double-entry accounting method on which the accounting industry is based.
There are, however, significant concerns about data integrity and security as a company’s general ledger goes digital.
While blockchain has its origins in the cryptography of the early 1990s, the technology was thrust into the public eye due to the rise of bitcoin during the late 2000s. As a refresher, bitcoin is a digital currency used throughout the world. Unlike traditional currency, it lacks physical form and a central regulating authority such as the U.S. dollar and U.S. Department of the Treasury.
One of the biggest challenges facing a currency that lacks a tangible form and central clearing house is the potential of double spending, which could lead to runaway inflation, loss in user confidence, and ultimately, collapse. Blockchain was the medium created for bitcoin as the solution to this problem.
In brief, blockchain is a decentralized and distributed ledger system made up of valid transactions that are cryptographically hash stamped and bundled into interlocking blocks. These blocks are, in theory, unmodifiable and allows for all transaction participants to verify the information.