Blockchain technology is quickly becoming the next technology to watch, with growth across many computing and data...
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management business areas -- including accounting and finance.
Blockchain is a type of distributed database that stores a permanent and tamper-proof ledger of transaction data, and since it distributes control across a network of participating entities with no central server, there is no single entity that controls the data. Instead, blockchain technology authenticates all submitted information via an unforgeable digital signature to provide user verification and prevent user impersonation.
The data in each "block" in the chain, or each computer connected to it, is updated as new transactions are made. The computers, or nodes, are constantly communicating with one another, comparing data to make sure it is correct and matches previous records and is therefore valid. Widely considered unhackable and impossible to shut down because there's no central server, the technology, with its focus on security and distributed controls, holds appeal for a number of industries, with finance-related institutions and departments leading beneficiaries.
In a traditional financial data management situation, a bank or financial institution controls the system and the data. Not only is the entire integrity of the system dependent on that owner, but all the information is potentially available to third parties, including government regulators and others. And because a single entity is in control of the system, there's always the risk of fraud, data loss or data corruption. If the data is corrupted or changed for any reason, there is no assurance that the change would ever be detected. But with blockchain, no one entity is in control of the data since that control is distributed across the network, with every entry authenticated and data confirmed across the network so it can never be altered or corrupted.
Blockchain technology applications are generating a powerful buzz, with a number of financial institutions investing in the technology in the hopes of harnessing the speed, security and lower costs as they redefine their position in the world's financial transaction flow.
While blockchain enables peer-to-peer transactions that bypass traditional financial institutions to ensure security, anonymity and lower transaction costs, it is likely that existing financial institutions will maintain their current role as intermediaries and preserve at least some of their fees. Companies can expect faster, more secure and lower-cost financial transactions thanks to the spread of blockchain technology to the world's financial data management infrastructure.
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