By Jennifter Gardner at AICPA Insights on January 10, 2019
I have a confession to make. Even though I get into just about anything techie, every time I see the word “blockchain,” my eyes and brain tend to glaze over. I suspect many others have the same reaction.
Yet, we really can’t ignore it. According to Microsoft, blockchain will change the way people think about exchanging value and assets, enforcing contracts and sharing data. It’s expected to grow in importance and transform business operations – on the scale of email and websites. That means CPAs and their clients are going to feel its effects. Wanting to avoid being a “blockhead,” I dove in to see what blockchain is all about. Fortunately, Jim Barnes, a self-described blockchain evangelist, agreed to walk me through it.
Barnes is an enterprise architect for Primerica, a distributor of financial products. Just as an architect creates a blueprint for a building, an enterprise architect creates an IT approach that serves the needs of the whole company. Techopedia defines them as the people who “connect an organization’s business mission, methodology and processes to its IT strategy.”
Please join us for a quick dive.
Jennifer Gardner: What is blockchain and what does it do exactly?
Jim Barnes: It’s just a database everyone can have a copy of and that nobody can change. Unlike a spreadsheet, however, blockchain lacks a central host. It’s essentially a ledger of transactions shared among a network of computers. Blockchain features smart contracts, which set into motion automatic enforcement of specified terms.
[Note: Another good definition from Forbes describes smart contracts as ‘those that are embedded with if/then statements and can be executed without the involvement of an intermediary….smart contracts might be put to use in the regulation of intellectual property, controlling how many times a user can access, share, or copy something.”]
Blockchain started getting attention when bitcoin emerged; it is the technology used for verifying and recording transactions for virtual currency. Another way to think of it: You can have blockchain without bitcoin, but you can’t have bitcoin without blockchain.
- How will blockchain affect the supply chain?
- One of the big things we’ve seen in supply chain in the last several years is end-to-end vertical integration - this is going to be a technology that can support that integration. A good example is food safety – at some point, you may be able to look up on your phone to see if something is really organic; what [materials, chemicals? I think we need a word here] did the farmer use? It can also reduce food waste – right now, if something is contaminated, they may throw out the whole shipment. With blockchain, you could have more specific identification, so someone can scan the shipment and only those in that one lot or group get discarded.
JG: What are the opportunities for accountants with blockchain and the supply chain?
JB: There’s definitely going to be a big part around auditing, especially with smart contracts.