Blockchain from the Perspective of a Public Accountant

Public accounting, like most professions, has been pushed to evolve owing to a variety of circumstances, including technological advances. Today, Blockchain is considered yet another instrument in our industry, and it is crucial to understand its roots and how it can benefit entrepreneurs and public accountants.

Blockchain is a protocol that works beneath a virtual currency, such as Bitcoin, which was created around 2008. It is important to note that although Blockchain and Bitcoin were launched at the same time, they are not the same technology. Blockchain can be copied countless times, but Bitcoin currency can only be spent or used once, without the presence of an institution that controls its use.

Blockchain can be summarized as a transition from the internet of information to the internet of value, which can include titles, records, certifications, files, and so on; in this case, we will look at the value of registrations and certifications.

Decentralization:

Blockchain is nothing more than a distributed database that is protected cryptographically and organized in blocks of transactions that are mathematically tied to each other. It is a decentralized database that cannot be tampered with. 

The nature of the network is decentralization, and the Block is a worldwide network made up of over 100,000 computers, also known as nodes. The network's machines are distributed around the world by users who earn a financial reward in exchange for saving a copy of the network. Blockchain is named such as a new block is created every 10 minutes on average (chain of blocks). Transactions take place within those blocks, and a balance is calculated for each member in the network (working like an accounting journal).

This provides a high level of certainty and security for operations carried out in the decentralized network, where we can define the data stored in the digital world, and which is captured automatically, is essentially preserved as immutable, perpetual, and global, and all information stored in the blocks cannot be edited or deleted, resulting in an unfalsifiable book of accounting records.

Advantages:

It is worth remembering that this technology has a number of advantages, one of which is that the costs of accessing information and verifying its legality will be very low because the information included in the network or in each block cannot be changed or removed.

For example, if an inventor wants to register something but does not have the financial means to seek advice and do it properly, he may not be able to do so. However, if he does it via the network with Blockchain, it can prove the existence of his given invention because everything that goes into it cannot be removed, thereby proving its authorship at very low costs, which means that its authorship cannot be questioned.

Now, this could have an impact on businesses and our profession, and we can sense it in the way that administrators are aware of account statuses online. They will be able to access information from any network-connected device, do automatic accounting of spending, income, or any recurring operation, and use this technology to systematize. It has the potential to become a corporate intelligence tool that aids in real-time decision-making.

Smart Contracts:

Smart Contracts, a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code, will generate controls in various areas because of the interaction of the virtual signature with any physical or legal person regulated by the Blockchain. However, these have not yet reached adequate maturity.

We will only have an acceptable degree of legal clarity in connection to its usage as more practical experience in the market, regulatory, and judicial action accumulates. In any event, it is highly recommended that specialists with sufficient legal abilities be involved in both the design of platforms and programs as well as the execution of each Smart Contract to assure its validity and legal efficacy. 

The accounting of the future will be based on Blockchain, and tax administrators must begin to understand this new model, which will reduce tax evasion in the future, and in such a way that they can be controlled from various jurisdictions and extended in cooperation agreements and/or exchange of information in tax matters. Today a large part of operations is carried out through electronic commerce and telecommunications.

Conclusion:

It is crucial to highlight that Blockchain is still a developing technology. Personally, I believe that this technology will rely heavily on artificial intelligence, which entails entering enough data into a program so that a computer discards events, selects the one that best fits a pre-established rule, and executes it as expected. This would be the case with Smart Contracts, as they are expected to be self-contained.

For more information please contact Óscar Opayome Ramírez - email: oscaropayome@vcfauditores.com

Further reading from members of AGA's Cryptocurrency Global practice Group:

• Tax implications for Cryptocurrency Owners
• Crypto Banks in Serbia - Myth or Reality?
• Cryptoassets and Sports
• The Nature of Cryptocurrencies within the Argentine legal framework

About Visión Contable & Financiera Ltda:

Mid-sized accounting firm Vision Contable & Financiera Ltda., with its headquarters in Bogotá, Colombia, is one of the top 50 firms in the country and provides outsourcing services in auditing and assurance, tax, accounting and bookkeeping, and payroll, and has a wealth of experience auditing social and solidarity enterprises as well as for national and international clients in the building, agricultural, oil and gas, and trade sectors. The firm's employees take great delight in providing clients with high-quality services while staying at the cutting edge of technical advancements. This dedication to these objectives gives clients peace of mind.