Article on Block chain and its use case
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Blockchain is a decentralized, distributed ledger system that can be used for applications beyond cryptocurrency. It provides transparency, security, and immutability for transactions and records. From an accounting perspective, blockchain is relevant as it can improve processes like auditing, tracking assets, and managing supply chains. Both public and private blockchains exist, with private blockchains being more applicable for business use cases where restricted access is needed. Blockchain continues to evolve with new developments in cloud-based services, cross-chain interoperability, hybrid public/private models, and integration with IoT.
Article on Block chain and its use case
- 1. Blockchain and its use cases From a Chartered Accountant’s perspective Basic of Blockchain Firstof all,blockchainisnotcryptocurrencythoughits primaryapplicationswhereincryptocurrency. Blockchainismore of a conceptthan a technology,its inceptionwasfromthe conceptof Accounting and Auditing (Ledger System, Logs or trail of data), Information technology (Information Systems, Information Portals), Security and Identity management (Cryptography),Mathematics (Hashing and Algorithm). This gives a clear indication that CA must be prepared with the concept of blockchain because who knows accounting and auditing more than what we Chartered Accountants. We may not know the technology or algorithm but we know what is the business processes, accounting, and auditing. Definition Blockchain is a decentralized computation and information sharing platform which enables multiple authoritative domains which do not trust each other to cooperate, coordinate and collaborate in a rational decision-making process. Blockchainis a cryptography-basedsoftware technologywhichfunctionsasa distributedledgerthat isheavilysecureddue toitsattributesof peertopeerverificationandauthentication.Leveragingthis technology to apply it in real world situations where a secured record is required for transactions, documents or any other sensitive information will lead to higher productivity and security. Blockchain System: The Blockchain system’s task is to ensure that all these individual copies are consistent with each other,that the local copieswhicheverynode has are identical,andthese copiesare alwaysupdated basedon the global informationi.e.,if thisnode wantsto enter some informationtothisblockchain thensuch informationwill getupdatedtoall the copyof the blockchainthateverynode possess. The architectural platform of blockchain supports a strong consistency among the local replica local information that every node has. Key Components of blockchain Decentralized Computing Cryptography (hashing) Chronological Ledger User Access (restricted / unrestricted)
- 2. Security Trust building tool (Consensus) Cooperate,coordinateandcollaboratetool betweenParticipants. (ProtocolforCommitment) Public vs Private Blockchain A PublicBlockchainisa permissionlessblockchain.Anyone canjointhe blockchainnetwork,theycan read, write, or participate witha public blockchain. Public blockchains are decentralised and no one has control over the network. They are secure in that the data can’t be changed once validatedon the blockchain. On the other hand, a Private Blockchain is a permissioned/federation blockchain. Permissioned networksplace restrictionsonwhoisallowedtoparticipate inthe networkandinwhattransactions. Whenpeople getintoblockchain,there’sanatural discussionaboutwhat kindof blockchain,because blockchain comes in many different varieties. We mustbe more concernedaboutprivate blockchainasacharteredaccountantbecause thisiswhere the bigger role of our expertise is required. Let’s understand what is Smart Contracts A smart contract allows individuals and enterprises to exchange data in a trusted, conflict-free manner without relying on a third party like a bank, lawyer or notary. It isa self-automatedcomputerprogramthat can carry out the terms of any contract. Mostly based on objective conditions precedent “If, then” criteria Let’s see where Blockchain Good For? Blockchainisa solutionwhichislookingforproblems.Blockchainmaybe usedformanythingswhere there are many people involved and they don’t trust each other. • Cryptocurrencies/Store of value - What is my account balance? • Digital Identity - Who are you and how have you changed over time? • Digital representation of a property/Tokenization – Who owned this car over time? • Tracking provenance offood or drugs – Whatcountry & postal code didthischickencome from? In the real world the choice for the business leaders regarding the technologywill not be clear, but the potential forthe technologyisimmense.Companiesneedtoproceeddeliberatelybutcautiously, in the context of a through cost benefit analysis. There is no magic formula which fits all purpose.
- 3. Blockchain – Applications in Industries and Use Cases Blockchain in Finance o Payments and Remittance Transactions can occur directly between two parties on a frictionless P2P basis. The technology’s application for overseas transactions has the potential to reduce risk, transaction costs and to improve speed, efficiency and transparency. o Issuance, Ownership and Transfer of Financial Instruments A blockchain-basedsecurities market allows traders to buy or sell stocks directlyon exchanges or directly to other market participants in a P2P manner without the intermediation services provide by a broker or clearing house. o Clearing and Settlement Latency On the blockchain,the entire lifecycleof atrade,includingitsexecution,clearingand settlement can occur at trade level, lowering post-trade latency and reducing counterparty Blockchain in Healthcare o Cost Containment The blockchaincanbe filteredtoidentifyandalertaboutspecificactivityonthe chain, monitoring, using patterns, can include data that represents a doctor, consumer, drugs, procedures, all can to tokenized and added to the chain.
- 4. • Buildinga rule base usingbestpractices,ICD codes, medical proceduresand other costs can be monitored and audited using blockchain. o Smart Contracts Smart contracts would automatically pay providers when conditions of service are established such as: • Validation that a service was received by a registered Medicaid patient • Service was provided by a properly registered doctor & provider • Neither party is on a known list of past participants in any fraud Blockchain in Government o Asset registration A blockchain framework enables government agencies to increase the accuracy and efficiencyof publiclyheldrecordsbylinkingownershipof anassetto a single,shared ledger without disrupting existing registry data. o Identity services Blockchainenablesgovernmentagenciestocreate a single,trustworthycollectionof digital identitydocuments.These documentsmake it easierforgovernmentofficials to reconcile dataconflictsandprovide citizenswith control over their own identity. o Fraud prevention and compliance Blockchain creates a shared and trusted ledger that sequentially appends cryptographically secure data. The ledger is only accessible to trusted parties, giving government administrators the assurance that they’re working with data that’s up- to-date, accurate and nearly impossible to manipulate. o Supply Chain Blockchainmakesthe precise locationof an object — andits accompanyingdigitized documentation — part of a traceable permanent record giving government full visibility of the supply chain. Recent Developments in Blockchain Blockchain as a service (BaaS) using the cloud Blockchain as a Service (BaaS) is required because enterprises are working on their own blockchain solution,itisnotalwaysfeasible tocreate,maintainandmanage an individual blockchainsolution.A cloud-basedservice providermanagesall the necessarytasksandactivitiestokeepthe infrastructure agile and operational. Interoperability between blockchains There are newblockchainnetworksshowingup,whichleadstonew chainsthatofferdifferentspeeds, networkprocessing,use-cases.Blockchaininteroperabilityaimstoimproveinformationsharingacross diverse blockchain networks.These cross-chainservicesimprove blockchaininteroperabilityandalso make them more practical for day-to-day usage. Government blockchains We expect to witness a rise in the use of federated blockchain by the government and semi governmentbodies asBlockchaingivesmore customizable,Transparency,Agility,andimmutabilityto
- 5. the transactions. Federated blockchains are similar to private blockchains, but with a simple twist: insteadof one organizationcontrollingit,manyauthoritiescancontrol the blockchainand pre-select nodes. Some of the use cases of federated blockchain by government include insurance claims, financial services, Revenue Records, Allocation of land and supply chain management. Enterprise Blockchain Enterprise blockchain isevolvingtobe a scalable anddevelopable solution.The growthof blockchain will happen in different phases in whichthe captivating use cases will be explored, discovered,then implementedonamore massivescale.Despiteearlystages,blockchainwillbe adisruptivetechnology that will fundamentally transform various industries in the next 5–10 years, bringing $3 trillion of market value for enterprise blockchain worldwide by 2030. Blockchain and the Internet of Things IoT adoptionis increasingthe numberof devicesandsensorsthat gather data, and many partiesare typicallyinvolvedinabusinesstransactionbasedonthatdata.Blockchainenablessafe record-keeping throughanimmutable ledger,andpermitsdecentralizedoperationsandtransactionswhilepreserving trust between all players in the value chain. The Transactional Capabilitiesamongthe IOTenabledintelligentdevicescanfacilitatethe emergence of newerbusinessmodels,usingIOTwithblockchaininvariousEnterpriseorGovernmentblockchain may result in huge data compilation and its authenticity. Hybrid blockchains The hybrid blockchain works by providing the better features and functionality of both public and private blockchain.Hybridblockchainsstandoutby offeringacustomizable solutionandalsomaking proper use of what blockchain has to offer – characteristics such as transparency, integrity and security. To name several use-cases of hybrid blockchain: Internet of Things (IoT), banking, supply chain, enterprise services. Blockchain is the future. Let’s be ready to leverage this technology! By, CA Abhishek Jain - B.com, ACA, ISA, FAFD, and CBE Partner V C A N & Co. Chartered Accountants