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M2 Part C: Blockchain p.102 (Applying blockchain technology to accounting…
M2 Part C: Blockchain p.102
What is blockchain? P.102
Goal
Digital information can be distributed but not edited
Distributed ledger technology
Multiple computers on a decentralised network validating if transaction information recorded is accurate
Distributed ledger technology that uses a
decentralised
network and multiple parties to conduct transactions transparently and permanently records the entries on a shared ledger
Cryptocurrencies p.106
Digital tokens Table 2.1
Cryptocurrency
Digital representation of value that can be used for transactions with others in the same blockchain network
Inherent value of $0
Asset-backed token
is derived from a physical asset like gold
value is the underlying asset
Utility-backed token
Giving access rights to a product or service
Set by demand for the issuer's product/service
Security token
An economic stake in an entity - rights to receive cash or other payout
Depends on the performance of the company - think like a share or dividend
Examples p.108
Bitcoin
Ethereum
Smart contracts,
Automatically self-executes actions based on agreed rules and conditions
Monero
Concealing the details of transactions from public view
Initial coin offerings
Applying blockchain technology to accounting p.113
Replacing double entry
Transparent, real-time data
Revolutionising the audit
Smart Contracts
Capturing all the data all the time
Micro transactions, towards full payment
Disintermediation - no more intermediaries
Automated Financial Reporting
Blockchain adoption p.119
Obstacles to adoptation
Lack of standardisation for blockchain record creation
Inconsistencies between regulatory approaches
Lack of knowledge and skills
Lack of trust
Privacy, Scalability and transaction verification
Tax and regulation issues
Adopting Blockchain p.121
Public Blockchain
Ledger of every transaction
Everyone can view
No central authority
Private or permissioned Blockchains
Companies are not going to give away business intelligence
Permissioned ones have restricted access and validators
Forced Adoptation
Step 1: Person in the system attempt to send crypto or a token from them to another person
Step 2: The transaction request is a braodcast to the network - waiting to be picked up by a 'miner'. While it waits it sits in a pool of unconfirmed transactions
Step 3: Miners select transactions from the pool & form them into a block. Every miner constructs their own block of these unapproved transactions
Step 4: Miner wants to add their block to blockchain - to do this they need a proof of work which is the has output. Have to solve a complex mathematical problem, to find the right hash (string).
Step 5: The miner who finds the right has signature first broadcasts this across the whole network. Other miners now verify the signature, if they all agree the block can then be added to the blockchain, every minder adds that transaction to the ledger. Every new block reconfirmed the previous block