Emerging technologies can be used to describe new technologies, but they can also be used to describe continuing technological development. Essentially, the term refers to technologies under development or expected to be available in the next 5 or 10 years (Ada et al., 2021). Emerging technologies are expected to have significant economic or social effects on the business environment. Some emerging technologies include quantum computing, virtual reality, robotic process automation, blockchain, the Internet of things, machine learning, and artificial intelligence.
Blockchain is one of the emerging technologies that is expected to revolutionize business and accounting practices. A blockchain can be described as a distributed, encrypted, peer-to-peer transaction system. Essentially, it is a disruptive technology expected to provide a secure, decentralized, and highly transparent platform for online transactions (Jacob et al., 2022). A blockchain is a type of ledger which records every transaction in the system. It ensures that every transaction is anonymous, secure, and highly transparent. Blockchain has the potential to transform business practices in the coming years by making their processes more efficient and accurate (Jacob et al., 2022). I will analyze how blockchain technology could affect business and account for this paper.
The Effects of Blockchain on Business
Blockchain is changing how businesses operate across different sectors in various global industries, including supply chains, real estate, the music industry, accounting, and finance. Blockchain is expected to help startups and small and medium enterprises finance their operations. Often, SMEs face stiff competition from multinational corporations that shrink their income due to reduced sales. MNCs usually create barriers to market and competition through bulk production that allows them to offer products at lower prices than SMEs’ prices for similar products (Schuckes & Gutmann, 2020). Typically, this allows them to implement a cost-leadership strategy that increases customer loyalty and satisfaction with their products.
However, full blockchain implementation will help small businesses thrive by helping owners access more funds. The first blockchain application will be in the context of initial coin offerings (ICOs), which will be central to businesses accessing finance (Schuckes & Gutmann, 2020). The idea of blockchain and ICOs is that businesses can create tokens such as bitcoins, Ethereum, dogecoin, and luna and offer them in ICO markets such as Freezone and ABYSS to investors (Schuckes & Gutmann, 2020). Upon investment, investors will be allowed to own a part of the company. Blockchain will ensure that the predesigned prices do not change across the funding period and eliminate fraud. Therefore, this will be one of the positive effects of blockchain on businesses. In the following sections, I will analyze the effects of blockchain across various industries, such as the music industry, supply-chain industry, real estate, accounting, and finance.
Supply Chain and Logistics
Blockchain technology is also expected to transform the supply chain sector, potentially solving the inefficiencies inherent in manual labor, such as time-sensitive information, delivery and payment issues, and invoice disputes. Blockchain will create a distributed database among manufacturers, retailers, shippers, and other stakeholders, allowing timely inventory levels or delayed updates (Rajeb et al., 2021). With an automated system that does not need third-party verification of purchase orders or invoices (payment is automatic), blockchain will help reduce errors caused by clerical missteps. However, the technology will likely be most useful in creating a more efficient monitoring system (Rajeb et al., 2021). The technology could enforce data integrity, ensuring that agreed-upon terms are met in every transaction. Besides, it could also connect suppliers and venues using smart contracts so that all parties can access information about their agreement and confirm whether it has been fulfilled.
Growing adoption of blockchain in the logistics industry has several advantages, including higher system trustworthiness resulting in increased openness, product traceability, and cost savings by doing away with manual and paper-based administration (Rajeb et al., 2021). Tradelines, an open and impartial supply chain platform supported by blockchain technology, serve as an illustration. Tradelines, a product of IBM and Maersk, has been accepted by some top logistics companies, including CMA, MSC, CGM, Hapag-Lloyd, and ONE (Jacob et al., 2022). According to the founders, Tradelens will increase efficiency by 15% by freeing supply companies from manual document handling and poor visibility, which will help increase supply chain revenue to $5.2 trillion by 2050 from $1.8 trillion in 2020, according to Jacob et al. (2022).
Blockchain in Real Estate
Blockchain is also expected to transform the real estate industry by streamlining the process of buying and selling property and making it secure (Tian et al., 2022). For buyers, blockchain will help them track the history of a property and its owners while at the same time offering transparency during the sale process. Another key expectation of blockchain in the real state is tokenization. Tokenization in real estate is the digitization of securities, financial instruments, and alternative assets (Ada et al., 2021). Digital assets can be created to feature transaction history, ownership rights, laws to ascertain asset issuance, distribution, and regulations to guarantee that transactions are lawful using Ethereum blockchain technology (Yang & Wang, 2022). Simple examples include restrictions to guarantee that token transfers during lock-up periods can only be made to specific entities or not at all (Tian et al., 2022). Any issuer criteria can be accommodated by altering digital assets.
Additionally, tokenization lowers expenses and accelerates developing features, selling and transferring assets, distributing dividends, and other company activities (Tian et al., 2022). Comprehensive customization and quick issuance will enable providers to seamlessly modify digital assets to investor preferences, drastically lowering counterparty risk. Finally, the blockchain cost savings enable companies to lower the investment amounts and increase access to a larger investor base (Ada et al., 2021). Digital assets’ secondary market potential and liquidity are expanded with interconnectivity between them and their supporting networks. These advantages for issuers and investors show that the true potential of blockchain is a future with radically new markets and products.
Blockchain in the Music Industry
Revenues from a Spotify stream can take up to 6 months to reach an artist, and this can cause liquidity problems for smaller, individual, and emerging artists. To resolve this, the Centrifuge company aims to provide an infrastructure to turn these receivables into an advanced payment, exchanging real-world assets on-chain. At the same time, Paperchain, a blockchain-backed technology, analyzes artists’ streamed data to forecast their profits over the next 6 months (Owen & Dair, 2020). The tokens produced by the accounts receivable can also be used as security for loans. Currently, payments are made using the stablecoin DAI, as DAI equals one US dollar, allowing easy conversion without running the risk of price volatility (Owen & Dair, 2020). This innovative payment system will not only be significantly faster than a conventional one but also be less expensive by 80% (Owen & Dair, 2020).
Blockchain in Accounting and Auditing
The blockchain will have a key role in the accounting and auditing industry. It will help companies enhance their focus when transferring ownership of assets and keeping specific financial records. Accounting professionals have entrusted financial information collection, reporting, and assessment (Pimentel, 2022). Most professions are often concerned with evaluating legal rights and responsibilities surrounding a property. Besides, they are also concerned with strategizing the most efficient use of economic and financial resources. Blockchain technology will significantly increase productivity by increasing clarity about who owns the property and their obligations.
In addition, blockchain technology will lower the expense of managing and balancing ledgers and offer clarity on ownership and asset history. Technology will certainly improve the accountancy profession (Pimentel, 2022). Typically, the technology will enhance resource planning and assessment instead of keeping records. As a result, it will enhance accountants’ understanding of the resources and responsibilities of their respective organizations.
Moreover, apart from automation trends offered by technology, such as machine learning, technology will increase the amount of transactional-level accounting done, though not by auditors or accountants (Pimentel, 2022). Instead, it will allow auditors and accountants to succeed by evaluating the true economic meaning of blockchain records and connecting the record to financial logic and valuation (Pimentel, 2022). For instance, blockchain can be used to verify the existence of a debtor. However, while this has been subject to debate, what matters the most is the recoverable value and economic significance a debtor holds to a company (Enrique, 2022). Besides, while the ownership of an item can be confirmed using blockchain data, its state, location, and actual value have to be validated.
Blockchain could also enhance accounting activities by removing reconciliations and providing affirmation over transaction records, which would also help shift focus to more areas that are currently thought to be too difficult or unreliable to measure, such as identifying the value of data a company holds. Finally, the new technology will replace bookkeeping and reconciliation tasks (Enrique, 2022). However, one disadvantage of the replacements is that they may jeopardize accountants’ jobs and strengthen the roles of those working on adding value in other ways.
What Blockchain Implies to Auditors
Blockchain has multiple uses outside of auditing. If all or most of the activities that constitute an organization’s economic position can be traced on blockchains, the need to confirm these transactions manually would become less necessary (Enrique, 2022). Essentially, blockchain would significantly alter how audits operate. The other implication is that if companies can use blockchain technology with the right data analytics, it may assist with the audit’s transactional level assertions and, as a result, allow auditors to have much more time to focus on higher-level issues. Auditing includes examining how a transaction is entered and classified and the specifics regarding the individuals involved (Enrique, 2022). Blockchain will help auditors answer questions such as, “if an activity credits cash, is it an outflow due to reduced sales or expenses?” “Or is it creating an asset or paying a creditor?” (Pimentel, 2022). With the technology in place, auditors will have additional time to concentrate on these questions because these judgmental elements frequently require context that is not readily available to the general public but requires an understanding of the business.
Skills for the Future
The use of blockchain technology and smart contracts will revolutionize multiple areas of accounting that deal with transactional security and the transfer of property rights. Greater attention can be paid to how to account for and consider the transactions. More areas can be accounted for due to the decreased requirement for reconciliation and conflict resolution and the enhanced certainty concerning rights and duties (Enrique, 2022). The accounting functions may be more effective and valuable by using blockchain and other cutting-edge innovations, including machine learning and data analytics, to improve accounting processes.
The range of abilities represented in accountancy by blockchain will change. While some tasks like provenance verification and bookkeeping will be scaled back or abolished, others like technology, consulting services, and other important activities will be expanded. Therefore, the auditor’s focus must change to adequately audit a business with considerable blockchain-based transactions (Enrique, 2022). However, there is still a lot of focus to be paid on how financial transactions are documented and identified in the financial statements and how discretionary components like valuations are agreed upon. However, worth noting is that will be little need to check the correctness with external sources. Over time, more and more documents might be moved onto blockchains, allowing auditors and regulators who have access to them to verify transactions in real-time and with confidence regarding their provenance.
Accountants will not be needed to have an in-depth understanding of blockchain technology or be experts in the field. However, they may need to be able to offer advice on blockchain adoption and take into account how blockchain will affect their clients and their enterprises (Pimentel, 2022). They must also have the communication skills to serve as a bridge between business stakeholders and technology. Since blockchain is already covered in the ICAEW’s ACA syllabus, accountants’ skill sets will be expanded to include knowledge of its key features and operations.
Conclusion
Blockchain is a disruptive technology expected to transform the business environment by bringing various valuable changes in real estate, the supply chain, the music industry, and accounting and finance. The technology will benefit real estate by allowing the tokenization of property assets. The technology will allow for the digitization of property ownership and the related assets, which is expected to enable the transfer of assets across geographies. Blockchain technology will also allow for more efficient processes involving title transfers, financing, and construction. The technology will also provide solutions to issues that have hampered transparency and accountability in the real estate sector. For instance, it will benefit accounting activities by eliminating the traditional approach of keeping financial data in paper-based files. It will also improve the investor experience by enabling a close look at asset performance. With blockchain, accounting practices will advance in terms of efficiency and transparency.
References
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