BLOCK-CHAIN | THE TECHNOLOGY WHICH WILL LEAD THE FUTURE INNOVATIONS

Today block-chain is evolving as the technology behind the greatest innovations and with no doubt this technology will lead the future.

Looking back to understand the future of blockchain :

The advent of postal services (circa 400 A.D.) introduced a common intermediary in the collection, transport, and delivery of goods, and it inspired an evolution in commerce. The reliability and regulation of a system to move goods across great distances opened lucrative new markets to producers and distributors.

In the 1990s, a vast interconnected global network called “the internet” and a new application called “email” enabled global commerce and communications at a velocity previously thought to be impossible.

Today, the boundaries of commerce are once again being pushed and the role of this intermediary is changing given blockchain technology. As before, we will all be taking this ride together. But to understand where it is going, first we must recognize the two types of organizations driving the innovation.

Blockchain use cases :
Blockchain-enabled business models will present a seismic shift to how business is conducted in the future. Its impact on commerce will be game-changing, especially given the increasingly digital global economy and the decentralization of business models and stakeholders enabled by blockchain. In this direction, a new dimension of innovation awaits. Below are some examples of disrupters ahead of the game.

Navigating the complexities, regulatory and otherwise
With innovative business models comes the need to thoughtfully consider the regulatory environment, best practices, and strategy. Professional advisors are left with dated rules and age-old playbooks as they evaluate the applications of this nascent, innovative commerce.

Tax

Determination of cryptocurrency as a security, commodity, debt, inventory, or cash equivalent bears significant consequence to income tax, indirect tax, and payroll tax analysis. This varies by state and by country, with a constantly evolving point of view by regulators and little authoritative guidance. Commerce enabled by tokens and cryptocurrency brings us into a world of barter transactions requiring determinations of character (capital vs. ordinary), and basis tracking of fungible assets.

Audit

In collaboration with regulators and standard-setting bodies, the CPA auditor must embrace the opportunities and challenges in having clients who have adopted blockchain technology in their operations and financial reporting processes. There may be increased transparency and the ability to automate routine audit tasks. However, immutable information can still be inaccurate due to error or fraud.

The CPA auditor can provide both enterprise organizations and the emerging disruptors with new service offerings such as blockchain platform assurance, digital asset validation services, and smart contract assurance, as well as the traditional financial statement review and audits.

Controls

One of the most critical internal control areas centers on the granting, reviewing, and removal of access controls to encryption keys or other system settings. Access controls are also dependent on appropriate delegation of authority and segregation of incompatible duties. Another important area of internal control to ensuring the maintenance of adequate books and records is timely reconciliations between transactions recorded on the blockchain and those recorded in the entity’s financial and tax records.

Technology

Technology consultants are now in the business of debunking blog hype, educating stakeholders, and debating what blockchain does and doesn’t do. We see new vernacular in the debates as to what is “on-chain” versus “off-chain,” or how “tokenomics” need to encourage good behavior.

The advent of new protocols and platforms requires re-imagining an appropriate technology stack—which continues to evolve at both the core and the edge—as innovative solutions emerge across developer communities to help bridge the technology from its current nascent form to an enterprise-grade future. While building a scalable blockchain solution is complex, tried-and-true processes deserve ongoing consideration.

As an enabler for virtual currencies such as bitcoin, and early associations with illicit actors like Silk Road and the dark web, blockchain was initially viewed by regulators with considerable skepticism. Among other things, its inherent qualities of speed, cross-border functionality, irreversibility, and pseudonymity raised concerns that cryptocurrencies would be attractive to money launderers and sanctions evaders.

Regulatory uncertainty with respect to the applicability of AML requirements such as KYC, have been blamed for stifling innovation among the players in the ecosystem. Ironically, blockchain may prove to be an ideal tool for satisfying regulatory requirements as a trusted repository of information, a mechanism for verification of identity, and a record of transactions. Financial services is among those industries facing the most significant disruption by blockchain technology.