Originally used for financial transactions, blockchain technology has been gaining ground over the past several years. It's being implemented in a wide range of industries, including shipping, streaming, and digital media, defense, aerospace, factory production and, of course, financial services. But what exactly is it and what impact will it have on tax businesses in the next few years?
Generally speaking, blockchain is a digital ledger that is very secure and extremely resistant to fraud and tampering. Though it was designed for use in the financial industry, its adaptability has it expanding in usage to a number of different transactions and situations. It can be used whenever something changes, whether that's a payment for access to streaming video through Netflix or Vudu to the production companies or artists, a change in location of an asset being shipped or similar aspects. You've probably used it without even being aware that blockchain was part of an everyday activity.
But why has it become so popular? Blockchain validates a transaction to prevent fraud, allowing you to distribute information without it being copied or manipulated. It's a digital native, meaning that it isn't tied into one system, making it much less vulnerable to failure. Because of this, it's extremely difficult to corrupt or counterfeit short of using huge amounts of processing power. If it is corrupted, there are signs left that make the fraudulent entry stand out because the numerical value for that entry is tied to all the entries it impacts.
It's important to consider how your business systems will interact with client or vendor blockchains. In many situations, such as using a cloud-based software system, essential parts of blockchain technology are already in place. For tracking the assets of a business, such as equipment, or shipping materials for production, blockchain interacts with the Internet of Things sensors to track these assets.
When you gain a stronger knowledge of what exactly blockchain is and how this digital ledger system can be used to create incorruptible secure financial entries, you can better understand how this information can benefit a business as a whole. Because it's integrated into existing systems, you don't need a strong background to take advantage of blockchain's many benefits.