"Blockchain" as a New Emerging Technology

Published: 2021-06-22 22:05:05
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Category: Modern Technology, Technology

Type of paper: Essay

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The new emerging technology “blockchain” has changed the direction of the sails for many industries that have potential to determine the way the world does business, and its impact is being vastly underestimated by the accounting and auditing domains. (American accounting association 2017)
Blockchain is a form of decentralized distribution ledger which provides a consensus mechanism, highly resilient and tamper resistant database due to the following technical operations performed are recommended confirmations, protocols and consensus mechanisms. (CPA Journal 2018) The peer to peer application eliminates the intermediaries such as centralized financial institutions, as the information will be held by multiple unfamiliar parties to the contract which create a transparent and nonrepudiable manner and engages in a variety of transactions pseudonymously. Dai and Vasarhelyi and baron was confident that this edge cutting technology would restructure the invoicing, payment processing, contracts and documentation that influences the accountants, financial professionals, and regulators. (2017)On the world economic forum 2017, the GDP growth rate will accelerate by 10 percent and by 2025 the anticipated growth will jump up by 7 percent (tractica 2016). The traditional accounting involves double entry system where the records are accurately maintained and stored safely with the trusted officers. This system has witnessed the release of sensitive personal information and breached firewalls have bought necessary scrutiny to the inner working of the financial system. (CPA Journal June 2018) Ledgers keep account of the monetary transactions between individuals which holds significant importance in the consistent tracking of uniform global trade. Using ledger in blockchain, allows sharing of synced distributed ledgers databases among multiple nodes that ensure the validation of accurate and up to date information. (CPA Journal 2018)
“Block” transactions are created through the process of mining which are authenticated by incentivizing parties/nodes through rewards of native tokens for every block formed. Sufficient confirmation requirements must be met to obtain the consideration for validating of the transactions as to be placed in the blockchain as the next sequential block. If unable to meet the requirements, then the transaction is not executed. (CPA Journal 2018)
Miners operate using two major type of consensus protocols: proof of work (POW) and proof of stake (POS). Based on proof of work, the miners use the power of computation to compete to solve the mathematical equations which differ on the basis of level of difficulty, depends on the demand and volume of transactions and number of miners. First node to successfully solve the equation is rewarded native currency validates the transaction and places the blocks in sequence. There is Finite data storage data crisis in each block when volume spikes up and demand becomes too large that causes the scalability issues.
In 2017, Miners fee increases for every transaction to the next block as the demand increases was proved when fees reached $20 range. This is disadvantageous for using blockchain for everyday medium of exchange. The consumption of large amounts of energy approximately that is utilized to power a house for a week for nonawarded miners in POW is a major disadvantage. POW has an edge over POS for the decentralized liquidity as in POS – “rich getting richer” and miners are constantly validating blocks which allows a stabilized network as negative behavior would cause the miner to lose native coins.
Popular method used is proof of stake due to its scalability and environmental friendliness because the miners don’t have to consume massive energy under this method for computing mathematical equations. Random selection of validator is chosen from a pool of miners who stake a portion of native coins. The selected validator receives a reward to sequence the next block and more native tokens. To grab the opportunity of solving mathematical equations, the miner must hold higher amounts of stake to increase the chances of winning. The required minimum amount of native coins staked by opening a virtual private server (VPS) or known as “masternode” who has high authority to store the complete copy of blockchain, in real time, and always must be updated regularly and received rewards much higher and on a regular basis. They offer high stability by disincentivizing miners with large number of native coins and capturing the market through monopoly strategy.

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