Accounting disruption by blockchain

Aaron Harris is Senior Vice President and Head of Engineering and Technology for Sage Intacct. Sage Intacct is a provider of cloud financial management software. Aaron has examined how to apply blockchain to Sage Intacct products.

Here are some highlights from Aaron where he wrote about the scaling issues for blockchain for Forbes.

Accounting sub-ledgers are an immediate opportunity for disruption by blockchain. Blockchain is a distributed ledger.

Accounting sub-ledgers record transactions between a business and their customers, suppliers, employees and other participants in business activity. The obvious benefits are instant reconciliation and reduced audit costs. The less obvious benefits come from blockchain smart contracts, which can trigger accounting activities based on transaction terms.

Blockchain networks can’t scale to support high volumes. Blockchains are currently too inefficient. Standards are not mature enough to induce participation. If a business does choose to participate in a blockchain, deploying the blockchain will require extensive information technology (IT) support because there are few packaged solutions, and those solutions that are packaged require extensive coding and configuration.

The computational energy required to post a single Bitcoin blockchain transaction is enough to power the average U.S. household for a week.

Blockchain replaces trust with consensus. Consensus requires every single node in the blockchain network to agree the transaction is correct.

The Bitcoin blockchain can currently support only seven transactions per second (tps). The PayPal network can support 193 tps. The Visa network can support more than 1,600 tps.

Over the next year managing blockchain will become a natural part of what software providers do, down to installing software on servers and containers that make the technology function.

In finance, this is likely to be blockchain that helps companies manage their sub-ledgers.
In trading, we’re likely to see products that record the entire activity of given stock markets without the need for a Bloomberg Terminal integration.
In health care, we’re likely to see more efficient ways of managing patient records securely.

Later full scaling solutions will be developed which will deliver the promise of blockchain disruptions.