Blockchain is termed by World Economic Forum as Technology Pioneer; financial experts call it “the next best thing after Internet.” Industry thinks impact of the accounting technology could be significant like use of double entry. Besides faster than existing systems, blockchain allows transparency as every transaction gets captured on real-time basis. Governments are looking at the technology for eGovernance.
India fares lowly on global corruption rankings
India stands at 76 position out of 175 countries on Transparency International’s Corruption Perceptions Index. India has poor ranking on ease-of-doing-business world rankings, published by World Bank. India stands at 130 out of 189 countries. China is at no. 90, Nepal and Sri Lanka are at 99 and 107, respectively. Data indicate corruption striking at roots of India’s development, preventing the country from realizing potential. Therefore, methods need to be found to curb corruption and for India to become the #1 destination for foreign investment and budding enterprises. Curtailing corruption will improve its image as leader among Third World countries.
How do blockchains work?
A blockchain is decentralized distributed ledger maintained through a distributed network of computers that don’t need central authority or a third-party intermediary. In this technology, each block references a previous block, not by a ‘block number’, but by its fingerprint (hash), which is decided by a block’s content. This makes content completely immune to tampering or revision.
“An organization can benefit in several ways. Data can be processed faster since it doesn’t need to go through several layers. Moreover, with there being no chance of breach of data integrity or data corruption, even my organization is moving on to a decentralized system. Certainly, this enables the software to overcome the bottlenecks that are created due to legacy installations. Consequently, this can unlock capabilities for cumulative predictive intelligence as well as dynamic supply management with multiparty memberships among several other things. This will lead to a truly multidimensional online B2B as well as B2C ecosystem,” says Shashank Dixit, CEO, Deskera, a global cloud software company that is planning to leverage this technology.
Blockchains can be single source of truth for organizations
Though blockchains can be public or private, blocks are encrypted and can be read by using correct decryption key. With decentralized nature and inbuilt resistance to revision, blockchain is perfect for retrieving as well as recording financial data, becoming a single source of truth. An organization can remove need for maintaining multiple centralized databases. It can also ensure real-time and sequential flow of information through an organization.
Financial auditors gain due to simplified and transparent accounting processes
By capturing transactions on real-time basis, auditors can avail of real-time access to sensitive information, retrieved in seconds. This is different from present scenario where auditor only gets access to data at end of a financial year. This results in delays in closing of accounts.
Governments must leverage blockchain technology for eGovernance
Blockchains can make great impact if governments implement it. Honduras—country in Central America and considered one of the most corrupt countries of the world—leveraged it to its advantage. The Honduran Government started a pilot project using fintech to eliminate corruption from property market as conventional system was unable to prevent officials from changing land records and allocating real estate to themselves. Transparency provided by the technology prevented abuse of power. It also encouraged unofficial land owners to register property.
Through blockchains, every ledger is accessible to public, police, journalists, and common man, making manipulation impossible. The fintech can lead to a global database. With millions of copies distributed across Internet, it is impossible to forge or destroy data. Blockchains are a fintech innovation, useful in fight against corruption.