KPMG Spark Blog
It’s considered the new hotness and it’s poised to potentially change small business but you still aren’t 100% what it is or what it might mean for your business.
It’s plastered all over billboards, blog posts, and the news. It’s considered the new hotness and it’s poised to potentially change small business but you still aren’t 100% what it is or what it might mean for your business. Well, here’s the deal…
The Blockchain Explained
The blockchain (adequately named) is a chain of blocks, each block in the chain contains data related to a specific transaction. When a transaction occurs, this information is stored in a block and then added to the chain. These blocks combine to form a distributed database that can scale as more and more transactions occur. Unlike traditional databases, this system creates a single shared ledger.
How does the blockchain keep transactions secure?
The blockchain maintains security through approval of its participants. Blocks are distributed amongst users (peer to peer network) and information is protected using private key cryptography. Rather than information being stored in a single location, data is distributed amongst many smaller decentralized networks working together as if one.
Each user has both a private and a public key. The public key is like an address by which other users can send and receive digital assets; the private key is known (or should) only be known to the individual user. Combined, these keys form a user profile by which they can anonymously interact and create transactions with others online.
Why is Blockchain important?
A New Future for CFOs
Blockchain may also have significant impact on financial operations. The KPMG analysts who have been studying the technology anticipate these key trends:
Smart Contracts are a less talked about blockchain innovation that can help facilitate agreements between businesses directly. Leveraging the power of the blockchain, smart contracts may help eliminate legal fees and create speedier workflow between two entities without the need for a lawyer or intermediary.
Smart contracts aren’t beholden solely to two separate entities. A company can use the technology internally, using it like an operating system that governs different types of transactions. In this sense, a business might be able to better track parts and services, transactions, data flow and other functions.
Some of the small business areas that will likely be affected are:
Evaluating Blockchain for Your Business
Industries Likely to be Impacted by Blockchain Technology
Blockchain can cut through that multilayered complexity by establishing a single ledger to track and capture as many of the interconnected web of transactions as makes sense for a given business. For example, consider the possibilities for a shipping company, which has to navigate transactions with:
Let’s take another, simpler example, like a landlord with several properties and a couple of employees. Here are some areas where blockchain technology might help:
Examples like these have many challenges that can stall business growth and cause headaches. However, leveraging the power of the blockchain may provide many opportunities to make complex process and workflows run smoother, safer, and more efficiently.
Businesses, developers and consumers are still learning and discovering the potential that blockchain technology holds. It has yet to completely overhaul an industry but the excitement behind it is undeniable, and the technology—potentially revolutionary.
For more insights about blockchain, visit here.
The information contained herein is general in nature and based on authorities that are subject to change. Applicability to specific situations is to be determined through consultation with your tax adviser.
Some or all of the services described herein may not be permissible for audit clients and their affiliates or related entities.
The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
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