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What is Blockchain?
Dennis Murphy, CPA, CCA
Nick Ward
September 13, 2018
2
Agenda
• What is blockchain?
• Types of blockchain
• Security
• Hurdles
• Industry impact
• Next steps
3
What is Blockchain?
• Distributed, digital ledger
• Continuously growing list of
records
• Stores information from
transactions
• Verified by the community
4
What is Bitcoin?
Bitcoin is a purely peer-to-
peer version of electronic
currency that allows online
payments to be sent directly
from one party to another
without going through a
financial institution.
5
Why Bitcoin?
• Double-spending problem
• Bitcoin stores details of every transaction that
ever happened in the network in a huge
version of a ledger, called the blockchain
• Bitcoin “miners” process transactions and
secure the network using specialized
computer hardware through a “proof-of-work”
system
6
How Blockchain Works
7
Characteristics of Blockchain
• Decentralized
• Consensus
• Immutability
• Hash identifier
• Distributed ledger
“The blockchain will do to the financial system what
the internet did to media.” – Joichi Ito, Neha Narula,
and Robleh Ali (Harvard Business Review)
8
Types of Blockchain
• Public blockchain
• Private blockchain
• Consortium blockchain
9
Blockchain Security
• Blockchain manipulation
 Hash functions
• Cryptography
 Public and private keys
• Distributed ledger
10
Smart Contracts and Blockchain
• Smart contracts are automated contracts that are
embedded in the blockchain
• Help exchange money, property, shares or
anything of value, conflict-free
• Avoids a middleman
11
Blockchain Benefits
• Immutable
• Distributed ledger
• Lacks single point of failure
• No single-party control
• Efficient
• Reliable
12
Blockchain Hurdles
• Technically complicated
• Lack of blockchain developers/engineers
• Speed
• Expensive
• Uncertainty in the regulatory environment
13
Where Can Blockchain be Applied?
• Accounting
• Financial services
• Health Care
• Real Estate
• Manufacturing
15
Blockchain and the Accounting
Industry
• Blockchain is here
 Big Four are investing/automating audits
• Audit trail
• Tracks ownership of assets
• Smart contracts – executed automatically
• Up-to-the-minute inventory records and tracking
• Elimination of month-end close
16
Blockchain and the Accounting
Industry
• Other Advantages
 Reducing the potential for errors when reconciling complex and
disparate information from multiple sources
 Real-time accounting
 Freeing up an auditor’s time to focus on more value-added services
 Decreasing the amount of time it takes to complete an audit, which in
turn, eases the associated burden on clients
 Cash savings to clients from the reduction in audit testing
 Reducing fraudulent activities
 Increasing security against cyberattacks and hacking
17
Blockchain and the Accounting
Industry
• Where Will it Start?
 Payables/receivables
 Intercompany transactions
 Contracts and agreements
• Tax Advantages
 No more spending time on hold with the IRS
 Withholdings (transparency)
18
Blockchain and the Accounting
Industry
19
Opportunities from Disruption
• Auditor of smart contracts
• Service auditor for a consortium blockchain
• Administrator function
• Arbitration function
20
Blockchain and the Financial
Services Industry
• Payment processing
• KYC
• Improved security and data quality
21
Blockchain and the Health Care
Industry
• Medical Records
• Consent Management
• Micropayments
22
Blockchain and the Real Estate
Industry
• Title records/transfers
• Property data
• Leasing arrangements
23
Blockchain and the Manufacturing
Industry
• Supply chain
• Traceability
• Additive manufacturing/3D printing
24
Next Steps
• Basic understanding
• Applicability to our clients today
• Trickle-down adoption
• What can I be doing now?
25
Process Documentation- Why?
• Facilitates an understanding of the processes
• Promotes agreement regarding process structure
• Clearly assigns individual responsibilities
• Highlights points of risks and controls
• May assist in identifying potential process improvements
26
Finished Product
27
Questions?
If you have questions or need
additional information, please contact:
Dennis Murphy Jr., CPA, CCA
Principal
dmurphy@skodaminotti.com
440-605-7124
Nick Ward
Senior Staff Accountant
nward@skodaminotti.com
440-605-7246
www.skodaminotti.com

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What Is Blockchain and How Will It Impact Various Industries

  • 1. What is Blockchain? Dennis Murphy, CPA, CCA Nick Ward September 13, 2018
  • 2. 2 Agenda • What is blockchain? • Types of blockchain • Security • Hurdles • Industry impact • Next steps
  • 3. 3 What is Blockchain? • Distributed, digital ledger • Continuously growing list of records • Stores information from transactions • Verified by the community
  • 4. 4 What is Bitcoin? Bitcoin is a purely peer-to- peer version of electronic currency that allows online payments to be sent directly from one party to another without going through a financial institution.
  • 5. 5 Why Bitcoin? • Double-spending problem • Bitcoin stores details of every transaction that ever happened in the network in a huge version of a ledger, called the blockchain • Bitcoin “miners” process transactions and secure the network using specialized computer hardware through a “proof-of-work” system
  • 7. 7 Characteristics of Blockchain • Decentralized • Consensus • Immutability • Hash identifier • Distributed ledger “The blockchain will do to the financial system what the internet did to media.” – Joichi Ito, Neha Narula, and Robleh Ali (Harvard Business Review)
  • 8. 8 Types of Blockchain • Public blockchain • Private blockchain • Consortium blockchain
  • 9. 9 Blockchain Security • Blockchain manipulation  Hash functions • Cryptography  Public and private keys • Distributed ledger
  • 10. 10 Smart Contracts and Blockchain • Smart contracts are automated contracts that are embedded in the blockchain • Help exchange money, property, shares or anything of value, conflict-free • Avoids a middleman
  • 11. 11 Blockchain Benefits • Immutable • Distributed ledger • Lacks single point of failure • No single-party control • Efficient • Reliable
  • 12. 12 Blockchain Hurdles • Technically complicated • Lack of blockchain developers/engineers • Speed • Expensive • Uncertainty in the regulatory environment
  • 13. 13 Where Can Blockchain be Applied? • Accounting • Financial services • Health Care • Real Estate • Manufacturing
  • 14.
  • 15. 15 Blockchain and the Accounting Industry • Blockchain is here  Big Four are investing/automating audits • Audit trail • Tracks ownership of assets • Smart contracts – executed automatically • Up-to-the-minute inventory records and tracking • Elimination of month-end close
  • 16. 16 Blockchain and the Accounting Industry • Other Advantages  Reducing the potential for errors when reconciling complex and disparate information from multiple sources  Real-time accounting  Freeing up an auditor’s time to focus on more value-added services  Decreasing the amount of time it takes to complete an audit, which in turn, eases the associated burden on clients  Cash savings to clients from the reduction in audit testing  Reducing fraudulent activities  Increasing security against cyberattacks and hacking
  • 17. 17 Blockchain and the Accounting Industry • Where Will it Start?  Payables/receivables  Intercompany transactions  Contracts and agreements • Tax Advantages  No more spending time on hold with the IRS  Withholdings (transparency)
  • 18. 18 Blockchain and the Accounting Industry
  • 19. 19 Opportunities from Disruption • Auditor of smart contracts • Service auditor for a consortium blockchain • Administrator function • Arbitration function
  • 20. 20 Blockchain and the Financial Services Industry • Payment processing • KYC • Improved security and data quality
  • 21. 21 Blockchain and the Health Care Industry • Medical Records • Consent Management • Micropayments
  • 22. 22 Blockchain and the Real Estate Industry • Title records/transfers • Property data • Leasing arrangements
  • 23. 23 Blockchain and the Manufacturing Industry • Supply chain • Traceability • Additive manufacturing/3D printing
  • 24. 24 Next Steps • Basic understanding • Applicability to our clients today • Trickle-down adoption • What can I be doing now?
  • 25. 25 Process Documentation- Why? • Facilitates an understanding of the processes • Promotes agreement regarding process structure • Clearly assigns individual responsibilities • Highlights points of risks and controls • May assist in identifying potential process improvements
  • 27. 27 Questions? If you have questions or need additional information, please contact: Dennis Murphy Jr., CPA, CCA Principal dmurphy@skodaminotti.com 440-605-7124 Nick Ward Senior Staff Accountant nward@skodaminotti.com 440-605-7246 www.skodaminotti.com

Editor's Notes

  1. Preface this slide with what has happened since the Fedex case
  2. Preface this slide with what has happened since the Fedex case
  3. https://blockgeeks.com/guides/smart-contracts/
  4. https://blockgeeks.com/guides/smart-contracts/
  5. https://blockgeeks.com/guides/smart-contracts/
  6. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  7. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  8. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  9. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  10. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  11. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  12. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  13. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018
  14. https://www.nasdaq.com/article/big-4-accounting-firms-are-experimenting-with-blockchain-and-bitcoin-cm812018