Blockchain renaissance portends the collapse of certain professions

Blockchain technology has the potential to unsettle the nature of today’s accounting. It may constitute a way to vastly automate accounting processes in compliance with the regulatory requirements

Granted that Blockchain adoption is still in its infancy but that hasn’t stopped experts from speculating on the vast changes the technology may bring. The accounting and auditing profession is investing heavily to try and harness its disruptive powers as is evident by declarations of the Big Four audit group which warn about the changes to the accounting profession that like a financial Tsunami will wreak havoc unless preventive action is taken by all to master it.

One can mention that for example, Deloitte has established a Blockchain consulting business and in certain countries EY accepts Bitcoin for settling invoices. What is new about the future Blockchain-based accounting system? What does it look like? Theoretically, it would allow secure, verified information to be stored and accessed by multiple parties across multiple locations. Because a Blockchain is encrypted and consensus verified, it essentially notarises itself.

All of this adds up to the possibility of a replacement for the double-entry accounting method that has been commonplace since it was invented by the Medieval Italian philosopher Paccioli.

This technological marvel makes it nearly impossible for records to be falsified or corrupted. It is because as transactions are permanently added to the ledger (like blocks in a chain), information is transparently presented to all parties involved and one block is then linked to the next in the chain. 

Files can also be time-stamped and marked with a virtual fingerprint known as a “hash string” to ensure they remain unmodified. Imagine a future world, where accounting is not double entry, but maintained in ledgers simultaneously recording the same item in multiple locations on multiple computers, all self-balancing. Needless to say, the system is self-checking every few minutes.

When Blockchain becomes mainstream, then the practical use of auditors and notaries (to name a few professions) may be entirely replaced by the use of smart contracts and other IT verification techniques.

In practical terms, what used to be an essential service rendered by auditors and notaries to record facts and check that transactions are verified independently now becomes pointless. In simple terms, Blockchain integration disrupts the future transactional world. In essence, there will no longer be a need for middlemen, no need for expensive reconciliations since theoretically the system fights against the imposition of any corrupt date. Simply put, there will be no need for month-end cycles, no need to bring together all the different books and records of departments and counter-parties. 

The Blockchain technology has the potential to unsettle the nature of today’s accounting. It may constitute a way to vastly automate accounting processes in compliance with the regulatory requirements. There is a consolation that while certain professions become dinosaurs yet there will be a sleuth of new job applications opening for IT careers. 

This generates a big demand for technical savvy workers. In addition to other skills, accountants, custodians and perhaps notaries may need to adopt new ways of thinking and acting in order to make the most to muster machine-learning tools. It goes without saying, this challenging world will need different ways of thinking to survive.

The most significant issue facing certain professions is disruption. Soon, there will be the proliferation of Artificial Intelligence which empowers robotics, machine learning and Blockchain systems that as stated above, makes verification by auditors and registration of contracts redundant. Readers may be jolted by this assertion and think that this prediction is nothing but scare-mongering.

Yet, the way Blockchain technology is structured it is said to revolutionise the way records are kept and maintained. Naturally, having all data in Blockchain may open up new vacancies for cybercrime busters even though in theory hackers cannot access data through a central point of vulnerability, having already stated that Blockchain networks are nearly impenetrable. This may be the case yet the concentration of data in distributed centres attracts cybercrime.

Cybercrime’s footprint is increasing each year both in its sophistication and frequency. Traditional defence strategies such as hardening of firewalls and intrusion prevention systems are no longer sufficient. Away from the curse of cybercrime, the onset of Artificial Intelligence coupled with the power of machine-learning will open new horizons in the next decade. 

There is no denying that it is a complex and ever-changing technological context. This interaction will be highly productive in creating new business opportunities which will be baptising the fourth Industrial revolution. One may question why all the fuss about Blockchain. Certainly AI techniques are not new although we are hearing more about them as they are becoming the next buzz word. 

Following the birth of the internet, twenty years ago we have seen and waited quietly for the next miracle in business development. Blockchain and its derivatives are here purporting to be the next miracle since the design of the ubiquitous steam-engine. Taking the bull by the horns, Malta was quick to embrace the revolution and has promulgated laws to regulate it. 

But it is still in the early stages. 

For Malta, diversification is a good start, yet we need to nurture a team of technical advisers assisted by a growing number of crypto-friendly banks. With the support of efficient yet friendly regulation in the midst of a growing cohort of IT experts supported by Fintech – this makes the dream come true. 

Surely we must double the research and development spend by Malta Enterprise – a government agency responsible for industrial promotion. This funding is badly needed in order to develop a deep understanding of how AI can speed the expansion of new business opportunities making judicious use of intelligent systems. Unless the government takes the first step to fund new research and invests in upgrading the levels of science and maths in secondary schools the growth will fizzle out. Quality education is the building block of future generations of IT savvy students.

Malta (like most other EU countries) is constantly looking to attract new talent to build a resource of workers necessary to fully exploit powerful new technologies. Otherwise having set the legal infrastructure for regulating Blockchain without maintaining momentum is like opening a grand pub with no beer. More funds are need to multiply the efforts in our university to research machine and quantum learning.

These leaders will tap into our own cognitive strengths – pattern recognition and learning, machine vision and game playing. In conclusion, Malta needs to build on its initial successes as a Blockchain regulator yet if it wishes to succeed as the Blockchain Island in the Med, more energy is expected from MFSA to attract international IT companies and crypto-friendly banks. 

Simply having the government sponsoring mega conferences and summits is a good start but it is not enough. The future is bright if we can muster the unassailable disruption that is expected to hit some of our professions.