Blockchain technology is a vast, distributed ledger, operating on millions of devices, recording anything, with identical copies maintained on each of the network computers. When a new transaction or an edit to an existing transaction comes in, generally a majority of the nodes within a blockchain network must execute some algorithms and essentially evaluate and verify the history of the transaction that is proposed and come to a consensus that the history and signature is valid, then the new transaction is accepted into the ledger. If a majority of nodes do not concede to the addition or modification of the ledger entry, then it is denied and not added to the chain. All the members can review previous entries and record new transactions. These are then grouped into ‘blocks’, which then form part of a ‘chain’, thus leading to a ‘blockchain’

1. All about Blockchain Technology and it's applications in Finance function:
Blockchain is the new buzzword in almost all areas.
This article showcases the Robotic Process Automation and Cognitive Computing as two
of the exponential technologies that would impact future professionals.
Blockchain as the emerging technology which will soon have significant influence on the
business and finance profession in the near future. It gives a perspective of how the
professionals will need to upskill and prepare themselves to embrace the new
technologies that will define the future of their business and finance
Blockchain is believed to have similar disruptive potential that the internet had in the
1990s. Just like the internet revolutionised the exchange of information, Blockchain is
being said to revolutionise the exchange of value. Clearly, Chartered Accountants, CFOs
and business leaders are intrigued by the promise of the Blockchain technology.
"Blockchain is a vast, distributed ledger, operating on millions of devices,
recording anything, with identical copies maintained on each of the network
computers. When a new transaction or an edit to an existing transaction comes in,
generally a majority of the nodes within a blockchain network must execute some
algorithms and essentially evaluate and verify the history of the transaction that is
proposed and come to a consensus that the history and signature is valid, then the
new transaction is accepted into the ledger. If a majority of nodes do not concede
to the addition or modification of the ledger entry, then it is denied and not added
to the chain. All the members can review previous entries and record new
transactions. These are then grouped into ‘blocks’, which then form part of a
‘chain’, thus leading to a ‘blockchain’".
The chain is encrypted so it cannot be deleted or duplicated.
By storing data across its network, the blockchain eliminates the risks that come with
data being held centrally. Its network lacks centralized points of vulnerability that
computer hackers can exploit. Today’s internet has security problems that are familiar to
everyone. We all rely on the ‘username/password’ system to protect our identity and

2. assets online. Blockchain security methods use encryption technology. The basis for this
are the so-called public and private ‘keys’.
A blockchain is the structure of data that represents a financial ledger entry, or a record
of a transaction. Each transaction is digitally signed to ensure its authenticity and that no
one tampers with it, so the ledger itself and the existing transactions within it are
assumed to be of high integrity.
“In a marked difference from the prevailing systems of exchange of value, where two or
more parties need to agree on the value and other commercial considerations for a
transaction to happen, Blockchain allows for transactions within a closed group
underpinned by a crypto currency.”
In fact, blockchain can be configured to work in a number of ways that use different
mechanisms to achieve consensus on transactions and, in particular, to define known
participants in the chain and exclude everyone else. The largest example of blockchain
in use, Bitcoin, employs an anonymous public ledger in which anyone can participate.
For more private uses of blockchain among a smaller number of known actors, many
organizations are deploying permissioned blockchains to control who participates in
transaction activity. In addition, event triggered programmable contracts, also known as
smart contracts, can be stored and executed on Blockchain.
“As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the
highest degree of accountability. No more missed transactions, human or machine
errors, or even an exchange that was not done with the consent of the parties involved.
Above anything else, the most critical area where Blockchain helps is to guarantee the
validity of a transaction by recording it not only on a main register but a connected
distributed system of registers, all of which are connected through a secure validation
mechanism.”
What is so powerful about this new technology:
There are several features of a Blockchain that lend it its power and allows it to record
and transfer value over the internet in a peer-to-peer manner:
Near real time: It enables near real time settlement of recorded transactions, removing
friction, and reducing risk.

3. No intermediary: It is based on cryptographic proof, allowing any two parties to
transact directly with each other, without the need for a trusted third party.
Distributed ledger: The peer-to-peer distributed network records a public history of
transactions, making Blockchain distributed and highly available.
Irreversibility: It contains certain and verifiable record of every single transaction ever
made that cannot be altered without altering the entire chain. This prevents double
spending, fraud, abuse, and manipulation of transactions.
Beyond bitcoin and other cryptocurrencies
Earlier, blockchain was seen to be related to only Bitcoin, because it was originally
developed as technology for cryptocurrencies. Many financial institutions have been
experimenting and developing the idea further.
There are many blockchain applications in the areas of finance, accounting, insurance,
trade finance, payments, settlements, and audit. Several entities are looking to move
from proof of concept to real-life application. Financial services industries lead the way
and effort in this. Leading global banks have been actively working together in the
Global Blockchain consortium R3, over 80 leading financial institutions and regulators
led by R3, a distributed ledger technology firm.
While several technical issues and privacy and security related issues are being discussed
and sorted out, regulation is awaited, the way forward seems promising, as the
technology seems to be achieving greater acceptability.
Blockchain proponents believe that it can be used to create alternatives to the current
time-consuming and expensive banking processes. Banks are attempting to decrease
the number of middlemen and participants in transactions processing.
Areas of application:
The areas in finance where blockchain could revolutionise the way we work, are of
interest to finance professionals, banking industry, CFOs and audit heads. They should
lead the discussion and initiative, in an effort to assist top management in decision-
making.

4. • Accounting and book-keeping, where transactions will no longer be required to be
recorded in the traditional double entry system, maintaining a single record for all
transactions.
• Budgeting and forecasting, placing the entire budget data, allowing transfer of funds
to various parties, creating an audit trail, providing transparency, and accountability.
• Inter-company reconciliation, which essentially will be done away with, facilitating
accurate and quick consolidation of financials.
• Vendor payable and management, creating and approving new vendor relationships,
entering into smart contracts, initiate automated payments, reducing processing time,
eliminating the need for reconciliation, improving vendor-customer relationships, doing
away with middlemen and institutions.
• Speeding up cross-border transfers and payments, simplifying the process and
reducing costs significantly.
• Share trading may also be influenced by blockchain, which shall allow for greater trade
accuracy and a shorter settlement process.
• Financial audit, the nature of which will fundamentally change, and companies and
firms will look to audit on a daily basis, eliminating the need for external auditors,
providing assurance on governance.
• Shareholder voting, recording ownership of shares and securities, reduced manual
intervention, better investor relations and ensuring shareholder participation.
Blockchain in action: cases:
Case 1: A global e-commerce company is offering a different approach to online retail,
by connecting buyers and sellers directly. The open-source project is creating a
decentralised network for peer-to-peer commerce. Instead of visiting a website, users
download and install a program that directly connects them to other people looking to
buy and sell goods and services, removing the middlemen altogether.
Case 2: A bank in Japan has completed a three month trial on the application of mijin (a
platform for creating Blockchains) to its accounting systems in a real-world environment.
In the demonstration, 2.5 million virtual bank accounts and an environment with
capacity to process 90,000 transactions every hour were created, with significantly
reduced risk of failure and fraud.