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Blockchain plans to transform many sectors by providing rapid and verifiable transfer and tracking.
Inside, blockchain is a distributed ledger that records transactions between each user in the chain. Although it is commonly considered a single technology, there are different types of blockchains: public and private.
The best known public blockchains are those of cryptocurrency like the one used for bitcoin transactions. They are completely transparent.
This type of platform does not fit organizations that deal with sensitive information such as business contracts or personal information of individuals.
Private organizations are more likely to join a private blockchain, which allows invited users to make transactions without making the data public.
Private blockchains allow different levels of permissions for users, so access can be restricted and information can be encrypted
This explanatory video is an introduction to public and private blockchains.
SEE NOW: What is the difference between a private and public blockchain?
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Blockchain: how does it work?
TRANSCRIPTION
What is the difference between a private and public blockchain?
Blockchain has potential applications in many sectors, from accounting to agriculture. It is essentially a distributed ledger, which records transactions between each user in the chain.
There are different types of blockchains: some are open and public and some are private and only accessible to people who are allowed to use them. [19659003] A public blockchain is an open network. Anyone can download the protocol and read, write or participate in the network.
A public blockchain is distributed and decentralized. Transactions are recorded as blocks and linked together to form a chain. Each new block must be timestamped and validated by all the computers connected to the network, known as nodes, before being written into the blockchain.
All transactions are public and all nodes are the same. This means that a public blockchain is immutable: once verified, the data can not be changed.
The best known public blockchains used for cryptocurrency are Bitcoin and Ethereum: open source blockchain and smart contract.
A private blockchain is an invitation – the only network governed by a single entity.
Network participants require permission to read, write or check the blockchain. There may be different levels of access and information can be encrypted to protect commercial confidentiality.
Private blockchains allow organizations to use generalized accounting technology without making data public.
But this means that they lack a distinctive characteristic of blockchains: decentralization. Some critics argue that private blockchains are not blockchain at all, but centralized databases that use distributed ledger technology.
Private blockchains are faster, more efficient and cheaper than public blockchains, which require a lot of time and energy to validate transactions
How safe are the blockchains?
A private blockchain controls user access to information but is less secure than a public blockchain.
A public blockchain is a totally transparent ledger. Because it is decentralized, information is encrypted and stored on multiple devices. This makes it almost impossible to hack a public blockchain. The more members have a blockchain, the safer it is.
Public blockchains are often referred to as "uncensored" and are particularly resistant to distributed denial-of-service (DDoS) attacks.
A private blockchain, on the other hand, can be changed by its owner. It is also more vulnerable to hacking.
So, how could the accountants use blockchain?
Private blockchains could signal the end of double-entry accounting.
Accountants will be able to use a private blockchain to automate control processes and real-time control transactions.
Blockchain is expected to shut down the financial sector – but it could provide opportunities for accountants to invest more time in activities that add value to their clients' businesses.
These are the early days for blockchain, but has the potential to transform the world of finance, accounting and business.
For more information on blockchain, check out this video:
Blockchain: How does it work?
