Blockchain Technology and Accounting

The field of accounting is one that is continually faced with the challenge of keeping up to date with financial trends as they emerge, and it will be your job to accurately track the assets and liabilities of your clients in an ever-changing world. One of the most important technologies to develop in the past decade is the advent of cryptocurrencies, the most notable of which is Bitcoin. It is, therefore, vital to understand how this form of payment applies to those who choose a career in accounting.

About Blockchain Certification

Professionals who want to work in various fields can benefit from blockchain certification, as they will be recognized by employers and clients as somebody who has been educated in the workings of blockchain cryptocurrency. Certification in blockchain technology will provide training and education that will equip an accountant to handle the needs of their clients.

Businesses and investors, more than ever, are looking to alternative means of diversifying their financial interests, and cryptocurrency is one way they can do this. The blockchain enables people to move money from one country to another easily, and so, users of cryptocurrencies can live in all parts of the globe. Developing nations, like Zimbabwe, are seeing an influx of users, as it has provided an easy substitution for their fiat currency, and other nations are following suit. Throughout the world, cryptocurrencies are becoming mainstream, and the number of users goes up all the time.

Blockchain credentials serve to establish a standard for education in the subject of alternate currencies, and it helps to reinforce acceptance of cryptocurrencies as a viable means of payment. Programmers, cryptocurrency developers, and security specialists are some of the other occupations, in addition to accounting, that can benefit from blockchain certification, as it provides a knowledge base that can help workers in a wide array of disciplines. Next, we will discuss what a student can expect to know in order to receive his or her blockchain certification.

How does a blockchain work: cryptocurrency and secure transactions infographic

What is the Blockchain?

Students interested in blockchain accounting need to understand the blockchain definition in order to properly advise their clients. The blockchain is the digital ledger that contains a record of every Bitcoin transaction ever completed. This is visible by everybody who uses Bitcoin, and it cannot be changed once the record is struck. Students of blockchain accounting must be able to understand how this system works and what it is for, ultimately, because it is the basis of cryptocurrency technology.

Digital currencies had been attempted in the late 90s and early 2000s, prior to the invention of Bitcoin, and all of these had failed. The challenge that digital currencies and cryptocurrencies face is to establish a means of sending and receiving money that is trusted by every user. Fiat currencies can pass through banking systems that are not easily manipulated — they require authorized personnel to enter transactions into a computer network that the average person does not have access to. This makes it safe for people to use, and in 2009, Satoshi Nakamoto invented the blockchain that would provide a trustworthy way to transmit a new currency — Bitcoin.

The identity of Satoshi remains unknown, and it may stand for a person or a group of people. Satoshi’s invention of the blockchain involved another innovation known as cryptography. Cryptography would hold the key to making Bitcoin transactions secure, and these involve a series of processes that take place after a person sends money to somebody else.

Transfer information is sent to a network of peer-to-peer users that are comprised of computers referred to as nodes. These nodes must be functioning computers that have a copy of the complete blockchain, and these are part of the vast infrastructure that is needed to house the information needed for Bitcoin to operate. Currently, there is no financial incentive for people to host nodes, and the machines drain resources, as they consume electricity. It is thought that in the future, Bitcoin may need to pay people to host them, or corporations will may have to get involved and provide this necessary function. For added security, plans are in place to send nodes to outer space where they cannot be easily tampered with.

The verification of transactions is done via the work of specialized computers that are used just for this purpose. This is referred to as Bitcoin mining, because those who help the Bitcoin system function in this way are rewarded 12.5 Bitcoin every time a transaction is confirmed. The amount of distributed Bitcoin will drop by half roughly every four years, until all Bitcoin have been mined. Total available Bitcoin is capped at 20,000,000 BTC.

When a person sends money, the data is encrypted using elliptic curve cryptography. Students studying blockchain accounting and the blockchain definition will learn that this function is the basis on which cryptocurrencies are built. This method of encryption involves plotting two points on an axis that will result in a curved line to draw those two points together. This creates a complex cipher through which to run mathematical formulas in order to encrypt information.

Each person chooses an integer that is between one and 1077, and this serves as a user’s private key. A private key is contained within his or her wallet with which he or she will send and receive money. This private key is encrypted into a public key, and this mathematical process is virtually impossible to run backward. The result is expressed as a hash or a signature.

A hash is a larger number that has been run through a specific formula to produce a much smaller number for people to work with, and the results are always the same size. This public key is then sent with the data from the transaction to the miners to be verified by running the hash through a series of additional formulas.

This process will usually be worked on by a collective of miners, and whichever machine produces the correct answer first is rewarded the Bitcoins. This usually takes about ten minutes. The information is then added to the ledger of the blockchain, and every node in the network is also updated with the timestamp and a digital signature. Each entry contains hash information from the previous transaction to be recorded so that the system cannot be broken into without altering the record and affecting future transactions. This also helps to prevent forgery and theft.

Blockchain Certification Can Help with Investment Advising

In addition to the blockchain definition, students of blockchain accounting will need to understand the role that cryptocurrencies play in the world of investing. As Bitcoin has grown and gained worldwide acceptance, it has gone up in price. In 2010, a developer purchased 2 pizzas for the price of 10,000 BTC, and this would be worth over $100 million today. Many people have asserted that Bitcoin has immense potential as an investment vehicle, including billionaire Michael Novogratz.

Bitcoin opened on the Chicago Exchange in December of 2017, and its value shot up to over $19,000. Since then, interest in Bitcoin as a means to make money has skyrocketed, as it began the year at just over $1,000 in value per Bitcoin. Students will also learn that Bitcoin is calculated in divisions up to one hundred millionth and that this unit is referred to as a Satoshi. QuickBooks is in talks to accept Bitcoin accounting features in its software program, and innovations involving Bitcoin are continually advancing.

Students of the blockchain definition also will receive training about other cryptocurrencies that utilize blockchain technology. Bitcoin is the most well-known, but it has been followed by the creation of other cryptocurrencies, such as Ethereum and Litecoin. In total, there are about 1,700 cryptocurrencies in existence, and those that utilize a blockchain method tend to make improvements upon the original innovation, such as making transactions private.

Blockchain Accounting Job Prospects

As businesses begin to accept cryptocurrencies in greater numbers, they will need accountants trained in cryptocurrency technologies to track their assets properly. Our current tax code in the United States treats virtual currency as property upon which federal taxes can be collected. That means that if your clients received income in the form of Bitcoin that taxes will be owed, and it also means that other levies, such as capital gains, can be imposed on money received from trading in Bitcoin. Accountants are responsible for processing audits from the Internal Revenue Service and providing the agency with the information that they will need.

Accountants working in Bitcoin may be offered jobs from businesses or real estate firms that wish to pay at least a portion of their salary in Bitcoin. It is becoming more common for Bitcoin firms to pay their employees this way, but it must be mentioned that Bitcoin’s values tend to fluctuate. Hard data cannot yet be found for what the average rate of pay for an accountant working predominantly with Bitcoin will be, but the current average salary for an accountant is $65,940.

Bitcoin exchange companies can be a potential employer of an accountant with a certification in Bitcoin. These firms provide the online wallets that enable people to buy and sell with one another, and they manage vast amounts of transactions. Payments have typically been assessed a fee of 1.49%, and this income can be taxable. An accountant may also need to track inventory receipts and prepare balance sheets. Businesses who accept cryptocurrency in exchange for goods and services can include car dealerships, online retailers, cell phone providers, nonprofit charities, software companies, and more.

An accountant may also be called on to help his or her employer run more efficiently by analyzing financial trends within the firm — an invaluable service. To become an accountant, a bachelor’s degree is required, and in some cases, a master’s degree is needed. Other certifications are available, including the credentials needed to become a certified public accountant. Licensing is not a requirement, but it can provide you with more opportunities for employment. Job growth within the accounting sector is expected to grow 11% between now and the year 2024. As more cryptocurrencies, like Ripple and Monero continue to be developed, there will be an increased need for accountants who are trained in blockchain technology to handle the recordkeeping for these endeavors.