Could Bitcoin change accounting forever?

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Most think of Bitcoin as just a currency, but it’s more complex than that. A better definition would be an open-source, decentralised exchange, capable of hosting a whole range of financial products, including accountancy services. Nick Chowdrey, Technical Writer at Crunch, explains

Digital is a disruptive force in the accounting industry. Crunch is the fastest growing accountancy firm in the UK, offering an online accounting service for small businesses, freelancers and contractors. This offers a more affordable alternative to its traditional competitors through a clever combination of software and remote, human services.

With the growing popularity of cryptocurrencies such as Bitcoin, the accounting industry could be set for further changes. Here’s why.

How Bitcoin can improve access to finance

In the same way that the internet has vastly improved access to information by creating a global connected network, Bitcoin has a similar potential to improve access to finance. Using the Bitcoin network, it is possible to instantly transfer wealth to anyone in the world with an internet connection, for little or no fee.

Critics say that Bitcoin could never be used in this way because the price fluctuates too wildly, making it too risky for service providers to accept it as payment. This could be the case, but there are already technologies being developed to overcome this problem.

Payment services like BitPay allow customers to pay in their local currency – the Bitcoin payment network is then used to transfer the funds and vendors can receive payment in their own local currency. This eliminates expensive overseas transfer fees, making it easier for accountants to offer their services internationally.

Could the use of Bitcoin lead to a complete decentralisation of the accounting industry?

As accountancy software becomes more and more sophisticated, this could mean a complete decentralisation of the accounting industry, removing the need for there to be any in-house accountants or ‘bricks and mortar’ firms at all.

Automation could speed this process along, aided by new technologies that use the Bitcoin blockchain. For those who don’t know how Bitcoin works under the bonnet, all Bitcoin transactions are recorded on a public ledger maintained by the network, known as the blockchain.

This means that every single Bitcoin transaction that has ever been made is visible to the public. Nobody has had to create or maintain this ledger – it has been automatically generated by the core Bitcoin software and requires zero maintenance.

Bitcoin: the future

Although no company offers this just yet, it would be possible to create a piece of software that uses this ledger to automatically record all incoming and outgoing transactions made by a company or individual, using this information not only for balancing the books, but also as a way to automatically create tax returns and other accountancy functions.

This technology will become more significant as tangible cash money is inevitably phased out – a process already well underway, as can be seen by the introduction of near field communication technology in credit/debit cards and, of course, Bitcoin itself.

Nick Chowdrey is Technical Writer at Crunch. You can follow him on Twitter.

Nick Chowdrey is a journalist who has contributed to Crunch Accounting, The Guardian, VICE, HuffPost UK, Copyblogger, Econsultancy and Social Media Today.

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