Blockchain in Accounting: Climbing the Slope of Enlightenment

The public blockchain revolutionises accounting by introducing a single shared base layer of bookkeeping. A global public blockchain network facilitates peer-to-peer trusted data exchange and interoperability without needing a trusted intermediary.

A Pragmatic Approach to Blockchain in Accounting

Simply put, accounting is the most direct use case for blockchain. As a network that has no dependence on a single service provider, blockchain ensures the integrity of records.

The technology is more complex than people think though. As many pilots failed to gain mainstream adoption, we entered into the Trough of Disillusionment stage of the hype cycle. This stage has been characterised by a diverse and disjointed array of blockchain systems that created more problems than they solved.

The good news is that we currently find ourselves climbing the Slope of Enlightenment. As the market gets more educated, blockchain implementations become simpler, more robust, and best of all, cheaper.

One of the pioneers of this new wave is the Swedish software company VISMA, a provider of accounting software with 15,000 employees and €2B in annual revenue. In 2021, VISMA’s subsidiary Yuki took a strategic leap to develop a pilot that differentiates itself from all prior attempts: using a single global public blockchain.

VISMA | Yuki connected its accounting platform to the blockchain as a means to authenticate invoices for enhanced security and automation. Still going strong as of the time of writing in 2024, this implementation of blockchain in the accounting suite has enabled efficiency in accounting processes and built a new foundation for future innovations.

In this article, we’ll cover the why, the how, and the next steps needed to reach the Plateau of Productivity.

Why is Blockchain a Good Fit for Accounting?

To explain why blockchain is a good fit for accounting, let’s keep it grounded by using the real-world VISMA | Yuki implementation.

VISMA | Yuki and our team at mintBlue collaborated to develop a means of exchanging complete invoice data in a peer-to-peer and trusted manner. By following industry standards like the XML data format using the Universal Business Language (UBL), we can write invoice information to the public blockchain so that a traditional invoice processor of any kind can process the data — with no additional effort required.

Our implementation allows organisations that receive an invoice to retrieve any missing data from the blockchain, while also independently validating the invoice’s authenticity. This is a fully automated process, and allows any incoming invoices to be nearly-immediately validated by the bookkeeping for further processing. For administrative staff, this results in a massive savings of both time and resources.

Let’s paint an even more detailed picture by going over some of the additional strengths and benefits of our approach where blockchain works hand-in-hand with existing accounting software.

Adherence to Established Standards

Our implementation has been through rigorous compliance checks to adhere to the criteria established by the European Union’s Data Act and the FAIR data principles:

Findability
- Receivers can find invoices through a public transaction ID. The key to accessing the encrypted data is handed over peer-to-peer outside the network.
Accessibility
- We exclusively use industry standards that are open and publicly verifiable.
Interoperability
- Any system can integrate our SDK and connect to the public blockchain. Our SDK is open source and can also be implemented independently from mintBlue. Users have no vendor lock-in with mintBlue.
Reusability
- Data published on the public blockchain is composable and can be repurposed for other uses (e.g. for invoice factoring or real-time taxation).

Data Ownership & Immutable Storage

Traditionally, many platforms have taken a “walled garden” approach, locking the data into themselves and only allowing access to administrators.

Our implementation empowers VISMA | Yuki users to maintain the ownership of their financial data and control who has access to it, and under what conditions. Due to the immutable (unchangeable) nature of blockchain, this storage is permanent. This means that even if you stop paying for your accounting software subscription, you won’t be cut off from your invoices — you always retain full access and control.

This decoupling of software and data means that rather than being a walled garden, the software has become a tool that interfaces with the data stored on the blockchain. In our “data ownership-first” approach, users have absolute control over where their data can be interfaced and used — but it is only their responsibility as long as it is also within their jurisdiction’s legislative framework. After all, data ownership here also implies that the digital signatures used to publish information on the blockchain is connected to the legal identity of the users.

To facilitate this and to secure mutual trust, we’ve partnered with the Dutch Chamber of Commerce in The Netherlands and also work with Qualified Trust Service Providers (QTSP) in other countries.

🤔 Digging Deeper: Qualified Trust Service Providers

In the coming decade, the demand for digital identity solutions will create a market for QTSPs. Individuals and organisations can choose to which QTSP they want to attest to their digital signature on the blockchain. This introduces a network of portable digital signatures that can be interfaced with, trusted, and leveraged in a multitude of applications.

This brings the ever-important element of trust to information of any type, from media, to articles, to credentials, and beyond.

In the context of accounting, if an individual or organisation breaks the law by committing some kind of financial fraud, they are not automatically caught — at least in most jurisdictions. But a blockchain implementation would mean that there is a permanent and immutable trail of evidence, making it far simpler for authorities to investigate what happened and enforce the law appropriately when a dispute arises.

This is contrary to what happens today on the internet. A lack of a straightforward evidence trail leads to large data scraping practices and back-door deals with data brokers. This inevitably results in investigations that are not targeted, but very broad, with many lawful citizens caught in the crossfire. Privacy concerns around this practice lead to widespread societal tensions towards both governments and Big Tech.

Universal Multi-Party Access Rights

Integrating blockchain into accounting systems enables a more organised overview of information, as well as that information’s provenance. Storing data on the public blockchain creates a global reference to any piece of information, while also keeping everyone in-sync and up-to-date.

The European Union is introducing new regulations in the coming years regarding the continuous transaction control of invoices. This practice will be mandatory over time as a 5 billion Euro VAT gap in Europe needs to be patched.

Niels van den Bergh, CEO mintBlue

There are many methods to perform continuous transaction control. For example, Spain has made it mandatory to add the tax office in CC for every invoice companies send out. But this is very cumbersome and, in our opinion, a prime example of an inappropriate use of technology.

Centralising data in a distributed ledger (blockchain) streamlines data exchange both securely and effortlessly. This straightforward multi-party encryption allows the appropriate authorities to independently audit the exchange of invoices at any time.

Tamperproof Audit Trail

Today the procurement cycle is broken up into many data silos that have an incomplete view of the invoice lifecycle.

The append-only nature of blockchain ensures all parties are held accountable for their actions. When an error is made, the only way to set the record straight is by adding a new entry and attaching it to the original. This means that the blockchain becomes the single source of truth.

Naturally, the interpretation of the data remains subjective however. Thus, when a dispute arises, traditional mediators, laws, and courts are still needed to interpret.

A Single Global State for Network Resilience

The public blockchain has 100% availability and resilience — two critical security elements that are often overlooked.

Financial systems integrated with the public blockchain have an immutable, always-available backup. In the event of a system crash, connection loss, or hacking attempt, the system can simply resync from the blockchain once security is restored.

How Can Blockchain Innovate in the Accounting Sector?

So with all the above in mind, you might ask: How can we implement blockchain in a sustainable way? And how can a proper blockchain implementation lead to efficiency gains in the accounting sector?

We’ve hinted at the answers over the course of the article, but let’s lay them out more concretely and concisely.

The Fundamental Problem in Accounting that Blockchain Solves

One of the most significant challenges for companies today is the sourcing of invoices and orders from third parties. These documents come in through different mediums and in different formats, from the traditional paper or fax, to PDF and UBL. These external sources must be validated and trusted before a receiver can safely add the documents to the bookkeeping.

Not having a secure exchange medium for invoices opens the door to fraud and drastically inhibits automation possibilities. Today ERP systems and bookkeeping platforms can automate up to 60% of the bookkeeping, but that number can only increase further as the incoming data is entirely digitised and authenticated.

Niels van den Bergh, CEO mintBlue

The solution is to have a fully digitised version of every invoice, always available globally, without going through a trusted institution to view it, and which includes a digital signature by a legal entity for ensured authenticity. For this goal, blockchain fits like a glove.

With blockchain’s public shared global storage layer that tracks and maintains invoice data and the associated legal entities, we have established a new foundation for innovation and can start thinking further.

Future Innovations for Blockchain in Accounting

With organisations implementing blockchain to take ownership of their financial documents and to grant multi-party access for indexing and viewing, new possibilities emerge:

Governments can track invoice flows continuously and do real-time tax payments, digital VAT processing, and even monitor for money laundering.
Auditors can track and monitor transactions happening between companies.
Financial institutions can finance and trust invoices in real-time.
Social and environmental impact projects can directly tap into trusted bookkeeping, for example, to offset certain predetermined goods & services.

The end game of blockchain in the accounting sector is the possibility of a so-called ‘triple-entry’ bookkeeping system, where every credit and debit transaction between multiple companies is interconnected, enabling seamless bookkeeping that can save companies significant overhead in the administrative workforce.

Niels van den Bergh, CEO mintBlue

Conclusion: Approaching the Plateau of Productivity

There are several clear use cases for blockchain in the accounting sector. Although many organisations are developing proofs of concepts, and some are even piloting implementations, the design choices that have been made thus far have not lead to larger scale adoption.

From our perspective, we have identified a lack of education to be the primary inhibitor. By focusing here on an implementation that does work and unpacking why and how it works, we have aimed to shed light on what we believe is the path forward.

mintBlue challenges the status quo in blockchain thinking: We believe that consolidation into a single chain must happen before more significant adoption can occur.

Consolidation of data into a single blockchain enables the necessary network effects to reap the benefits of blockchain: It would allow ecosystem actors to trace the full lifecycle of data in a tamperproof manner without needing to trust an intermediary. Furthermore, the consolidated transaction volume, combined with a UTXO-based network architecture, allows for an economic security and privacy layer — it would simply be far too expensive to try to sift through the pool of encrypted transactions.

Many understand the value thesis of a single global blockchain, just like the thesis of a single global internet, but only some believe in the technical feasibility of this vision. At mintBlue, we have a clear idea and pragmatic approach to how a global blockchain can achieve this through a UTXO-based network architecture that supports parallelisation, as well as our integrated partnerships with specialised R&D firms, universities, and professional data centres worldwide.

Niels van den Bergh, CEO mintBlue

After all, one of the primary drivers for the invention of blockchain — and one of the primary reasons for not wanting multiple blockchains — was how Bernie Madoff was able to run a large-scale Ponzi scheme by maintaining multiple sets of books. By having multiple sources of “truth” and simply presenting the “right” book at the right time, he was able to trick stakeholders into believing the authenticity of the book in front of them.

This is precisely why the mainstream multi-blockchain thesis makes little sense: Multiple blockchains reintroduce this multiple-books dilemma, the very problem that blockchain was meant to solve in the first place — having a single source of truth. All along, blockchain was meant to be the solution to the issue of fooling people into believing a copy was authentic.

To truly realise the potential of blockchain and arrive at the Plateau of Productivity, it is necessary to use a single shared blockchain with unlimited scale. That is precisely why mintBlue leverages the public blockchain and why we will always advocate for others to do so too.