Ledgers Matter

Blockchains and Bitcoin can seem so challenging and technical but its really built on an old system of debits and credits in a bookkeeping ledger.

Blockchains are a double-entry ledger system like double-entry bookkeeping, which is the basis of accounting.

Accounting is actually quite brilliant and there is a good argument that it spurred the Renaissance and thus the modern world.

But that’s a story for another post. Suffice it to say one of the greatest thinkers and writers Johann Wolfgang von Goethe called double entry accounting,

“among the finest inventions of the human mind.”

I bet he would get a kick out of blockchain and distributed ledgers secured by cryptography and invented in anonymity.

Double entry bookkeeping was the intellectual achievement of the 14th century that created the banking dynasties that fueled and financed the Renaissance.

The distributed ledgers of blockchains are its latest incarnation. It is the basis of banking and financial markets and business.

The blockchain can act as a payment system. A payment system is a method to amend and record changers in ledgers for money.

Coins and tokens are used as money in crypto on a blockchain.

Ledgers Matter

• The characteristics of a good ledger are:
• Immutable and tamper-proof
• Time-stamped. When transactions take place.
• Document the counter-parties to transactions
• Accuracy

In our current banking, we make deposits and withdrawals. We use debit and credit cards to record the ledger activity. We also use checks to record a transaction.

The salient information on a check is:

• Date (timestamp)
• Signature
• Payer and payee
• Account number and routing number
• Amount

This information is what is stored in the blockchain to record each transaction.

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