The Most Significant Invention Since Double Entry Accounting.
The Process Of ANY Transaction Is Double Entry Accounting.
Buying a Pint Of Milk.
That Is Double Entry Accounting.
By Daniel Bennett
Ledgers. Double entry accounting first academically formalized by Luca Pacioli. Italian Mathematician. Father of accounting. Assets=Capital+Liabilities.
Basic error detection.
Italian merchants first observed to be using this system commonly with expanding trade empires
Ledgers kept at central location by bookkeeper/accountant
Double entry accounting used today by everybody big and small
What are miners? One of the goals of blockchain is to be a trustless network to the same degree remove humanity from a lot of the things that make networks work. So when we talk about accounting on the blockchain we try to make sure that this is mostly automated but still controlled by humans.
So, what does that mean? We will refer to 10,000 witnesses in stages.
Merchants, prefer integral sorts of transactional units of exchange. So, things like cash for instance, are often preferred by merchants because it’s something you can get your hands on its easily verifiable. This is so cash. So cash is king. Cash is trustable, reliable. However cash can be counterfeited.
It’s not exactly completely free of being problematic or useless. So, even cash can be compromised. But, merchants can also prefer cash for other reasons such as, for instance if you had a credit card charge, that charge can be reversed. And some credit cards can be eligible for reversals for weeks or even months per transaction so there is a long period of risk. For a merchant in terms of some transactions perhaps being reversed unexpectedly and can cause problems for merchants maintaining capital.
Right let’s go back, to our stadium full of 10,000 witnesses. We have all of the two of us in the middle of the pitch in front of the crowd, we are exchanging a two dollar coin. So all of these witnesses see us exchanging our two dollars. Remember, that handshake was the RULE that everyone needed to see that the transaction validated that we both agreed that handshake had to be observed.
So all of these witnesses in our stadium example are individual people looking at our transaction. They are looking at it with their human eyes they are verifying with their human brain what’s going on and this is the standard as we mentioned applying to cryptocurrencies. What cryptocurrencies are doing is, as this is an analogist – we need to remember that all all these people here in the picture above, are not in fact doing this manually. They are not using their human eyes and their human brains. What in fact all of these witnesses are is little computers. And it’s the computers that are in fact observing the transactions that are observing the rules. The hand-shakers is an analogy for a rule such as no counterfeit, that it can’t be a double spend transaction. One transaction has to have an input that matches an output everything has to line up. This of course is surmising the double entry method. Remember I talk about nodes and how they verify transactions. Again, all these witnesses are in fact not people, but computers. And what’s important is that all those computers are established by human beings.
So, we have, mining equipment & nodes all of that stuff. The witnesses, the verifiers, and legitimisers of transactions and its all managed by human beings. But, the human beings are not doing any of this – the specific detail oriented work, we’re simply establishing rules. Human beings are essentially saying we are going to look for the handshake, we’re going to look for the double spins, we’re going to look for a coinbase so we know these transactions came from somewhere and so on and so forth. We’re going to look for the rules.
But, next time, we are essentially going to create a computer programme that looks for those rules, that recognises the rules and then makes the network operate.