People have always looked for ways to reduce uncertainty between one another when exchanging value. Unfortunately abstract trust is not enough to ensure an exchange will go smoothly. As trade mushroomed from an act between individuals in small communities to an intricate process involving multiple entities all over the world, we’ve had to find ways of keeping track of it all. We resorted to recording our transactions so as to reduce dependence on trust, and those records have been stored on ledgers since the days of the first trades.
Ledgers are the foundations of accounting. They are systems by which people can establish who owns what, who has what, and who owes what to whom. While the concept has remained the same, the medium used to record transactions has varied over time and through technological advances. From clay tablets to papyrus, books to computers, the goal has always been to keep records as efficiently and effectively as possible. Humans have been maintaining ledgers for thousands of years, and while the medium and methods have changed over time, one element of ledger-keeping has not. From Mesopotamia to McGladrey, a third party party has always had to register and oversee transactions and maintain accounts. This makes sense as it provides the basis for validation, and allows people conducting a trade of value to have a basis by which to trust one another.
Our modern economy is filled to the brim with middlemen whose primary purpose it is to keep record of exchanges of value. To maintain and update ledgers. They do a very important job, for we can only really own something if there is agreement — consensus — that we own that thing. Ownership is set by social agreement, and that agreement needs to be held somewhere. Yet, as long as that record is kept somewhere, it must also be in the hands of someone, and with that responsibility comes a great deal of power. The growth of global trade and commerce has led to the creation of a vast network of ledger systems, which are vulnerable to downtime, corruption, misinterpretation and fraud, the repercussions of which can be catastrophic.
But what if we didn’t have to trust institutions to maintain our ledgers? What if we could put those ledgers online and decentralize them? What if money was no longer printed or controlled? We’re on the cusp of another revolution. One that goes far beyond the realm of finance and accounting. A breakthrough of colossal proportions. The question of trust between trading, collaborating and competing parties may no longer be an issue, thanks to Distributed Ledger Technology.
Blockchain is the lifeblood of the first cryptocurrency, bitcoin. It’s the most popular form of Distributed Ledger Technology or DLT, and the first ledger to eliminate the need for a central authority. The first ledger to eliminate the need for trust in single, centralised person or institution. It does this by distributing information previously held in a centralised ledger across a decentralized network — a network with no central point of power or control. It’s a governance technology. A trust protocol.
No one person or company owns a DLT— it is leveraged, maintained and verified by all who are incentivised to use it. Whether that DLT is used to record currency, trade, identity or anything else is down to its creators. The magic behind it all is its ability to maintain consensus between collaborating and competing parties without having to rely on any one person. The result is a decentralized system of data registry where transactions are transparent, reliable and incorruptible — and yes, it’s as big as it sounds.
