TD₿: Bitcoin: An Accounting Revolution by Permabull Niño
TL;DR Bitcoin is a breakthrough in accounting where fraud is impossible and there's absolute assurance over the ledger's data.
The accounting layer in a money system is responsible for reporting the numbers for every transaction and producing an overall balance sheet.
Single entry accounting is the most basic form of accounting where an individual creates a list, and simply adds/removes entries to describe an asset.
This form of accounting was rife with human error and fraud because there was nothing to stop someone from simply adding/removing an entry from the list. This led to the invention of Double-entry accounting.
Double-entry accounting is where all entries are separated into two groups, “assets” and “liabilities” and then balanced using the balance sheet equation. If an entry is added as an asset and there is no matching liability, it is simply discarded as an incomplete entry or labeled as fraudulent.
With Double-entry accounting, there’s a clear strategy to identify errors in the ledger as well as to identify if the errors were the result of an accident or fraud, but there is no way to prevent fraud altogether (think Bernie Madoff).
Bitcoin is a technological breakthrough in accounting because it enables Triple-entry accounting where fraudulent entries are impossible on an immutable, transparent ledger.
Permabull Niño expands on the idea that Bitcoin is a technological advancement in the field of accounting in this blog post (05/21/2019).
Bitcoin is an accounting truth machine.
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Quote of the Day
“Bitcoin is more sound than gold due to triple entry accounting. Everyone can see the ledger.” - Lawrence Lepard, Managing Partner at Equity Management Associates
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