While the hype around blockchain continues to grow, the technology is simply the next evolutionary step in accounting. Yet its emergence is highly significant, especially when it comes to minimizing mistakes. To err is human, and so we’ve created numerous programs and systems that limit, prevent, and inform us of our errors. When we can easily identify problems they are much simpler to correct.
The double entry accounting system is one such method. It requires that the movement of monies be written down twice to ensure that debits and credits are in sync. A mismatch proves an error was made; some poor sap has to identify the issue. I should know as I’ve been that sap. Such errors are likely human: a transaction was debited when it should have been credited; a 31 was input as a 13; extra zero was added. Double-entry bookkeeping is a 500-year-old semi-efficient method of data entry.
The algorithm is mightier than the pen, as it turns out. With blockchain, there is no need for a centralized source. Computers are connected to a network that provides all accounting for everyone on the chain. If one computer fails, the others serve as backups. All computers connected to the network aid in the development of a communal ledger. If one fails, the others pick up the slack. Instead of double-entry bookkeeping, blockchain is just X-entry bookkeeping, where X equals the numbers of nodes on the chain.
This leads to significant changes in the way that accounting functions, some of which are objectively beneficial while others simply provide different operating environments. The first and most obvious difference: everything is public-facing, with the exception of permissioned blockchains. Transactions sent and received can be tracked by anyone who knows a public address.
Furthermore, all transactions are final. There are no chargebacks, disputes, or do-overs. The computers maintaining a ledger record every transaction; it would require enormous effort and untenable financial cost to break in and change a record on an economically secured network. To do so would require hacking into multiple machines, each with different hardware and software, across international borders, nearly simultaneously. The technology required to make that kind of attack would be more valuable monetarily than the attack itself.
Financial record keeping is only the first of many applications of blockchains. If rather than “transaction” we call it “an exchange of data,” we account for any type of information that could be reduced to a number. That information can be placed on an immutable, public-facing record, increasing accountability, transparency, and trust. Blockchains are already being used to confirm the validity of University of Cagliari’s degrees in Sardegna. Vermont’s real estate industry is using blockchain for large-scale deals. The European Union is actively developing its own blockchain to facilitate “Global Money Transfer, for Social and Civic advancement, and for public and private sector adoption sponsored and validated by the European Commission.” Microsoft has already developed and deployed its own private blockchain platform called Azure.
We here in the RChain ecosystem are helping further these objectives. Our Venture capital partners, Pithia and Reflective Ventures, fund viable projects focused on the ethos of making the world a better place. LifeID, a Pithia portfolio company, aims to reduce and limit the amount of information that can be gathered on its users without their consent. Swytch, a Reflective portfolio company, “tracks and verifies the impact of sustainability efforts and actions on the worldwide level of C02 emissions.” The world needs to address global problems; the RChain platform is designed to help do exactly that. That is the communal purpose driving those in this ecosystem.