Hocus pocus! Boom! Blockchain gave birth to a powerful concept of triple-entry-bookkeeping and … it’s simple! Let’s have a look at its workings and some implications.
Here you are: make one initial entry on the Blockchain and -based on that entry- make two automated entries in the classical in-house double bookkeeping system. One plus two is three: triple entry bookkeeping!
A transaction entry on the Blockchain is subject to a network-wide consensus. An ingenious voting process -in which all network computers participate- ensures each transaction’s legitimacy. And once registered, the entry becomes immutable and unfalsifiable.
This Blockchain consensus for each individual transaction creates, in essence, the equivalence of what a bookkeeping audit produces at the end of the accounting year: credibility and trust.
So Blockchain is turning things kind of up its head: the auditing part from classical bookkeeping is moved up-front! And this is powerful!
The consequences of triple entry bookkeeping as described are simple and powerful at the same time: audit up-front, consensus up-front, no reconciliation with counterparties, reduction of litigations, reduction of manipulation, removal of conflict of interests in the audit process … and we even could ask ourselves if this will induce a reduction in risk premia on financial instruments.
As a conclusion, Blockchain is so fundamental in its constituent elements, that essential processes and tasks in business will be redefined completely!
Let’s get ourselves prepared and start by understanding the fundamental building blocks of Blockchain!