Bitcoin Triple Accounting

From P2P Foundation
Jump to navigation Jump to search


Triple Accounting and the Verification by the whole network of peers


"The most remarkable innovation brought by Bitcoin deals with the system of accounting that we use today.

Double-entry bookkeeping is what we use today to make sure that earnings and expenditures match, basically authenticating the flow of money and making sure “nothing is duplicated”.

From an historical perspective, the double-entry bookkeeping system is very ancient and barely actualised through the ages: it was described by an Italian mathematician and Franciscan friar named Luca Pacioli in his book “Summa de arithmetica, geometria, proportioni et proportionalità” published in 1494 in Venice.

The second half of his book, dedicated to geometry, is a section titled “Trattato de computi e delle scritture” in which he describes the necessity of mathematics in accountancy. Those principles were certainly not invented by Pacioli, but mostly actualised, formalised and translated in his tractatus, as demonstrated by the existence of a previous book “Della mercatura e del mercante perfetto” by Benedikt Kotruljević published in Latin some decades before, or as hinted by the presence of another figure behind his portrait in the famous painting attributed to Jacopo de’ Barbari who is believed to be Albrecht Dürer, an artist and traveler who shared Pacioli’s passion for geometry and magic.

Such a system is still, as of today and despite its flaws, the one in use on large scale around the world by most accountancy systems. Being a system that ensures the univoque matching of what is written with what is real, it can be seen as gateway to the digital dimension and can undoubtedly benefit from the technical innovation through digital tools. Hence my argument that Bitcoin is basically this innovation or, more precisely, the implementation of an innovation as the triple-signed receipt method.

Quoting Ian Grigg:

- The digitally signed receipt, with the entire authorisation for a transaction, represents a dramatic challenge to double entry bookkeeping at least at the conceptual level. The cryptographic invention of the digital signature gives powerful evidentiary force to the receipt, and in practice reduces the accounting problem to one of the receipt’s presence or its absence. This problem is solved by sharing the Digital Press – 7 – 6 April 2013Bitcoin, the end of the Taboo on Money D.J. Roio records - each of the agents has a good copy. In some strict sense of relational database theory, double entry book keeping is now redundant.

The accounting system of triple-signed receipts in Bitcoin respects the original role of money as contract (and digitized speech, I’d argue).

Quoting Marco Sachy’s research on complementary and alternative currency:

- The ontology of money is as relational, abstract and cogent as agreements are in general and the possibilities to formulate these agreements are unimaginable, bearing in mind that the orthodox process of currency design and creation is - drawing from Adorno and Horkheimer’s Dialectic of the Enlightenment - an arbitrary and historically determined one.

It is the very substance of those cogent agreements that money represents and can be verified by matching declarations on two books or, as Bitcoin does, calling the whole network of participating peers to witness every contract and entangling it into a cryptographic blockchain. Simply put, this is bookkeeping in the age of Bitcoin." (