The Bitcoin Masterclass (Zurich) Day 1
Dr Craig S. Wright, Chief Scientist at nChain, recently held the third edition of his Bitcoin Masterclass series at an exclusive venue in Zurich, Switzerland. The Masterclass course forms part of a monthly series aimed at helping attendees understand the fundamentals of Bitcoin and the technology behind it.
The Bitcoin Masterclass series will give you a comprehensive overview of Bitcoin’s history, theory and design. Wright discussed the future of Bitcoin and the unbounded scalability of nChain’s blockchain solutions, with a focus on accounting and mapping transactions on-chain.
In the first session, Wright explained that the reason double-entry accounting was created was to solve some of the problems with error entry—with a double-entry book, two columns need to match, creating a check and a balance. He noted that triple-entry bookkeeping takes this further, by recording what is attributable to the transaction.
Wright began the session by noting that blockchains don’t fix anything, and are still susceptible to the basic rule of ‘garbage in, garbage out’. He added that, like any system, it is still open to human error – giving the example of someone who mistakenly orders the wrong number of plates for a kitchen. However, he noted that blockchain does create a system of accountability – meaning it is possible to tell who signed off on the plates, to begin with.
Double-entry accounting and accountability
Wright explains that double-entry accounting was introduced to address issues related to error entry. By having two columns that need to match, a check and balance system is established. However, triple-entry bookkeeping takes this concept further by recording the specifics of a transaction.
While accountability is crucial, Dr Wright believes that additional measures are necessary in dealing with tangible goods in the real world. He gave an example of counterfeiting in China where a manufacturing plant may receive a legitimate order for 10,000 units of a designer bag, fulfil it, but also produce an additional 10,000 items for personal gain. To combat this, non-fungible tokens (NFTs) can be employed to establish the authenticity of products, offering a practical use case for NFTs.
Dr Wright further explains that each component or item involved in the manufacturing process can be meticulously recorded. For instance, using a bottle of water as an example, he highlights the water source, the bottle itself, the lid, and the label, all of which can be independently documented. This comprehensive record-keeping allows for the tracking of input and output processes at every step.
Such transparency proves beneficial in the event of product recalls, enabling manufacturers to pinpoint and identify problematic parts more efficiently without the need for an entire product line to be recalled.
Evidence requires scrutiny
Triple-entry accounting goes beyond mere financial tracking by making records accessible to the public. By ensuring the immutability of these records, anyone can utilise them for various operations and functions. It’s important to note that not every specific detail and context of ledger entries is revealed to everyone. However, a permanent log exists.
Institutions that primarily represent the public and rely on taxpayer funds can greatly benefit from having an unchangeable record of how tax revenues are utilised. This record would indicate which parties authorised expenditures, and the reasoning or evidence behind such decisions, and could significantly contribute to rebuilding trust in the social contract.
