Accounting’s basis, ledgers, are as old as writing and money.
They used clay, wooden tally sticks (which posed a fire danger), stone, papyrus, and paper as their mediums. A change occurred in the 1980s and 1990s as computers began to be more widely used. This led to the digitization of paper records, which is usually done by manually inputting data.
These early digital ledgers modeled the cataloging and accounting of the paper-based world, and it might be argued that digitization has been applied more to the logistics of paper records than to their production. Money, written signatures, seals, certificates, bills, and double-entry accounting are all paper-based institutions in modern society.
Distributed ledgers have been made possible by advances in computing power and encryption, as well as the discovery and usage of certain novel and fascinating algorithms.
A distributed ledger, in its most basic form, is a database that each member (or node) in a vast network maintains and updates independently. The distribution is unusual in that records are not distributed by a central authority but rather generated and stored independently by each node. That is, each node on the network analyzes each transaction independently, arriving at its own findings, and then voting on those conclusions to ensure that the majority agrees.
Once this agreement has been achieved, the distributed ledger has been updated, and each node now has its own identical copy of the ledger. As a record-keeping system that goes beyond a simple database, its architecture allows for a new degree of dexterity.
The features and capabilities of Distributed Ledgers much outweigh those of static paper-based ledgers, which are a diverse form of media with character traits and capacities that far exceed those of static paper-based ledgers.
The essence of these new types of interactions is that the design and characteristics of distributed ledgers eliminate the expense of trust (which was previously supplied by notaries, attorneys, banks, regulatory compliance officials, governments, and so on).
The development of distributed ledgers marks a watershed moment in the way data is collected and shared. Distributed ledgers enable users to shift their focus away from database custodianship and toward how we utilize, modify, and extract value from databases — less about maintaining a database and more about managing a system of record.