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As far as I know, blockchains keeps transaction records from the beginning of time. This lets the blockchain retain a history of traceable transactions so it can maintain validity.

Double-entry book-keeping keeps transaction records since the "opening balance" (usually).

Both systems ensure that for every credit there's a debit, and vice-versa. Does this mean that double-entry book-keeping is practically a blockchain, with each block being a transaction?

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Does this mean that double entry book-keeping is practically a blockchain, with each block being a transaction?

Not exactly. In double entry book-keeping, every institution keep its own accounts that reflects the truth. This means there are 2 version of truth and there is reconciliation between these 2 truths to agree on actual truth.

In blockchain, there is single copy of truth that every one can refer to.

For example Bank A opens a Current/Checking account with Bank B. This account that is held in Bank B's book is called VOSTRO [Say number 123] and Bank A maintains a version of this account in its book. This is called NOSTRO [say numbered 789]. Every time Bank A makes a payment / or receives credits on Bank B account, it reflects this in its book in NOSTRO account 789. Like wise Bank A would keep a record of this on Account 123.

Ideally both these entries should match; in reality there are some discrepancies. These are hence reconciled every day. Sometimes its due to date the entries are off; sometimes the entries are missing / incorrect due to various reasons.

In blockchain, the idea is there is one account, say ABC. Whatever is in this account is truth and Bank A, and Bank B [or any related parties] can look at it. The recon is much easier by Bank A and Bank B; as they get to see complete set of same transactions that have hit the blockchain.

  • That's right. In Blockchain, NOSTRO is held by the will of the Universe and we trust that it is correct because mathematically it would be impractical to write "alternative facts" into it instead. – Lightness Races with Monica Mar 5 '18 at 10:07
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Both are examples of the general method of applying checksums: a single number that can be used to check that a large number of records is valid.

However, in blockchains the hash covers the whole block: all information within it is checked for correctness. In double entry book-keeping, only the total value of transactions is checked for. It is still possible to change e.g. who the payment was to.

Blockchains are used in "no-one trusts anyone" situations, where it would be very bad if payment destinations could be modified after the fact. In comparison, double entry book-keeping is kept behind closed doors and can only be modified (or even seen!) by authorized people. The checksum there mainly acts against accidental mistakes, not against intentional ones.

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It's also hard to disassociate the blockchain from POW (Proof of Work).

Imagine that your ledger can be updated by anyone, anyplace and that you do not know who that person is. How will you prevent all sorts of bad actors from altering entries and stealing money? (The quick answer to that question is Proof of Work.)

  • 1
    It's not that hard; proof-of-stake, for example. – ChrisInEdmonton Mar 5 '18 at 14:22
  • @ChrisInEdmonton - :) Yeah. There are alternatives. I was trying to keep it simple. – Mayo Mar 5 '18 at 14:42
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Double entry requires credit and debit or other well double entry, blockchain is a single entry distributed ledger.

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    Blockchain doesn't have to be a single entry distributed ledger. It may be, but it doesn't have to be. – ChrisInEdmonton Jun 23 '18 at 13:15

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