“It’s tough to lie when everybody is watching.”- Ian Grigg
The story of blockchain is closely tied with the story of accounting. In history, humans commenced with no system to attest asset ownership and we started with a single entry accounting system that facilitated us to verify asset ownership. This required us to have a single authority like king/queen to control the ledger. As human advance in timeline in order to take benefits of trade and recording business transaction we required to have at least two authorities so double entry accounting emerged.
Presently, in blockchain we have an asset being recorded on the ledger in the context of a transaction and it is the very first implementation of triple entry accounting. We can contemplate what this triple entry is and why we need it? Let’s explore it. The triple entry accounting is cryptography, where we have a cryptographic account of the transaction stored permanently and immutably on the ledger. We need it because it is decentralized, more secure, cost effective and irreversible. It is more secure because a single entity cannot corrupt the blockchain network and cannot alter the ownership; however it can be transferred anonymously.
Triple entry accounting is slightly confusing as there is not involvement of any third entry; rather, in a debit and credit system a third component is added and it is Blockchain that chains the books together and can facilitates to validate the transactions. The involved parties went through an agreement that evidently contains every context of a transaction like the traded product, buyer, seller and it is digitally signed.
Triple entry accounting system brings numerous features:
- There is no need for auditors to certify fairness or reliability
- It established a self-regulated and shared environment amongst all stakeholders.
- It fetches trust as it is irrevocable
- It offers a non-biased record that can be easily verifiable by anyone.
- “Last but not least, with triple entry accounting, for the very first time, we can seamlessly follow the world’s money.”- David Hartley
Currently triple entry is mainly used for cryptocurrencies and has just penetrated the accounting processes. The experts have a consensus opinion that it will completely disrupt the accounting processes. It is just the beginning of a new era in accounting and it will witness widespread adoption, it’s just a matter of time!!!