What Is a Ledger?
A ledger is a book that contains a grouped and permanent record of all the transactions of a business. It is often described as a boring and monotonous document with lines that are associated with the accounting profession.
History of a Ledger
Accounting ledgers were developed by Sumerians of Mesopotamia (present-day -Iraq) during 3500-3000 BCE, also known as ‘proto-cuneiform’. It was used in the recording market, consisting of drawing, symbolizing a quantity set up in rows and columns next to an adjusted pictorial representation of goods and commodities.
These depictions started to evolve into a complete written language towards the end of the Uruk period in 3200 BCE, known as cuneiform, derived from the Latin word cuneus, meaning wedge. The writing style appeared like a wedge. It was scribbled down in soft clay and later fried or baked in the sun.
The Sumerians discovered the spreadsheet before they found out the word processor. The carving details the movement of commodities such as grain, textiles, fish, pots, tools, and cattle by the date of the transaction. At that time, the ledgers in the Mesopotamia period were kept safely in temples that were considered banks at one point.
Importance of a Ledger
Ledgers provide an accurate record of all financial transactions and authorize permanent and relevant information as acquired. It records the fact that it strengthened the modern economy.
1. Ledgers confirm ownership: When the contract is recorded in a ledger, it also notes down the owner of the asset. Therefore, property registers are also ledgers just like checklists.
2. Ledgers confirm identity: Businesses have identities jotted down on government ledgers to track their citizen’s presence and their status under tax law. The company’s register records the identity of enterprises.
3. Ledgers confirm status: The register of births, deaths, and marriage records the survival of individuals at the central movement, which later uses the information to confirm their identities whenever those individuals are in touch with legalities.
4. Ledgers confirm authority: Ledgers identifies who has the authority to sit in parliament, who can obtain what bank account, who can work with children, or who can enter restricted areas.
The Invention of Double-Entry Book-Keeping System
The ledgers in the time of Mesopotamia era remained the same until Fra Luca Pacioli (Italian mathematician and Franciscan mendicant) recorded the double-entry book-keeping which became the referral study for accountants in Europe.
The discovery of a double-entry book-keeping system permitted to write down both debits and credits and allowed for the understanding of information between ledgers. What Fra Pacioli did, gave rise to the banking sector as we know it today. Additionally, this system helped Lorenzo de Medici’s family to initiate the first merchant bank and start a global banking system, simply by recognizing the importance of the ledger. He solved how to intermediate between savers and borrowers by creating a ledger to keep all records of all the debts and claims.
Medici created a powerful centralized system of trust and with the help of their specialized services, others who were unknown had no way to trust each other, now had a way to conduct fair business. The expansion of centralized ledgers that are clung to mediators such as banks and central authorities meant that their power has increased and is built around a system of assigned and concentrated trust.
The Flourishing Blockchain Economy
Blockchain Technology has been popular nowadays. But, what is blockchain technology?
Blockchain is considered to be the pioneer of digital cryptocurrency, Bitcoin. It is a type of database that collects information in groups that holds them in blocks that have a certain cache potential and is grouped together. Blockchain was first discovered in 1991 by two researchers, Stuart Haber and W. Scott Stornetta, who wanted to execute a system where documents, dates, and time could not be interfered with. Its main objective is to allow digital information to be recorded permanently.
One of the most popular uses of blockchain is Bitcoin transactions. Blockchain-based technologies offer trust as well as privacy to ensure private and protected records. It is best recognized as a decentralized ledger that decreases the costs of mediators, such as banks and central authority. Each block represents a transactional record and a chain linked to them. The distributed computer network confirms the record and chronologically lists the blocks of transactions, hence the term blockchain. It can be quite adherent when it comes to reducing security threats and data leaks.
In 2009, Bitcoin proposed a new ledger technology, an open peer-to-peer distributed ledger allowing users to verify, examine, and record advanced as well as complex transactions economically in a permanent manner that doesn’t have to be guided or looked after by a central authority. This was followed by Ethereum’s network built on their very own public blockchain that allows anyone to launch smart contracts and decentralized apps (dApps).
The use of blockchain by governments and institutions is to make their work more efficient and reliable. It can give taxpayers and consumers more control over their data. But, blockchains also take a stand against the control that comes with centrally operated firms and governments. It is a new way to maintain a ledger that is coordinated economically. Distributed ledger technology has the potential to revive economic, innovation, and job growth.
To cut a long story short, distributed ledger technology is currently being used in trade, commercial, and investment banking including debts and borrowed, insurance, estate management, market infrastructure, international payment, healthcare, and verification of identity. As this technology has already made groundbreaking advancements in various sectors, the integration of blockchain technology is increasing in real-life applications.