Triple-Entry Bookkeeping: How Satoshi Nakamoto Solved the Byzantine Generals’ Problem

In 2008, Satoshi Nakamoto essentially solved the infamous computational issue called the “Byzantine generals’ problem” or the “Byzantine Fault.”

Throughout the history of man, people used ledgers to record economic transactions and property ownership. A ledger is often referred to as the “principal book,” and entries can be recorded in stone, parchment, wood, metal, and with software as well. Ledgers were used for centuries, but the shared ledger system became really popular in 1538 when the church kept records.

In Mesopotamia, which was about 5,000 years ago, scientists discovered Mesopotamians used single-entry accounting ledgers. Much of it was complex and these ledgers accounted for things like property and money. But with a single-entry ledger, all anyone has to do is remove one line of entry or a few lines, and the funds would be gone or disappear from the records.

Triple-Entry Bookkeeping: How Satoshi Nakamoto Solved the Byzantine Generals' Problem
An old church ledger.

During the Renaissance period, intelligent people discovered double-entry bookkeeping, which literally changed everything in the world of accounting. Our modern financial system is based on the double-entry system created more than six hundred years ago. Double-entry systems grew because trade swelled beyond borders, so people needed a way to maintain records that were far more trustworthy than the single-entry accounting ledgers. Leveraging single-entry accounting would not work well when dealing with people who are thousands of miles away.

The double-entry system was first documented centuries ago by Luca Pacioli (1446–1517), a mathematician and Franciscan friar. Towards the latter part of the 15th century, this system became extremely popular, as it was leveraged by merchants and traders everywhere. Now double-entry bookkeeping isn’t necessarily transparent and these types of books can be private or open. The system does a much better job than single-entry accounting when it comes to errors, fraud detection, and financial reality. But most mathematicians…

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