An Excerpt:

Innovations in ledger systems have played a role in the development of mathematics and culture to a degree which remains undervalued even in academic economics circles. The development of ledger systems in Mesopotamia was instrumental in the advancement of early mathematics. In 1494 Luca Pacioli described double-entry book-keeping; this was an important enzyme for the growth of the Italian banking dynasties of the Renaissance and beyond. Pacioli also taught mathematics to Leonardo da Vinci and understood that, like other areas of mathematics, accounting systems have a logic to them which has a certain aesthetic quality as well as the obvious functional aspects. During the seventeenth and eighteenth centuries the maturation of stock markets and joint stock companies meant that ledgers now played a key role in allocating ownership of the entities themselves rather than just the underlying assets. What stock markets were to the eighteenth and nineteenth centuries – the first age of globalisation – blockchain technology has the potential to be to the current age of globalisation – the internet age. Writing in Harvard Business Review, Marco Iansiti and Karim R. Lakhani (2017) called blockchain a “foundational” technology as opposed to, for instance, a “disruptive” technology since it has the potential to affect many different sectors of the economy. As they put it, “With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain.”

The ledger system that currently forms the basis of our financial and monetary system was well summarised in a Bank of England paper on blockchain (Ali et al 2014 p263):

“In modern payment systems, payments are made by reducing the balance in a customer’s account and increasing the balance in the recipient’s account by an equivalent amount — a process that has not changed since the 16th century. The difference lies in the technology employed to record the balances and transfer them between different banks. Technological developments over the past 50 years have affected payment systems in two key ways. First, the records and ledgers have been converted from paper to electronic form, which has increased the speed of completing transactions and reduced operational risks. Second, the emergence of low-cost technology has allowed new payment schemes to emerge, such as mobile money schemes.

“Despite the application of new technology, the basic structure of centralised payment systems has remained unchanged. At the heart lies a central ledger, with settlement taking place across the books of a central authority, acting as a clearing bank (a service usually undertaken by the central bank of a given economy). Each participant, typically a commercial financial institution, holds a balance at the central bank, recorded in the ledger, but also reflected in the participant bank’s own (internal) ledger. Individual customers, branches, or even other (typically smaller) banks would then hold balances at the participant bank, which would again be reflected in their own ledger.”

Such pyramidic ledger systems are increasingly impractical in a modern economy. A cheque written in America for a company in Britain, for instance, can take up to four weeks to clear. To put that into perspective, the SS Royal William, the first steamship to cross the Atlantic, did so in 1831 in only 25 days. Blockchain provides a ledger structure for the economy which challenges the nature of modern financial and trading systems at their most fundamental level. The internet as it exists today is good for exchanging information, blockchain allows value to be exchanged with the same ease and without the timocratic elements of the current financial structure.