Cryptocurrency is a revolution, but maybe it’s not the revolution you imagined. That’s because more than anything, crypto is a revolution in accoun
Cryptocurrency is a revolution, but maybe it’s not the revolution you imagined. That’s because more than anything, crypto is a revolution in accounting.
While most people might not think much about accounting, without it we’d still be hunting and gathering instead of blasting satellites into space or communicating instantly on a network that circles the globe. Without accounting, you wouldn’t be reading this article on your iPad, or streaming music on Spotify or renting an Airbnb for your next vacation.
Without accounting, there’s no commerce or trade. Without commerce, there are no planes, no trains, no tractors, no steam engine, no skyscrapers or smartphones. We’d have no nation-states, no boats, no shipping containers traveling all over the world ferrying goods from the far corners of the Earth.
Dan Jeffries is a futurist, systems thinker and author. This article is part of CoinDesk’s Future of Money Week, a series exploring the varied (and sometimes weird) ways value will move in the future.
We’ve only had two accounting revolutions in the entire history of the world before now and both presaged a massive uptick in societal complexity and innovation.
Crypto is the third revolution in accounting. Just like the two that came before, it will mean a huge surge forward in new ideas and technologies that we’re only beginning to understand.
To understand why we just have to turn back the clock to the first two revolutions before racing forward into the future.
The first wave: single-entry accounting
Single-entry accounting goes back to our earliest civilizations. As soon as we could write, we started writing down who owed what to whom.
Hunter-gatherers had no need for accounting – that we know of – because they shared everything communally and their lives were spent in perpetual motion, so property was transient to them.
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We can trace some of the first examples of single-entry accounting to the Sumerians about 5,000 years ago on cuneiform tablets. Those tablets came from Uruk, one of the first great cities of the world. It was a city created by the people who famously gave us the “Epic of Gilgamesh,” the world’s oldest recorded story.
Single-entry accounting is incredibly simple: You just put a note in a ledger. “So-and-so owes $50,” for example.
But single-entry accounting can only take a civilization so far. A city like Uruk was massive by ancient standards, but it was only 5,000 to 6,000 people, not much bigger than a small town today.
SINGLE ENTRY ACCOUNTING
In about 3200 BC the first spreadsheet was invented. Farmers began documenting information using clay tablets in the earliest form of human writing ever discovered called Cuneiform. They partitioned their clay tablet into rows, columns, and cells. pic.twitter.com/O3wV9j88LK
— BITCOIN☂️⚡🇸🇻 丰 (@Cipherhoodlum) November 2, 2021
The only accountants back then were the king’s brother because you really had to trust that guy. All he had to do was wipe away a single line in the ledger and that money no longer existed. There was no way to verify, no way to audit and no way for two people to agree. The ledger was the only receipt and that made it brittle and prone to error and fraud.
It also made trade an extended family affair. The kings and queens traded with other nobility and mostly they kept all the money for themselves, leaving the rest of us to starve or scratch out a subsistence living. Powerful clans dominated, rising and falling in great waves over time. National borders were endlessly fluid, expanding and collapsing back as one powerful ruler came to power, only to die off or get killed later, his influence collapsing.
Single-entry accounting was powerful enough to sustain the world into the height of the Roman empire, with the city of Rome reaching 60 million to 70 million people at its peak. While the Romans never developed double-entry bookkeeping, they did have a prototype system that kept track of receipts and expenditures before their civilization started to decline over the next thousand years.
Still, single-entry accounting was almost all the ancient bean counters needed to sustain those early civilizations that dominated the Earth, keeping track of everything from taxes and tithes to tradable goods and services.
But for society to make the next leap, we needed a breakthrough.
The second wave: double-entry accounting
By the 1400s, single-entry systems really started to show their age.
Now we had ships circling the globe, traveling from near and far to bring goods from around the world, everything from salted fish and meat, to wine and beer, to exotic spices and fabrics. Because we could range over huge distances that meant we could trade with people we’d never met before, who weren’t blood relatives or even distant relatives in our tiny clan.
As boats became the most important way to carry goods to distant lands, port city-states like Venice became powerhouses of…
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