Understanding Central Ledgers
Central ledgers are either physical books or digital files used by individuals or organizations to record and track economic transactions in a centralized manner.
They differ from decentralized ledgers in distributed ledger technology (DLT) systems.
From Ancient Records to Double-Entry Bookkeeping
Throughout history, ledgers have played a crucial role in recording and verifying asset ownership and establishing individuals’ legal identity, status, and rights.
From ancient to modern times, ledgers have been employed to maintain accurate financial records.
The advent of double-entry bookkeeping in 16th-century Italy revolutionized ledger usage in banking and accounting.
This technique, involving recording every entry in one account and opposing access in another, greatly enhanced ledger records’ accuracy.
Experts believe this innovation contributed to the expansion of the capitalist economic system.
Advancing Beyond Centralized Accounting
In a traditional setting, a central ledger is managed by a company’s accounting department to document all economic activities for financial analysis and tax reporting purposes.
However, this approach has drawbacks.
It relies on a central authority to oversee the ledger, making it susceptible to errors or manipulation, whether intentional or unintentional.