How is the Blockchain Different from Banking Ledgers?


New Member
May 25, 2017
Because don't banks and accounting systems use ledgers to track and timestamp transactions...


Well-Known Member
Aug 28, 2015
Hi @lucaf, and welcome to the forum. Yes both banks and blockchains are similar that way. This paper Money is Memory gives a contemporary look at money and the idea of the ledger. Where the concept of bitcoin's blockchain diverge greatly is with in the application of the Quantity Theory Of Money.

In the old economy the central bank measured economic growth and then set an interest rate and banks followed that interest rate. A high interest rate would reduce the money supply as people would take money out of circulation to save and preserve value or pay down loans, while low interest rate would expand the money supply, people would spend or invest in the economy because they get no return on savings. (the economy we have now is not free market capitalism it's centralized control of capital markets )

The difference is the banking ledger can be eddied by an authority or the owner. Fractional reserve banking is a typical owner edit (i.e. the bank creates money it does not have to lend to people for interest), and a garnishing order from the government is a typical authority edit.

The bitcoin blockchain is written by nodes that collect transactions in a block and writ them to the blockchain, the ledger. Fraud and edits to the ledger are prevented by Proof of Work, (PoW).

The firs node to show PoW gets a reward (new money + mining fees) once a block is written everyone who does PoW must check the block of transactions is valid and the PoW is valid. If the PoW and transactions are valid they then start a race to find the next block. These nodes are called miners today they collectively are earning about $5,000,000 a day they compete for market share of the reward which is set arithmetically to write a block on average every 10 minus.

A mining pool is multiple miners pooling there efforts to get better luck, they then share a fraction of the reward according to effort.

PoW is very competitive and the more computational work a node does the more chance tehy have of writing the block reward and writing the transactions. Competition to get more market share makes the network more secure.

Editing the blockchain is practically impossible. It requires the network to undo the PoW done before. Fraud is prevented by the market competition. It's more profitable to cooperate and earn part of that $5,000,000 a day than it is to make a fraudulent transaction. A fraudulent transaction costs the perpetrator $5,000,000 a day to keep faking it and is reversed when they stop the fraudulent attack.

For the ins and outs I suggest you read the Bitcoin White paper its light reading and explains the security incentive very simply.

bank ledgers is susceptible to inflation and editing

bitcoin's blockchain has inflation control and no editing.

Be skeptical of people selling just "blockchain" the thing that secures bitcoins blockchain and makes it immutable is the fact that people use bitcoin as Digital Cash. Bitcoin's blockchain security scales to the value users store on the network and the block reward has value because people value it as money. without the money function the blockchain would not be secure.