 When we're talking about economies, we're typically referring to this information layer that resides on top of what we call the real economy, the physical production and exchange of goods. Accounting is then the basis of how we create this information layer and bring all these physical objects and services into this information system of the economy that we then exchange and analyse. The earliest, most rudimentary economies of pre-civilisation may have existed purely in a physical form, but an economy of any complexity requires that the real system is translated into this virtual information form, not just physical assets and liquid currencies, but also identity and contractual agreements. At the end of the day, it all has to be converted into an information format. In order to form organisations, exchange goods and services, we need to define ownership and keep track of exchanges, and this is done by a series of ledgers. A system of ledgers forms the basis of records of who owns what and what has been exchanged within the system. A ledger consists simply of data structured by rules. Any time that we need a consensus about facts, we use a ledger. Ledgers record the facts that underpin modern economies. All of our economic institutions are at the end of the day networks of ledgers, some simple, some more complex. A firm is often described as a nexus of contracts. A firm is in fact a ledger of contracts, people, technology and capital that are arranged in a particular fashion to deliver a function. Ledgers maintain ledgers in a variety of forms, of property, of employment and responsibility, of the ownership and development, of supplies and contracts, of intellectual property and corporate privilege, of physical and human capital, it's all recorded in ledgers. It's safe to say that our economies are ledgers all the way down, and at the bottom will find a government-backed legal system. Where a ledger requires coercion, in order to be enforced, the government is required. Governments maintain ledgers of authority, privilege, responsibility and access. Governments are the trusted entities that keep databases of citizenship, taxation obligations, social security entitlements and property ownership. Ledgers can confirm ownership through property rights, for example, property title registers, map, who owns what and whether their land is subject to any conditions or constraints. Ledgers confirm identity, businesses have identities recorded on government ledgers to track their existence and their status under tax law. Ledgers confirm status, citizenship is essentially just a ledger, recording who has what legal rights and what obligations people are subjected to. Ledgers are ledger, giving those employed a contractual claim on payments in return for work. Likewise, the voting system within a political system is just another form of ledger. Ledgers confirm authority, ledgers identify who can access what bank accounts, who can validly sit in parliament, who can enter restricted areas. At their most fundamental level, ledgers map economic and social relationships, they can be understood as agreements about the facts and when they change. This consensus about what is in the ledger and its accuracy is one of the fundamental basis of a market economy and indeed the contractual agreements structuring our whole societies. Ledger technology has for thousands of years remained largely unchanged. Ledgers originated with the beginning of written communications. Ledgers and writing developed at the same time in the ancient Middle East to record production, trade and finance. Ancient clay tablets with cuneiform scripts listed units of work, taxes, rations etc. The first international trade networks worked through a structured network for alliances that functioned a lot like distributed ledgers. The modern era brought the first major changes to ledgers in the 14th century with the invention of double entry bookkeeping. By recording both credits and debits, double entry bookkeeping allowed for the efficient reconciliation of information between different ledgers. The 1800s saw the next revolution in ledger technology with the rise of large bureaucracies in the corporation. These centralized ledgers enabled major increases in organizational size, scope and efficiency but relied completely in the trust in the centralized institution. In the latter half of the 20th century, ledgers moved from analog to digital. For example, national databases of passport ledgers were digitalized and centralized. These digital databases are computable and searchable, making them greatly more efficient. However, a database still relies on trust. A digital database, however efficient it may be, is only as reliable as the organization that maintains it. We can see how the economic structure of modern capitalism has evolved around the structure of these centralized ledgers. The 2009 Nobel Laureate in Economics, Oliver Williamson, showed that people produced an exchange in markets, firms or governments depending on the relative transaction costs of the different institutions. Building upon the work of Robert Coase, Williamson's transaction cost approach provides a key to understanding what institutions manage ledgers and why they do so. It might seem strange that a ledger, a somewhat mundane and practical document associated mainly with accounting, would be described as a revolutionary technology, but the significance of the blockchain is largely based on the significance of ledgers as the foundations to our economies. Because at the end of the day, ledgers are nothing more than a kind of database or information system. How we record value is of course critically dependent upon the information technology that we have available to us. Traditionally, we've relied on centralized institutions of private enterprises or governments in order to provide the authority needed for people to trust a given ledger and the records of exchange and ownership that it contained. However, today through the advance in information technology, specifically the combination of distributed computing and cryptography, blockchain technology now provides the infrastructure for a network of computers to collaborate towards maintaining a shared, tamper proof and trusted ledger. Thus the blockchain provides an alternative to traditional centralized ledger systems of firms and governments. As such, it is legitimate to say that the blockchain is an institutional technology. It is a new way to maintain a ledger that is coordinate economic activity distinct from firms and governments. A ledger of contracts and capital can now be decentralized and distributed in ways they could not be before. Ledgers of identity, permission, privilege and entitlement can be maintained and enforced without the need for private organizations or government backing. The ledger is instead maintained by a distributed network of nodes. This changes the very foundations of economic activity with massive repercussions for how economies are structured and function. It literally rewires the channels through which we coordinate in the production and exchange of goods and services in society. The changes are so pervasive and the possible applications of blockchain so all-encompassing that some of the most fundamental principles governing our society are now once again up for grabs. The blockchain is a distributed ledger that does not rely on a trusted centralized authority to maintain and validate the ledger. This means that we can create economic networks for the recording and exchanging of value that are not dependent upon the centralized systems that currently run our economies in society. Such a system for coordination via distributed ledgers would have massive advantages. It would drastically reduce the cost of recording and thus make it possible for us to expand formal legal systems in economic activity. For example to the 2.4 billion people that currently have no formal ID or the 70% of global population that has no documented land rights but also to record extremely small exchanges of value that are currently not feasible and to also account for new forms and different forms of value that are currently unaccounted for.