Before starting with Ledger Management and Transactions, let us refresh our memory on the topics that was discussed in the previous session. We came across the challenges of the digital transactions that come up while transactions of cryptocurrency are carried out. The authentication and the security issues related to the Account permissions and transaction record decentralization. Towing the same lines, Ledger Management and Transactions look further into the other challenges that come up while transacting for crypto.
Topics to be discussed
- Decentralization of Ledger
- Replicating the bookkeeping process
- Transaction Ordering and Block allocation.
Ledger Management and Transactions – Decentralization of Ledger
After the creation of the accounts s discussed in the earlier session, we also came close to eliminating a third-party administration role as far as account creation and authentication are concerned. However, challenges are still ripe as far as the ledger entries or the bookkeeping records are concerned.
The coordinator who maintains the list of transactions and balances and who both validates and orders the transactions we request against some business and technical rules. This single point of control ultimately decides what is reflected in your account, whether your transaction goes through or not. As a single point of control, it is classified as a financial institution and has the regulatory burden of having to identify you and all other customers, a process known as Know Your Customer or KYC.
Ledger Management and Transactions - Replicating the bookkeeping process
The more people you have sharing a secure system and its information, the less vulnerable that information is to manipulation. However, a group of ‘trusted bookkeepers’ would inevitably require their own gatekeeper, so we would be back to the central point of control problem again. The solution is for anyone anywhere to be able to be a bookkeeper without asking permission from anyone else and without hierarchy.
All bookkeepers, wherever they are, maintain the same complete books of record and are peers of equal seniority, with checks and balances such that if any single bookkeeper were forced to try to censor a transaction or manipulate the database, the others would ignore or exclude them.
Ledger Management and Transactions – Transaction Ordering and Block Allocation
Every bookkeeper will have a different idea of the order of transactions. Given that there could be hundreds of transactions being created anywhere in that there could be hundreds of transactions being created anywhere in the world, and given that it takes some time for these to fully propagate across the network, if every bookkeeper tried to put these Ledger Management and transactions in order, there would be many conflicting versions of the ‘correct’ order of transactions.
In the next session, we go further into the technical and architectural details of the transaction and block development process.
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