Bitcoin: TRIPLE ENTRY CROWD ACCOUNTING

[casascius]

I suppose we need some way of saying they are writing the ledger then… Nothing catchy springs to mind just yet though.

I would almost like "blocks" to be called "pages".

Miners are competing to create the next block in the chain.  They must solve a complex mathematical problem to solve a block.

Transaction confirmers are competing to record the next page in the public ledger.  To be accepted into the ledger, their page must include the solution to a difficult mathematical problem.  The mathematical problem is specific to each page and is based on all of the transaction entries they are trying to record on that page.

The second one makes more sense to the uninitiated, I hope.

[1715026937]

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[BTCurious]

That could work

tbh I'd be happy with anything that's not "mining", but if we're going to change, we better do it right.

[casascius]

I agree, it should sound like they are working and getting paid to perform a useful service, rather than pulling valid money out of their butts. Then it would make sense to people why they are doing it and why it is valuable, instead of suggesting they are getting something for nothing.

[becoin]

Reconciling is like checking to see if two sums balance and, if not, explaining why.

No.

In accounting, reconciliation refers to a process that compares two sets of records (usually the balances of two accounts) to make sure they are in agreement. Reconciliation is used to ensure that the money leaving an account matches the actual money spent, this is done by making sure the balances match at the end of a particular accounting period.

http://en.wikipedia.org/wiki/Reconciliation_(accounting)
This is exactly what miners are doing when checking against double spending!

tbh I'd be happy with anything that's not "mining", but if we're going to change, we better do it right.

If we use auditors instead of miners then reconciling is the perfect addition.

[notme]

Not sure I like verifying or reconciling. These mean things that have absolutely nothing to do with what miners do.

Verifying means checking to see if something is valid.  It is sort of like asking a question and seeking either "valid" or "invalid" as an answer. For example, nodes verify digital signatures before deciding whether to relay transactions.  On the other hand, miners are competing to create a record, not competing to see if something is valid or true. Verifying in Bitcoin is a quick process, miners are doing work towards confirming, recording, logging transactions that were already valid the moment they were created.

Reconciling is a misuse of an established accounting term. The established meaning has nothing to do with what miners are doing. Reconciling is like checking to see if two sums balance and, if not, explaining why.  Miners don't do this.

But the record they are competing to create is a record of valid transactions.  Any invalid transactions are ignored, so they are performing verification.

[niko]

Excellent thread. I would like to see a few sentences at the end that also explain the initial creation of the supply.  Whenever I try to explain Bitcoin along the lines of what is attempted here, I get asked about the origin of Bitcoins in circulation. Any suggestions?

[casascius]

Reconciling is like checking to see if two sums balance and, if not, explaining why.

No.

In accounting, reconciliation refers to a process that compares two sets of records (usually the balances of two accounts) to make sure they are in agreement. Reconciliation is used to ensure that the money leaving an account matches the actual money spent, this is done by making sure the balances match at the end of a particular accounting period.

http://en.wikipedia.org/wiki/Reconciliation_(accounting)
This is exactly what miners are doing when checking against double spending!

The efforts of mining aren't to check against double spending, particularly since most double spending attempts are unlikely to ever be relayed to a miner, they are far more likely to be rejected by non-mining nodes before they ever arrive.  While miners are nodes too, and miners also perform the same check, the bulk of miners' efforts - the efforts that create gigajoules of heat good for drying strawberries - is to create a record that allows others to define and reject double spending.  The verification step doesn't create enough heat to even make a raisin.

Compare to a county recorder's office.  The job of a county recorder's office isn't to prevent real estate fraud, it's to record things in a journal.  Of course, that journal can be used to avoid fraud, but the job of the recorder is to record.

You have highlighted part of the Wikipedia article, but seem to have underrepresented what it says after the highlighted part: making sure the balances end at the end of a particular accounting period.  That has absolutely nothing to do with any of the things that what we call "miners" do.  The SHA256 algorithm doesn't help "balance" accounts - it helps create a strong permanent record.

But the record they are competing to create is a record of valid transactions.  Any invalid transactions are ignored, so they are performing verification.

All nodes do this, whether or not they are "mining".  If all nodes verify, then what do miners do?

[SgtSpike]

"Etching"

[becoin]

You have highlighted part of the Wikipedia article, but seem to have underrepresented what it says after the highlighted part: making sure the balances end at the end of a particular accounting period.

There is no point in highlighting the entire quotation... The highlight is to match against your previous argument! As far as your recent point, yes, every block is a set of transaction records and the end of the block is the end of accounting period. I don't see any valid arguments against what I have suggested.

[casascius]

You have highlighted part of the Wikipedia article, but seem to have underrepresented what it says after the highlighted part: making sure the balances end at the end of a particular accounting period.

There is no point in highlighting the entire quotation... The highlight is to match against your previous argument! As far as your recent point, yes, every block is a set of transaction records and the end of the block is the end of accounting period. I don't see any valid arguments against what I have suggested.

"Accounting period", as used in the finance industry and in business, means a month, a quarter, a fiscal year.  Using "accounting period" to mean a period that approximates 10 minutes - and whose actual length is totally random - will do little to help them understand what's happening.  Also, there is no requirement that a "block" include any or all of the transactions that happened during the "period" they purport to account for.  This becomes even less correlated in the event of what we presently call a chain reorganization.  May as well just continue to call it mining a block.

If miners' GPUs were busy adding the inputs and the outputs of the transactions together and comparing the sums to ensure they balance, then I would certainly agree that they are reconciling.  If you are familiar with the algorithm that miners run though, you'll know that's not the case.

[casascius]

Excellent thread. I would like to see a few sentences at the end that also explain the initial creation of the supply.  Whenever I try to explain Bitcoin along the lines of what is attempted here, I get asked about the origin of Bitcoins in circulation. Any suggestions?

If using my proposed jargon replacements, it would sound like this.

"The inventor of Bitcoin stipulated that the initial distribution of Bitcoin currency would be awarded to those who gave their computing resources to storing, maintaining, and recording new pages into the public journal.  The system's design grants a fixed but diminishing reward per successfully recorded page.  It was designed this way, in part, to give a market incentive for participants to bootstrap the Bitcoin infrastructure in the initial absence of fee-generating transaction volume.  As Bitcoin grows, its inventor designed it such that the costs of creating and maintaining the public journal would slowly transition from rewards of new currency per recorded page, to charging fees per recorded transaction, particularly so that the creation of new currency would eventually reach a limit.  Because anyone can work on creating pages and collect fees for doing so, the fees are kept in check by market forces of competition to closely reflect the actual cost of maintaining the journal."

(note that I'm playing with the term "public journal" in place of "public ledger", which of course refers to what we call the "block chain"... because a "journal" sounds more like a book with "pages" being a meaningful unit, where "ledger" is more likely to bring a spreadsheet to mind, where you add rows.)

[BTCurious]

Excellent thread. I would like to see a few sentences at the end that also explain the initial creation of the supply.  Whenever I try to explain Bitcoin along the lines of what is attempted here, I get asked about the origin of Bitcoins in circulation. Any suggestions?

Here is my attempt. I tried incorporating the new terminology, as well as a number of things about the security and workings of bitcoin in general.

"The recorders record the transactions to the public ledger, setting them in stone so to speak. This recording costs a lot of processing power, to prevent someone with malicious intent from adding fake pages to the ledger with their home computer. Or, for that matter, to prevent a government that wants to hurt bitcoin from adding fake pages to the ledger: the recorders' combined is larger than the 500 top supercomputers combined, which means it is impossible for anyone to create fake pages.
As a compensation for the processing power, the recorders of the network currently get new coins. These coins didn't exist before, and slowly increase the supply of bitcoins available. The speed at which these new bitcoins are generated decreases over time. Currently there are about 7 million coins, but there will never be more than 21 million coins.
This reward for the recording serves both to distribute the new coins, and also to motivate people to be a recorder. Over time, the generation reward will go down. It is expected that at that point the transactions themselves will provide enough reward: Some of the transactions will cost a small fee, in the order of half a dollarcent. This fee is a reward to the recorders.

Having this small fee also prevents people from trying to harm bitcoin by sending lots and lots of small transactions, trying to clog the network. If they want to do that, it would actually cost them money, so the recorders would not care since they're compensated by small fees on the spam-transactions."

Note that I have taken some liberty in the explanation. The bit about "fake pages" is slightly different in reality, but I think it is more important to create an explanation that regular people from all backgrounds can understand. The difference between my explanation and the real explanation is small enough that they won't ever notice it, but it's much easier to explain. This still gives them a confidence in the security which is roughly equal to the real explanation.

[molecular]

I suppose we need some way of saying they are writing the ledger then… Nothing catchy springs to mind just yet though.

I would almost like "blocks" to be called "pages".

Miners are competing to create the next block in the chain.  They must solve a complex mathematical problem to solve a block.

Transaction confirmers are competing to record the next page in the public ledger.  To be accepted into the ledger, their page must include the solution to a difficult mathematical problem.  The mathematical problem is specific to each page and is based on all of the transaction entries they are trying to record on that page.

The second one makes more sense to the uninitiated, I hope.

I like "page".

Let's use "block chain" as a technical term concerning the implementation. The bitcoin "block chain" is a type of (or: implements a) "public ledger" with certain properties.

[SgtSpike]

Public ledger is scores better than block chain.  It's a term that actually makes sense to people in the business and financial world.

[becoin]

"Accounting period", as used in the finance industry and in business, means a month, a quarter, a fiscal year.

Accounting period can be any period. Accounting periods are not only those periods that are defined in IRS manuals... Every organization is free to define their own accounting periods to suit their internal needs. If you need reliable data for all financial transactions every minute then 1 minute can be the accounting period.

If you are familiar with the algorithm that miners run though, you'll know that's not the case.

Hmm... Well, I thought you have started this thread trying to abstractly describe Bitcoin in as few words as possible with terms that would make sense to those who are familiar with banking but not with technology? So, my short answer to your initial question is miners are like auditors and what they do is like reconciling data sets of financial transactions for 10 minute accounting periods.

Obviously, your intention is to argue against every proposal and teach me what is mining.

[casascius]

"Accounting period", as used in the finance industry and in business, means a month, a quarter, a fiscal year.

Accounting period can be any period. Accounting periods are not only those periods that are defined in IRS manuals... Every organization is free to define their own accounting periods to suit their internal needs. If you need reliable data for all financial transactions every minute then 1 minute can be the accounting period.

Ideally, we want terms with similar meaning in the real world, the objective being to use language to describe concepts people already understand.  Kind of how Apple decided that a "subdirectory" would better be understood by the world as a "folder".  If most accountants and financial sector workers are familiar with accounting periods of random length approximately ten minutes long, that may or may not contain transactions that took place during the period, then sure, it is an excellent choice, and I will leave it at that.

Obviously, your intention is to argue against every proposal and teach me what is mining.

As it should be, and so should yours (not the mining part).  If the idea of changing core Bitcoin terminology gets a consensus around it, the pros and cons of every credible choice should be well enumerated.  If you already understand the mining algorithm, then accept my apologies for assuming otherwise (most people do not understand the mining algorithm nor do they need to).

I am looking to come up with better terminology to describe what bitcoin is, not so much what it's like, so I am favoring words that mean what is literally happening.  I am considering formally proposing to the developers and the community at large that we avoid terms like "block" and "block chain" (except when talking about source code etc.) in favor of accurate non-computer-scientific terms that will be better understood by the non-technical public, while still remaining literally correct.

[BTCurious]

I am looking to come up with better terminology to describe what bitcoin is, not so much what it's like, so I am favoring words that mean what is literally happening.  I am considering formally proposing to the developers and the community at large that we avoid terms like "block" and "block chain" (except when talking about source code etc.) in favor of accurate non-computer-scientific terms that will be better understood by the non-technical public, while still remaining literally correct.

+1

[Steve]

I came up with the term TRIPLE ENTRY CROWD ACCOUNTING as a way to abstractly describe Bitcoin in as few words as possible.  I wanted to solicit feedback.  This term would make sense to those who are familiar with banking but not with technology.

People have referred bitcoin as a distributed digital notary service.  I like this description.  With such a notary service it is possible to implement a triple entry accounting system.  I wouldn't say that bitcoin *is* "triple entry crowd accounting," but it certainly enables it.  I like the use of "crowd" to distinguish it from your typical triple entry system which requires an independent third party to a transaction.  In the case of bitcoin, the crowd is that third party.  I'm not especially crazy about the term "crowd" however…maybe "Distributed Triple Entry Accounting" or "Two Party Triple Entry Accounting" (since it doesn't require any trusted third party …aside from the network itself).

[becoin]

I came up with the term TRIPLE ENTRY CROWD ACCOUNTING as a way to abstractly describe Bitcoin in as few words as possible.  I wanted to solicit feedback.  This term would make sense to those who are familiar with banking but not with technology.

People have referred bitcoin as a distributed digital notary service.  I like this description.

Every notary service in every country is heavily regulated and licensed. Why do you want to break the law?

I'm not sure why you all insist to put bitcoin in a certain category that already exists? Don't you understand that you're actually trying to put it under existing legal framework? This is the government and banks that need this done, not the average bitcoin user. Bitcoin is just bitcoin. Nothing like it was created before. This is the power of bitcoin. Let people read what is bitcoin. IMO, short explanations would do more harm than good.

[P4man]

"Bitcoin is a payment network based on triple-entry crowd accounting.  A crowd of computers - run by ordinary Bitcoin users - observes the transactions, produces a single common ledger, and keeps everyone honest.  

Bold part needs rephrasing or simply scratch it. Its not like all bitcoin users are honest.

The magic that came from Bitcoin's inventor - the thread that holds the whole thing together - is a documented

Dont like that phrase much either. Let the reader decide if its magic or not. IMO, it isnt magic, its math. Magic is something without rational explanation. Its brilliant perhaps, but no hocus pocus.  A thread holding the whole thing together also makes it sound as if its very fragile, when in reality its ridiculously robust.

and published process by which the entire crowd can always agree on what transactions it observed, despite differences in timing and perspective, and even despite varying levels of honesty among participants.  Bitcoin's design ensures that no matter how big the crowd, its collective efforts always produce exactly one consistent transaction ledger."

As many others, I dont like the word crowd. I think words like "public" and "Open" are more appropriate.