Decoding Bitcoin’s Transaction Growth: The Emergence of History’s Greatest Accounting Innovation

This is an opinion editorial from Darin Feinstein, co-founder and co-chairman of bitcoin mining firm Core Scientific.

Recent surge in transaction volume Conversations and debates have sprung up about the increased transaction fees on the bitcoin network and the overall goals and purpose of bitcoin. This has resulted in questions about the future of the network and its ability to handle increasing demand.

In answering those questions, it can be helpful to consider the intricacies of bitcoin’s transaction volume through an accounting lens, because the bitcoin network is, at its foundation, an accounting ledger whose data is written on a public chain. is and is recorded forever. Through this lens, we’ll examine why bitcoin’s transaction volume matters, how often such growth will occur, and whether or not this growth is sustainable.

Bitcoin’s Accounting Innovation

As an accounting ledger, bitcoin represents the first true accounting innovation. more than 700 yearsmarking the transition from legacy, stakeholder-controlled, Personaldouble-entry accounting system to a publicTriple-entry system.

“Triple entry” simply means that two-party transactions (debit and credit) are written to a public, immutable ledger (the third entry). “Public” means that the ledger can be accessed at any time on the bitcoin network.

The accounting innovation here is to remove stakeholders (humans) in exchange for only machines (aka, servers and nodes) that run difficulty-adjusted proofs of work (PoW). Bitcoin uses PoW to authenticate entries, instead of relying on stakeholders who may be biased or incentivized to commit fraud or manipulate the ledger. This means that miners and nodes, not humans, control the network in a fair, manipulation-free environment.

In contrast, all older accounting technologies rely on trusted third parties, known as “stakeholders”. The fatal problem with a stakeholder-controlled system is that humans are fallible, and the ledgers are subject to human error, fraud, censorship, and manipulation.

Until bitcoin, every government, every bank, and every corporation on earth used a private, double-entry accounting system, 100% controlled by the stakeholders. This means that stakeholders can secretly change the books and records of all these legacy systems, away from the public eye. To catch fraud, corruption or even error, the entire stakeholder-controlled system – in which each transaction is traced to the root – would need to be audited. The process is time consuming, complex and cumbersome, and like all legacy systems, the audit is conducted by humans, further making the audit system subject to fraud, corruption and error.

Bitcoin solves this in three ways:

1. converting private accounts to public accounts
2. By removing stakeholder control and using a difficulty-adjusted PoW to record transactions
3. Eliminating the need for human audits as the network self-audits each block, TimeChain

Altogether, this creates the first immutable ledger in human history.

Accounting for Truth with Bitcoin

Accounting can be viewed as verifying the veracity of the data involved. The role of accounting is to make sure that the data you are being shown is true. And accounting in society has never been more important than it is today, because truth is under constant attack in every field. All systems depend on accounting, and the sheer volume of information available makes it difficult to discern the truth.

Truth is the most important thing on the planet earth. How do you record the truth, collect the truth and then spread the truth if all the records are corrupted by humans?

Because the bitcoin ledger is public, self-auditing and immutable, it cannot be corrupted or altered by any human. Never before in the history of record-keeping could you trust a ledger to be 100% truthful, until the invention of bitcoin.

If you are a member of a legacy, stakeholder-dominated business that relies on legacy accounting, and you have historically been able to manipulate the truth through control of ledgers, then the bitcoin ledger is lethal.

In terms of who controls the information on the ledger, at the top of the food chain are authoritarian governments that seek to control the truth. Bitcoin destroys these systems as governments, as major stakeholders, no longer have control over information/data. That is why bitcoin is often referred to as a “Trojan horse”. On the face of it, it is presented as a technology based on money, but diving deeper, bitcoin represents a new accounting technology that will give people more freedom within the borders of every country.

When you give people immutable data that cannot be confiscated, you give them freedom in the form of property rights, sound/hard money, truth, control, and more.

Bitcoin will be the ledger of choice for everything

A somewhat concise way of explaining the “why” that drives people to choose bitcoin for transactions is that the underlying ledger that controls the data is the best ledger ever invented, free from fraud, control, and manipulation. is free from manipulation, and provides freedom to those who use it. ,

Simply put: If you value the data you want to record, you are strongly encouraged to choose the only ledger in human history that will record it for eternity without subjecting it to human manipulation.

If you believe that an immutable immutable ledger is better than a legacy, mutable, stakeholder ledger, intuition suggests that all data will eventually be recorded on the bitcoin network, from wills and trusts to corporate data, to climate data, to vaccines. Till data, title/ownership data and so on. The list of possibilities is endless.

All businesses, governments and banks rely on books of accounts. Almost all industries, except accounting, have made significant discoveries and inventions since their inception. After 700 years, the triple-entry system has just been invented (double entry was invented in earnest in the 1400s), and the legacy stakeholder’s hesitancy to accept an analog system moving to a digital, irreversible system has to be questioned.

The Ordinals Are Just The Beginning

Ordinals and NFTs are important to some people. The beauty of a free system is that everyone has a choice about what he or she values. You don’t need to engage with them if you believe their value is zero, but bitcoin as a free market won’t censor some transactions because others don’t value them. Networks will always allow innovation and free choice. Those who wish to pay a reasonable fee can record ordinal or NFT transactions on the bitcoin network. In the future the bitcoin mempool will always have a base layer of transactions waiting for fees to drop enough to be written on-chain.

Since all data will want to be recorded on this network, this will not be the first or last time that your transaction will wait to be recorded. For smaller transactions, there are layer 2 solutions such as the Lightning Network, which live on top of bitcoin and can be used immediately. Ordinals and NFTs may all go away in the future, and transaction volumes may drop, but they will eventually be replaced by other projects that similarly want to use this ledger, be it product or data, The cycle will repeat.

Since bitcoin innovation is to remove the need to trust stakeholders, anyone advocating censoring the content of the bitcoin network is inherently anti-bitcoin or doesn’t understand bitcoin. Those who want to exploit the control and power over the bitcoin network are precisely the problem bitcoin solves.

As the world realizes that the only way to preserve the truth (i.e., data and information) is on the bitcoin network, traffic will increase. This increased traffic creates a strong environment for entrepreneurs to build on top of the bitcoin network and a variety of products and services will emerge from that aggregated content and underwrite the bitcoin base layer.

Bitcoin Fear, Uncertainty and Doubt (FUD) is spread by those who challenge or fear this technology – Understanding this network is no small task, it takes thousands of hours. Anyone who says they understand bitcoin after a cursory examination is a liar or ignorant. Similarly, transaction fee FUD is generated by people arguing on both sides, that there are too few transactions for the network to support as well as too many transactions for the network to support.

The truth is that the network is working as intended, and a full mempool that requires free market search for value transactions is inevitable and thus, intended.

Accounting is the operating system that runs the world. Making sense of the data requires all systems and information to be faithfully entered, analyzed, and then truthfully distributed. Historically, the ledger has been protected by physical human violence, meaning that whoever has a monopoly on violence (aka, governments) can alter the record and/or its distribution.

Recording truth on the bitcoin ledger is the only way to record data that for the first time in history does not rely on human violence to protect or transmit it.

This is a guest post by Darin Feinstein. The opinions expressed are solely his own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.