The Doppler Quarterly Winter 2018 | Page 20

Ebenezer Scrooge and His Ledger Mr. Scrooge is, of course, the notorious money lender and miser from Charles Dickens’ famous 19th century novella, A Christmas Carol. Many films have been based on this story. My personal favorite is “Scrooge,” the musical, starring Albert Finney. In one particular scene, we follow Scrooge as he calls on several people to seek payment for the loans he’s extended to them. As his debtors negotiate payment, he marks entries into a little black book. Then he requires that each entry be signed to acknowledge the transaction. Later, an employee (Bob Cratchit), would transcribe the transactions into a larger black book— Scrooge’s ledger. Ledger’s like Scrooge’s have been used for centuries as permanent, sequential records of value-exchange transactions that are maintained by a single, trusted authority. But when the reach and volume of transactions continued to grow, so did the need for intermediaries. Having previously established these third- party trusted relationships, businesses would engage intermediaries to recon- cile and confirm the validity and sequence of transactions in their ledgers. Say, for example, Scrooge wanted to do business with a company in France with whom he’d never interacted—or established any level of trust. Both parties would record their business transactions in their own ledgers. Then they’d engage the services of a third party with whom they’d both previously estab- lished trust. That mutually trusted third party would reconcile the ledgers’ transactions to ensure consistency and avoid potential discrepancies. Of course, since the third party is also running a business, both Scrooge and the party in France would each pay a small fee for services rendered. Fast Forward to Present Day Whether we realize it or not, ledgers continue to be a central part of our daily lives. Your bank maintains a ledger of your deposits and withdrawals. Your credit card company maintains a ledger of your charges and payments. Your local registry of deeds maintains a ledger of property ownership and transfer, such as your home. And your registry of motor vehicles maintains a ledger of vehicle ownership and title transfers. So we still use trusted central authorities to control our ledgers. The only fundamental difference between Scrooge’s ledgers and today’s is technology. Ledgers today are stored digitally, but the process itself hasn’t changed. Businesses still count on third parties to reconcile, ensure consis- tency, and ensure trust in the system. You trust your bank to maintain its ledger. And your bank trusts the third- party clearing house it uses for clearing and reconciling transactions through their ledgers (to other banks and businesses and their ledgers). 18 | THE DOPPLER | WINTER 2018