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Emerging Interest

Before the blockchain: 5 fascinating ledger systems that time forgot

byThe i-vest Team
byThe i-vest Team
The i-vest Team
Group 7 Article, 5 min read

Today, the blockchain is widely discussed as the gatekeeper of innovation in the world of finance, logistics, healthcare, and virtually every existing industry we currently use. But at the heart of it is a simple concept of a ledger, or a record of accounts and transactions, distributed across several computers in a linked network.

However, as revolutionary as the concept may be, the ledger has an interesting evolution across time and civilizations that highlights not just the need for a strong recordkeeping system in every robust system but also showcases the power of human ingenuity. One such system developed hundreds of years ago, even uses the same decentralized system as the blockchain. Without the technological complexity of course. Read on to discover five ways that ledger systems have evolved through time.

1. Tally sticks made of prehistoric animal bones

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Several ancient discoveries have been theorized to be methods of counting and record keeping. The 20,000-year-old Ishango bone, discovered in the Democratic Republic of Congo in 1950, has seemingly matching tally marks, which many archaeologists have suggested to be an application of one-to-one correspondence counting – a system where the items being counted or tallied are directly marked on the counting tool. In this case, the tool used is the thigh bone of a baboon. If a string of horses were being traded by a farmer, one etching on the bone would correspond to one horse. The simplicity of the system meant that the farmer did not even need to know how to count to use it. To see if all their horses were present, the farmer simply needed to assign one etching to each horse.

2. Mesopotamian clay tablet

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In 1929, Julius Jordan, a German archaeologist discovered a wide collection of clay tablets in Uruk, in present-day Iraq. The tablets were dated to be 5,000 years old and written in a script now known as proto-Cuneiform.

Uruk was a thriving city in Mesopotamia, with vast amounts of agricultural production, trade, and labor. It was discovered that these clay tablets were used to track the back and forth of the various commodities and services being traded. Using a stylus fashioned from reeds growing by the river, ancient Mesopotamians would write on clay (also widely available) tablets. Symbols were made to represent the shape of the objects being traded and using cuneiform, a clear account of their quantity would be recorded. Once the clay tablets were complete, they were left in the sun to dry and harden so they would last.

3. Medieval tally sticks

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Tally sticks were a way to record debts that were widely used in medieval Europe. The system was simple enough that it didn’t require one to be literate, and effective enough to work for over seven centuries. Notches were made on the wooden stick to indicate the amount owed and then the stick was split lengthwise so that both pieces would have the same notches. One half of the stick, called the foil, was given to the debtor and the other, called the stock, was given to the payer (in fact, the financial term ‘stockholders’ and ‘stocks’ originates from here). The system was tamper-proof to a certain degree owing to the distinct texture of each stick. If someone tried to add a notch after the stick was split and distributed, placing the sticks together would show clear evidence of tampering.

Since medieval Europe suffered from a scarcity of currency, stocks began being used as a form of currency themselves. If a stockholder needed to pay a vendor, they would simply give them a stock of the equivalent value, and in doing so transfer the debt of the original debtor to the new stockholder.

4. Quipu

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Quipus were mysterious knotted strings discovered to be used across several historic South American cultures. Made from a dominant string with other strings tied to it, archaeologists had originally discovered quipus in graves, buried with those who created and used them. This, however, didn’t give them a clear idea of the purpose they served. When a team of excavators found a collection of quipus at a site called Incahausi in Peru, it was the first time they had appeared at a place where they were used – in this case, an ancient storage facility for agricultural produce. They were apparently used to record the amounts of beans, corn and peanuts, and other items that went in and out of the facility.

The Incas were a vast empire of their time, and the Quipus were also used as a record-keeping device that tracked taxes, census records, and even the way the military was organized. Not only were the strings of different colors and lengths, but the knots on the string were of different types as well. The choices of color, the shapes of the knots, and the string arrangements were careful and deliberate, conveying specific information on how to decipher the quipu as a whole.

5. Mental ledgers

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Perhaps the closest resemblance to the decentralized ledger system of a blockchain was found on the Micronesian island of Yap. The local communities used large discs made of limestone, called Rai stones, as a valuable form of exchange. Limestone was hard to find on Yap and hence was perceived as a scarce resource that held high value. However, using the Rai stones presented two problems. Firstly, they were so large and fragile that they were seldom moved after being placed in a location. Secondly, if they were exchanged or presented as a gift, it was often the case that the person receiving the stone lived quite a distance from the stone.

This is where it gets really interesting. Each time Rai stones were exchanged between parties an oral account of the exchange was announced to the entire community. In a way, the entire community held a ledger in their minds. If a dispute took place between members on the matter of ownership, the whole community would gather to collectively settle the issue by tallying their mental ledgers. While this may not be the most reliable of storage mechanisms, it is truly a system where the element of trust – essential for any functional financial system – was held not by a single source, but by an entire community.

A mark in history

While their forms have varied over time, it is interesting to note that from the earliest known civilizations and across disconnected geographies, the underlying idea emerged independently and served a prominent, if not silent, role in moving the wheels of commerce forward. One ledger entry at a time.

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Disclaimer:
Alpian has submitted an application for a full banking license to Switzerland’s Financial Market Supervisory Authority (FINMA). Content of this publication is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice.

Group 7 Article, 5 min read
About the author
The i-vest Team
The i-vest Team

Driven by a need for clarity and simplicity on all things wealth related, the i-vest team works closely with senior financial experts and advisors to dive deeper into the world of finance, investment and wealth to make it more relevant for you.