Blockchain Revolution

Triple-Entry Accounting: Privacy Is for Individuals, Not Corporations
Triple-entry accounting is not without skeptics. Izabella Kaminska, a Financial Times
reporter, believes mandating triple-entry accounting will lead to an increasing number
of transactions moving off balance sheets. “There will always be those who refuse to
follow the protocol, who abscond and hide secret value in parallel off-grid networks,
what we call the black market, off balance sheet, shadow banking.”
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How does one reconcile non-transaction-based accounting measures, particularly
the recognition of intangible assets? How are we going to track intellectual property
rights, brand value, or even celebrity status—think Tom Hanks? How many bad films
must this Oscar winner make before the blockchain impairs the Hanks brand value?

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The argument for triple-entry accounting is not against traditional accounting.
There will always be areas where we will need competent auditors. But if triple-entry
accounting can vastly increase transparency and responsiveness through real-time
accruals, verifiable transaction records, and instant audit, then the blockchain could
solve many of accounting’s biggest problems. Deloitte will need someone to assess in
real time the value of intangibles and perform the other accounting functions that the
blockchain cannot, rather than a large task force of auditors.
Finally, is an immutable record of everything truly desirable? In Europe, courts
are upholding the “right to be forgotten,” enforcing people’s petitions to remove their
history from the Internet. Shouldn’t the same principle apply to corporations? No.
Why do Uber drivers get rated on customer satisfaction but corporate executives get a
pass? Imagine a mechanism—let’s call it a trust app—to record feedback in a public
ledger and maintain an independent, searchable score for corporate integrity. Inside
the black box of corporations, sunshine is the best disinfectant.
Triple-entry accounting is the first of many blockchain innovations in corporate
governance. Like many institutions in society, our corporations are suffering from a
crisis of legitimacy. Shareholder activist Robert Monks wrote, “Capitalism has
become a kleptocracy, run by and for the enrichment of CEOs, or what I term
manager-kings.”
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The blockchain returns power to shareholders. Imagine that a token representing a
claim on an asset, a “bitshare,” could come with a vote or many votes, each colored to
a particular corporate decision. People could vote their proxies instantly from
anywhere, thereby making the voting process for major corporate actions more
responsive, more inclusive, and less subject to manipulation. Decisions within
companies would require real consensus, multiple signatures on an industrial scale,
where each shareholder held a key to the company’s future. Once the votes are in, the
decision as well as the board meeting minutes would be time-stamped and recorded in
an immutable ledger.
Shouldn’t corporations have a right to change their history, to be forgotten?
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No.
As artifacts of society, companies have responsibilities that accompany their license to
operate. Indeed, corporations have an obligation to society to publish any and all
information about their dealings. Sure, corporations have a right and obligation to
protect trade secrets and the privacy of their employees, staff, and other stakeholders.
But that’s different from privacy. Increasing transparency is a huge opportunity for
managers everywhere: uphold the highest standards of corporate governance, seize
the mantle of trust as corporate leaders, and do it by embracing the blockchain.