One of the functions that make banks so uniquely useful is the fact that they maintains full records of both the buyer’s and seller’s accounts.

And these records include not only the number of accounts, and who-owns-what, but it includes all transactions that have ever occurred.

And these specific types of Bank Account records have a name. They are known as Ledgers.

The ledger has a dual purpose:

When Jack sends money to Peter through a conventional bank, the bank verifies that Jack has sufficient funds in her account before reducing Jack’s balance and increasing Peter’s.

Simply put, a record keeping system is required for electronic (non-physical) monetary exchanges.

The ledger serves this purpose. It retains a history of transactions.

Molly gave Ursula one dollar, and the transaction was entered in the ledger. Now Molly has zero dollars.

This prevents the double spending problem. Which is something we will look into in a future post.