Today’s banking and financial systems were by and large automated in the 1970s and early 1980; the process began in the late 1950 and through the 1960s.  I find it helpful to reduce the problem of what the systems do down to the most basic elements in considering the financial patterns involved.

And what might be the most basic element?  In many respects, to state it most simply consider how the system might be built if (1) all inputs had to come from a punch card, and (2) if the outputs from any process had to be recorded on a punch card.

Our systems were automated in such a way that by and large all of them function on this paradigm.

Business transactions, like deposits, origination of loans, checks, everything, were encoded onto a punch card.  This punch card was fed into a process which read yesterday’s balance (stored on a punch card) and updated it based upon all the business events–on punch cards–from the last time we ran this process.

The process then created a new balance–and stored it on a punch card.

At the end of the month, when it is time to calculate interests or fees or something else, the balances are read, and new punch cards are created for these new business events.

And the cycle starts over again.

This kind of fundamental understanding is lost on most people working in Blockchain today; and without this kind of fundamental understanding, Blockchain will never replace our existing financial systems.

This is Episode 141 of Conversations with Kip, the best financial system vlog there is.  Literally learn more–about ledgers and financial systems–at www.LedgerLearning.com.