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A Private and Efficient Triple-Entry Accounting Protocol on Bitcoin

Author

Listed:
  • Liuxuan Pan

    (nChain Ltd., 30 Market Place, London W1W 8AP, UK)

  • Owen Vaughan

    (nChain Ltd., 30 Market Place, London W1W 8AP, UK)

  • Craig Steven Wright

    (nChain Ltd., 30 Market Place, London W1W 8AP, UK)

Abstract

The ‘Big Four’ accountancy firms dominate the auditing market, auditing almost all the Financial Times Stock Exchange (FTSE) 100 companies. This leads to people having to accept auditing results even if they may be poor quality and/or for inadequate purposes. In addition, accountants may provide different auditing results with the same financial data. These issues are hard for regulators such as the Financial Reporting Council to identify because of insufficient resources or inconsistent compliance. In this paper, we proposed a triple-entry accounting protocol to allow users to report Bitcoin transactions to a third-party auditor to comply with regulations such as the travel rule. It allows the auditor to easily detect anomalies and identify the non-compliant parties, whilst the blockchain itself provides a transparent and immutable record of these anomalies. Despite building on a public ledger, our solution preserves privacy and offers an interoperability layer for information exchange. Merkle proofs were used to record non-compliant transactions whilst allowing compliant transactions to be pruned from an auditor’s active database.

Suggested Citation

  • Liuxuan Pan & Owen Vaughan & Craig Steven Wright, 2023. "A Private and Efficient Triple-Entry Accounting Protocol on Bitcoin," JRFM, MDPI, vol. 16(9), pages 1-9, September.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:9:p:400-:d:1234708
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    References listed on IDEAS

    as
    1. Juan Ignacio Ibañez & Chris N. Bayer & Paolo Tasca & Jiahua Xu, 2023. "REA, Triple-Entry Accounting and Blockchain: Converging Paths to Shared Ledger Systems," JRFM, MDPI, vol. 16(9), pages 1-20, August.
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