Line by line, column by column, Sara walked through the financial situation of each member of her savings group. She knew the numbers forward and backward—savings contributions, loan balances outstanding, interest rates, fee structures, and transaction history. She knew it all. And her group knew it all. The American entrepreneurs who joined me in visiting this Rwandan neighborhood took notes—this was the sort of fluency they wanted from their respective CFOs in their businesses.
In that group and the many groups like it I’ve visited across the world, the “Big Ledger Book” (BLB) is a staple. As certain as a literal song and dance in group meetings is the oversized register that reconciles the information held by each individual of the group in their passbooks.
Savings group in Rwanda; my apologies for the poor picture quality
The magic of the BLB is its transparency. There are no secrets within the group. Every member can see and validate what they see in the master spreadsheets enclosed in the BLB. Transparency begets trust. And this trust is what makes the whole thing work. But this old-fashioned magic finally has hit primetime.
When NBA Top Shot hit the scene earlier this year, I found its existence hard to believe. People are spending thousands (even millions!) of dollars to own digital highlight video clips? Soon, though, it wasn’t just strangers investing real money into Top Shot, but my own friends. And the more I learned, the more rational this decision seemed to be. I bought hundreds of dollars of baseball cards throughout my childhood. Buying, selling, and trading exclusive video clips is no crazier than buying, selling, and trading pictures printed on laminated cardstock.
But beyond the intrigue of a Lebron James dunk highlight selling for $387,000 (and Charlie biting his brother’s finger selling for double that) was the framework underlying the whole system: distributed ledger technology. Anytime my smart friends attempt to explain cryptocurrencies and blockchain to me, I feel like Michael Scott when Oscar Martinez from accounting attempted to explain what a surplus is: Why don’t you explain this to me like I’m five?
Here’s my amateur summary: These new financial instruments bring BLB transparency to the masses. Much like the master ledger enables savings groups to see the transaction history and balances of group members, blockchain does the same thing for a new wave of currencies and products. Deloitte summarizes that blockchain technology “offers a new way to trade, invest, and share information – including cash, property assets, or intellectual property – in a secure, transparent, and efficient way.”
Blockchain explained (via Deloitte)
Though I remain a blockchain newb and have not yet purchased my first digital trading card, the trends and systems beneath these new financial instruments are hard to miss. Venmo makes most financial transactions public. Cryptocurrencies like Bitcoin appear to be much more than a passing fad. The digital shift of our financial systems will only accelerate. Heck, even our savings group BLBs are going virtual.
The power of the transparency of distributed ledgers in savings groups is amplified by the depth of the relationships within these groups. How exactly will these dynamics play out as groups of strangers begin to experience these dynamics on a societal scale? Will increasing transparency lead to increasing trust? We’ll likely have answers to these questions sooner than we think.