how do banks store digital money ?
Let’s suppose a central bank gives 10 million dollars to a local bank.
How is this money saved?
It just a excel spreadsheet with the amount of the money writted in?
What prevents the local bank to just edit the “spreadsheet” ?
Is there any sort of protocol or agreement between the central bank and local bank,
Like a blockchain or something?
In: Economics
Well there are systems in place developed over hundreds of years to ensure this kind of thing is very difficult to do.
1) Banks/Companies don’t record “balances”. The first step is are “order” documents. This is usually some paperwork or record.
2) Then this order is entered as a “journal” entry. This is the record of the transaction itself. These journal entries of course, also record who made these entries and are stored permanently.
3) Then the ledger are adjusted according to the journal entry. Because all systems nowadays uses double entry accounting, each ledger transaction involves a debiting account and a crediting account. These accounts must all balance.
And, of course, both parties (sender/receiver) do all of the above. So a “single” transaction involves at least 6 records (usually more) each of which is stored and and be used to reconcile the other. For security reasons, almost no single person would have access to records in all these separate databases. All banks are required to have regular audits and all accounts are regularly reconciled which would highlight any balance or transaction discrepancies. (eg $10,000,000 shows up in an account with no order or journal entry would immediately show up) Bear in mind that with electronic databases, every manual entry is tagged with the credentials of the person making that entry.
So to “spoof” the system, it requires a lot of access and knowledge to disguise all these records – something that is nearly impossible to do without being discovered. It may not be immediate but there is now software that can go through millions of records and are programmed to detect odd patterns of transactions etc. When it comes to money, there is a lot invested in security.
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