From what I can tell (this is not my field), at least as concerns the English state, the tally stick was divided into the "stock," which was kept by the state, and the "foil," which went with the individual.

This video shows a number of examples of stocks (apparently few foils survive) and how they recorded debts. https://www.youtube.com/watch?v=0rxAYSXJ41Y .

It explains that they were used to record money that was deposited, essentially a receipt, by removing wood from the then original stick before it was split into the stock/foil. My guess (again not my area) is that it primarily functioned this way:

1. The removed wood representing the debt. I have no confirmation, but I would expect the stock/foil was created in view of the depositor who understood its markings.

2. The entity seeking repayment would not be able to fake their receipt, presumably to indicate they had deposited more money than they had (i.e., by removing wood from their foil). If they tried, the stock would still have that wood present, but the other grooves and grain of the stock/foil would align. The state would easily be able to tell that someone had subtracted wood from their foil.

3. The state could, of course, destroy the stock and claim its nonexistence, but information of that would, presumably, escape and others would be less likely to lend to the state. It appears there is writing on the stock/foil, so perhaps that served a secondary verification function (e.g., handwriting comparison or reference to a paper ledger)?

[EDIT: The process of making English tallies was laid out in the "The Dialogue Concerning the Exchequer. circa 1180" (https://avalon.law.yale.edu/medieval/excheq.asp. It describes making these tally sticks in the section "As to the Maker of Tallies." Unfortunately, I do not see the details of dispute resolution in that document. But, I only skimmed it.]

Another old process (ancient?) a teacher of mine once mentioned is that of always having three witnesses to any official transaction (usually one being a Notary to record) and two other people present.

Having three people present is a way to protect against he said/she said.

Three people is the minimum viable democracy: the smallest number for which a majority is possible.

This principle is used all over robust engineering, from Raft to best-of-three sensors.

You only need 1 witness for that. The first two are the parties.

3 is an enhancement for redundancy. Habit an odd number is a false confidence. Think about it: what happens if you have 4 witnesses? They could tie? How is that worse, as it adds more information that maybe 2 of the first 3 are lying or wrong?

Having just the notary there relies on trusting the notary to be an impartial party, with just one witness in addition to the two parties there's only one point of verification meaning only one person you have to corrupt to be able to lie about what happened. Bringing in more people increases the size of the conspiracy required to lie about the transaction.

An alternative to blockchains, Corda does something similar instead of the wasteful proof of works.

My understanding is that these were used as what we currently refer to as treasuries. I.e., debt that the government owes to an investor. So, if you want to lend the government some money, you get half a piece of wood with some notches indicating how much you lent. Then when it is time to collect you go to the government show them your piece of wood and if it matches you get your money plus whatever interest.

So if they do not match the government simply does not give you your money.

So it is in the best interest of the government to get a rasp and file some of of their side of the block. Nothing will match and thus they don’t have to pay.

If the government wants to default on its debts it can generally just do so. People lend money to the government because they choose to trust it for various reasons.

If the government decided to say tomorrow that $100 bills with serial numbers AB1234567000-AB12334567999 were counterfeit and should not be accepted, what do you think would stop them?

Maybe in the short term, but long term it's best for a government to pay off its debts. Who would lend money to the government if it was well known that they will never pay back?

You tell them to f off? Its like asking what happens when you're handed a bill that is clearly counterfeit

That doesn't answer the question, because the point of the two halves is that they are independently recording the contract.

If we use a split stick to record how much money you owe me, and I simply add more marks to mine, to pretend you owe me more, it's obvious that I'm cheating. But if I simply split a brand-new stick and add marks on it, then our sticks won't match up at all. How will a court know which is the original?

Presumably they had some way to sign them? After all, that's why both parties sign both contracts today. If you go change yours, I still have your signature on mine.

Let's say we cut notches perpedicular to where the split will be, and then split through the notches. If you cut more notches in your side of the wood, it will be obvious that you've done so - the two sides will fit together perfectly in shape and in grain, but one side will have extra notches. It's not like I could have filled in the notches on my piece.

Right. That's what I said in my middle paragraph.

But if I simply throw away my half and make a new half, a court will have no way of knowing which was the original. (Unless each half was signed by both parties.)

> But if I simply throw away my half and make a new half

Your new half would not match together in the "split" part of the stick, so one could tell that /someone/ made a new half, but not necessarily which party was the forger.

Right. As I've been saying from the start of the thread.

You could split wood more than 2 ways, then register one of the pieces. Or a system of splitting multiple pieces of wood, leaving some for registration. No idea if this is what anyone has done.

Signing makes sense.

But if you have a system where you can register the stick then why do you need the stick? Just register the contract with this, apparently trusted, 3rd party.

The third party and the registered stick slice aren't required to add marks to the outstanding sticks.

Splitting more tallies from one stick was done on certain occasions, especially if intentional fraud was a concern.

I dont understand. Its straight up told that the party giving the money had the longer stick, meaning the party with most to lose had to match the longer stick

If I give you $100, and we mark it on a stick, and then split it and give me the longer one, and then I throw away my half and split a new one that says you owe me $200, how do we resolve it when the halves come together and don't match? I say you made a new half-stick, and you say I did.

Both parties in a contract can have an incentive to lie.

I think in this case one of the recipients has a monopoly on violence and doesn't care how much money you think they owe you.

You have to give both parties incentive to produce the original stick. So if they don’t match then you both lose.

I don’t think all contracts have an obvious both losing state though.

> I don't understand

Think about two situations:

Firstly, if I lend you money, we split sticks, then I throw away my stick and get a new stick that says I lent you more money.

Secondly, if you lend me money, we split sticks, then I throw away my stick and get a new stick that says you lent me less money.

In both cases you're claiming my stick is clearly counterfeit because it doesn't match yours and I'm (falsely, but nobody knows that except the other party) claiming your stick is clearly counterfeit because it doesn't match mine.

What happens next? We're no better off than if we only had a verbal record and were disagreeing. So what is the point in the sticks?

Understand?

> Its like asking what happens when you're handed a bill that is clearly counterfeit

Presumably they would say that your stick is the one that is clearly counterfeit.

So how do you resolve that?

If the two sticks don't match, then the two parties didn't mutually authenticate and then nothing further happens.You can't even say there's a dispute. You can't say anything.