Merge pull request #106 from interledger/jb/3179/tb-blog

feature(3179): rafiki tigerbeetle blog

Author: koekiebox

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+# webstorm
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public/img/blog/2024-12-17/tigerbeetle.png

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+---
+title: "Balancing the Ledger: Rafiki's TigerBeetle Integration"
+description: "How TigerBeetle Supercharges Rafiki’s Financial Core."
+date: 2024-12-17
+slug: rafiki-tigerbeetle-integration
+authors:
+  - Jason Bruwer
+author_urls:
+  - https://github.com/koekiebox
+  - https://www.linkedin.com/in/jason-bruwer-8110766/
+tags:
+  - Interledger
+  - Interledger Protocol
+  - Interledger Stack
+  - Interledger Foundation
+  - Open Payments
+  - Rafiki
+  - TigerBeetle
+---
+
+Rafiki is an open-source platform that enables Account Servicing Entities (ASEs) like banks and digital wallet providers to integrate Interledger Protocol (ILP) functionality into their systems.
+
+A critical component of Rafiki’s architecture is its accounting database, which manages financial transactions and account balances. To enhance performance and reliability, Rafiki offers the option to use TigerBeetle, a specialized financial accounting database, as its accounting backend.
+
+![Tigerbeetle + Rafiki](/developers/img/blog/2024-12-17/tigerbeetle.png)
+
+
+## What is TigerBeetle?
+[TigerBeetle](https://tigerbeetle.com/) is a financial accounting database designed for mission-critical safety and performance, aiming to power the future of financial services. It provides high-throughput transaction processing and ensures data integrity, making it well-suited for handling complex financial operations.
+
+#### Why Integrate TigerBeetle with Rafiki?
+Integrating TigerBeetle into Rafiki brings several advantages:
+- **High Performance:** TigerBeetle is optimized for online transaction processing (OLTP) workloads, offering significantly higher performance compared to general-purpose databases.
+- **Financial Consistency:** With its built-in debit/credit schema, TigerBeetle enforces financial consistency at the database level, reducing the risk of errors in transaction processing.
+- **Fault Tolerance:** TigerBeetle is designed for faults and ensures data durability, which is crucial for financial applications.
+
+
+## How Does Rafiki Utilize TigerBeetle?
+In Rafiki, the backend service is responsible for handling business logic and external communications, including managing accounts and tracking liquidity.
+
+For the accounting database, Rafiki provides the option to use TigerBeetle instead of PostgreSQL.
+This setup allows Rafiki to leverage TigerBeetle’s high-performance transaction processing capabilities for managing account balances and financial transactions.
+
+It’s important to note that while TigerBeetle can be used for accounting purposes, Rafiki still requires a PostgreSQL instance for the authentication services and Open Payments resources.
+Therefore, both databases operate in tandem within Rafiki’s infrastructure.
+
+## Double-Entry Accounting: The Backbone of Financial Systems
+At the heart of any financial system lies the principle of **double-entry accounting**.
+
+This system, which dates back to the 15th century, ensures financial accuracy by recording every transaction as two corresponding entries: a **debit** in one account and a **credit** in another.
+
+The total debits and credits always balance, providing a clear view of financial transactions and reducing the risk of errors or fraud.
+
+### How Double-Entry Accounting Works
+In double-entry accounting:
+- **Debit** entries represent increases in assets or expenses and decreases in liabilities, equity, or revenue.
+- **Credit** entries represent increases in liabilities, equity, or revenue and decreases in assets or expenses.
+
+__For example, if a customer pays $100 into a digital wallet__:
+
+**1.** The Cash account (an asset) is debited by $100.
+
+**2.** The Customer Balance account (a liability) is credited by $100.
+
+This systematic approach ensures that the books are always balanced, providing transparency and consistency in financial operations.
+
+### Why Double-Entry Accounting Matters in Rafiki and TigerBeetle
+Both Rafiki and TigerBeetle embrace double-entry accounting as a fundamental concept, ensuring that all financial transactions are meticulously tracked and balanced.
+
+Here’s how it applies to their integration:
+- **Financial Integrity at Scale:** TigerBeetle is built with a native debit/credit schema, ensuring that every transaction adheres to double-entry accounting principles. This guarantees that the accounting records are always accurate and consistent, even under high-throughput conditions.
+- **Error Detection:** By requiring every transaction to balance debits and credits, double-entry accounting makes it easier to identify discrepancies or anomalies, enhancing the overall reliability of the system.
+- **Operational Transparency:** For Account Serving Entities (ASEs) using Rafiki, double-entry accounting provides clear insights into financial flows, helping operators manage liquidity, track balances, and ensure compliance with financial regulations.
+
+### Enhanced Features with TigerBeetle
+TigerBeetle elevates double-entry accounting by embedding these principles directly into its architecture:
+
+- **Atomic Transactions:** TigerBeetle ensures that transactions are either fully completed or not executed at all, preventing partial updates that could lead to discrepancies.
+- **Performance and Consistency:** By using double-entry accounting, TigerBeetle can process an exceptionally high volume of transactions per second while ensuring financial accuracy.
+
+### Real-World Example
+Thanks to double-entry accounting, both sides of the transaction are recorded in balance, providing a clear audit trail for reconciliation and compliance.
+
+Double-entry accounting is more than a bookkeeping method, it is the foundation of trust and accuracy in financial systems. By integrating TigerBeetle, which seamlessly implements this principle, Rafiki ensures that its users have a robust, reliable, and high-performing platform to manage financial operations with precision and confidence.
+
+#### Detailed Example: Sending and Receiving Rafiki instances
+Here’s a practical illustration involving sending and receiving connectors within Rafiki, and how the underlying TigerBeetle accounts are affected. In this example, a sending Rafiki (where an outgoing payment is) sends ILP packets to a peer Rafiki over ILP, (paying into an incoming payment). The peering relationship is defined using USD for simplicity in this example.
+
+This process happens **for each ILP packet**, which can occur at an extremely high frequency, especially during real-time payments. TigerBeetle’s high-performance architecture is critical here, as it ensures accurate and consistent accounting for these high transaction volumes while maintaining financial integrity.
+
+##### Sending Rafiki
+The sender creates an outgoing payment of `100 USD` to an incoming payment at a peer’s Rafiki instance. The peering relationship between instances is in USD.
+
+| TigerBeetle Ledger Entry #1         | Debit    | Credit  |
+|-------------------------------------|----------|---------|
+| USD outgoing payment liquidity acct | `100`    |         |
+| USD peer liquidity acct             |          | `100`   |
+
+##### Receiving Rafiki
+An incoming payment at the recipient’s end receives `100 USD` from the outgoing payment at the peer’s Rafiki instance.
+
+| TigerBeetle Ledger Entry #2         | Debit    | Credit  |
+|-------------------------------------|----------|---------|
+| USD peer liquidity acct             | `100`    |         |
+| USD incoming payment liquidity acct |          | `100`   |
+
+Rafiki documentation has more [accounting explanations](https://rafiki.dev/overview/concepts/accounting).
+
+## Implementing TigerBeetle in Rafiki
+To deploy Rafiki with TigerBeetle, you can use Docker Compose or Helm with Kubernetes.
+
+[Rafiki documentation](https://rafiki.dev/) provides example configurations for these deployment methods, including how to set up TigerBeetle as the accounting database.
+
+For instance, when using Helm, you can specify the TigerBeetle version by adjusting the respective tag in the `values.yaml` file.
+During the deployment process, it’s crucial to ensure that the environment variables are correctly set, especially when preparing for a production environment.
+
+## Conclusion
+The integration of TigerBeetle into Rafiki significantly enhances the platform’s capacity to process financial transactions with exceptional performance and reliability.
+
+By harnessing TigerBeetle’s advanced features, Rafiki offers Account Servicing Entities (ASEs) a powerful and dependable solution for implementing Interledger functionality, ensuring seamless and secure financial operations.
+
+More than just a bookkeeping method, double-entry accounting is the cornerstone of trust and precision in financial systems.
+
+With TigerBeetle seamlessly incorporating this principle, Rafiki delivers a high-performance platform that empowers its users to manage financial transactions with accuracy, confidence, and efficiency.