This guide offers a comprehensive view on Distributed Ledger Technology (DLT). Learn the definition, basic features, history, types, platforms, applications, challenges, and possible future of this technology.
We’ve heard a lot of buzzes lately revolving around – Distributed Ledger Technology. If you’ve been tackling with cryptocurrencies and blockchain, you must’ve already heard about it. The distributed ledger implementation is unquestionably one of the ingenious inventions of all time.
Since then, the technology came a long way, evolved into something of much more value. By allowing distributions of information with greater transparency, DLT did indeed evolve the internet. Initially, this technology was only devised for transactions and digital currencies. But now tech community found many potential use cases that can change our lifestyle for good.
However, there’s still a lot of confusion around distributed ledger solutions. Many of you still confuse distributed ledger implementation with blockchain. But distributed ledger technology is not only blockchain but something of much more significance.
Enroll Now: Enterprise Blockchains Fundamentals Course
Table of Contents
Chapter-1: Evolution of Ledger Technology
Did you know that the centralized ledger system prevailed from a really long time ago? More than 5000 years ago, clay tablets were used as a record keeping centralized ledger. Here, the ancient Mesopotamians would draw pictures in row and columns along with punching holes to keep track of how many items they had in store. Quite fascinating, isn’t it?
But about 700 years ago, a newer kind of centralized ledger system emerged in northern Italy. Here, merchants tried to accomplish a logical connection between all the entries. Every item on the centralized ledger would have a debit and credit entry. So, you would have to enter the item twice. Apparently, this new form of the centralized ledger was the pathway to “capitalism.”
The typical banking systems and keeping records came long after that. Where people used to keep everything record on paper. But after the invention of computers, everything started to digitize. In the 1980s and 90s computer system started to take over the typical banking centralized ledger systems.
And just ten years ago, a new form of decentralized database structure emerged. In 2009, Satoshi Nakamoto introduced the first distributed ledger technology that gets rid of the whole authoritative environment and promotes a fairground.
And this is how the revolutionary centralized ledger technology came into being.
Chapter-2: What is a Distributed Ledger?
A distributed ledger is a form of digital database that is updated and held by every member independently in a large network space. In this type of ledger there’s isn’t any central authority to broadcast the records to every member.
Instead, all the nodes will hold the ledger and construct it independently. But in that case, the nodes on the network will need to have access to the transaction lists and giving out their own conclusion before adding it on the distributed ledger.
Usually, every node on the network tends to go through an agreement process to come to a single conclusion. The system actually differs from distributed ledger to distributed ledger.
After the agreement, the distributed ledger gets updated, and all the node on the network will update their every own ledger as well. The system makes the overall architecture of the interface quite complex compared to typical database systems.
If you want to have a clearer idea, check out this article on what is distributed ledger?
Distributed ledgers come with a special dynamic system that can outdo the capabilities of typical paper-based ledger systems. In short, with different types of DLTs, you will be able to form new technologies and enable security across the whole digital world.
Usually, in this kind of typical systems, there’s always a matter of trust. However, this new DLT is introducing a new kind of technology that gets rid of the “trust” issues and builds everything on total transparency.
With this new invention of the distributed ledger system, now you can experience the revolution of information gathering and communicate beyond the traditional ways. You can apply it to both dynamic data and static data schemes.
Distributed ledgers simply put the power back in your hands. It’s more about managing the whole system rather than merely a simple database.
Learn More: What is DLT (Distributed Ledger Technology)?
Myth Buster: Not All DLTs are Blockchain
With the sudden rise in popularity of Bitcoin and many cryptocurrencies, the word “blockchain” has become a favorable choice of topic. People now use this word as a synonym for everything associated with cryptocurrencies and token economy.
Even the crypto movement is sometimes referred to as the “blockchain movement.”
So, you see in a way blockchain happens to be used a lot in many contexts. There’s only a handful of people out there that really wants to distinguish blockchain and distributed ledger solutions from one another.
However, it’s best not to mismatch both of them as DLT and Blockchain can’t be interchanged.
Distributed Ledger technology vs Blockchain: The Main Differences
The term distributed ledger technology is one kind of Umbrella-Term that covers the technologies where the ledger system is distributed among everyone using it. Here, different types of DLTs can be either private or public; it depends on the characteristics of the technology.
The blockchain is one kind of distributed ledger implementation and more preciously the first ever functional one. The technology kind of stormed the new digital world and many people started to believe it’s the only form of distributed ledger system.
So, people often used them interchangeably, which led the whole misconception that DLT is another name of Blockchain.
In simple terms, blockchain is just one of the subcategories of the distributed ledger system. For example, there are different kinds of fruits and one of them is “Apple.” Here, the term “Apple” falls in the fruit category. So, the apple is one kind of fruit, but not all fruits are apple.
In the same way, blockchain is one kind of DLT but not all DLTs are blockchain. For further information, check out the article on blockchain vs distributed ledger technology
Why Distinguish Blockchain and DLT?
The crypto world just came into being a few years back, meaning it’s still an immature technology. Over the next few years, we will see exponential growth as it has the potential to change the typical ways completely.
There are many projects out there that are dealing with the whole concept of different types of DLTs rather than only sticking with blockchain. Distributed ledger implementation is a vast category, and if we really want more innovation, we have to come out of our “blockchain” shell.
There are already many different types of DLTs into play, and hopefully, we will be able to see more additions in the newer future. But for now, shifting to distributed ledger implementation would be the wisest choice for any kind of growth.
Chapter-3: Different Types of Distributed Ledger Technology and How They Work
There are different types of DLTs, and all of them have different ways to operate. To understand the major differences among them, you’ll need to compare them.
First, we need to take a look at the blockchain definition. It’s one of the most popular types of DLTs out there. Blockchain is a type of DLT where transaction records are kept in the ledger as a chain of blocks. Think of it as a long list of records. But not literal blocks, here when we are saying the chain of blocks, we mean any kind of digital information that is stored in the database.
Here, digital information makes up the blocks. Usually, they have three different kinds of parts –
Let’s say someone made a transaction. The transaction block will contain the time, date and the amount the sender sent.
The block will also have the sender’s information in it. But to maintain the anonymity the technology will not be using your real name, but rather it will contain your unique “digital signature.”
To differentiate or synchronize the transactions every block will contain a special ID known as the hash. This hash function helps to distinguish between all the transaction blocks on the ledger. Mainly the function includes characters which are alphanumeric and every hash function is a unique and random selection.
Which means, no one can just predict it or have any way to hack their way to alter it.
How Does Blockchain Work?
In blockchain there are multiple blocks that get added to the ledger system, but how does this process happen exactly?
There are four stages of how the “block” gets added to the blockchain. Let’s see what they are:
Firstly, someone on the network has to make a transaction. Let’s say; you sent some money to your friend Mike.
Once you’ve made the transaction it needs to get verified. There are also different ways how the blockchain verifies a transaction. It mostly depends on the nodes on that network. The nodes would have to come to an agreement that the transaction indeed took place.
For that, they check out whether the transaction did occur as you declared it did. The consensus on that network allows most of the members to come in agreement, and if the majority thinks it’s true, your transaction will get stored in a block.
After your transaction gets the green signal, all information regarding your transaction such as time, amount, your digital signature, mike’s digital signature gets stored in the block. You will see the amount gets deducted from your wallet and Mike will see the amount being added to his.
However, before it gets a spot on the ledger, the block gets a unique ID. It’s an identifying code for that specific transaction. The block will also contain the recent block’s hash to maintain the chain of blocks structure.
After your transaction is added to the ledger, you will be able to see it and based on the characteristics of the network, others may or may not see it as well. If these types of DLTs are public, then everybody on the network would be able to see it, and if they are private or federated, it will depend on that distributed ledger system rules.
In Hashgraph there can be multiple transactions stored on the ledger on the same timestamp. All transactions are stored in a parallel structure. Here every record on the ledger is called an “Event.”
This distributed ledger without blockchain is absolutely fair as no node on the network will be able to manipulate the information or transactions. It means no one on the DLT system can actually alter or postpone all the instructions that are going to happen or control the process of the transaction.
If we compare it to the blockchain, you’ll see how a miner can choose which transaction to include in the “block.” For example, you and mike both made transactions, and now they are waiting to be verified. Other nodes on the network can selectively choose Mike’s transaction to verify first rather than you’re, even though you may have transacted a bit earlier than Mike.
For Hashgraph, the verifier nodes have to include both your and Mike’s transaction in the manner you guys transacted, so no one will be left behind.
So, in this distributed ledger without blockchain, the faster connection you have, the better. That way, you’ll be able to transact faster and would be in the first line to get verified.
Read More: What is Hashgraph?
Smaller Storage Units
In this type of distributed ledger implementation, all the transaction in the network is provable. How? Well, as any transactions occur on the network, within a few minutes everyone on the network will know where the transaction would be placed in the ledger.
On top of that, everyone on the network will know that the whole network knows about the existence of the transaction and thus, make the changes accordingly. It means the nodes will do the changes and then discard the transaction.
You won’t have to keep this information in your ledger for eternity. That’s why it only needs a few gigabytes of a storage unit to store all the information of the Hashgraph distributed ledger database platform.
Byzantine and ACID Nature of the Network
This is one of the essential features of Hashgraph distributed ledger implementation. A system is Byzantine means that no small group or entity can influence the pathway to reach consensus. Also, after the consensus has been reached, no one can do anything to stop it. Every member will know that the consensus has been reached and it will remain like that.
In this distributed ledger without blockchain, every node on the network will agree on how the transaction occurred and list it out accordingly.
The whole community in this DLT will have a distributed yet single database system sharing similar properties. If we compare the blockchain DLT, you’ll notice how nodes on the network are never certain if a consensus has been reached.
However, in Hashgraph, it’s possible. So, it’s also ACID compliant.
How Does Hashgraph Work?
How Hashgraph works is quite interesting actually. This distributed ledger system uses a Gossip protocol to relay all kinds of information mainly about transactions across the network. Each node on the network can send out information (known as “event” and they are pre-signed) on a new transaction.
Every node will randomly choose the neighboring node to relay this information. A node will then aggregate the event with other received information and then relay it out to other neighboring nodes.
So, in simple terms, once a transaction takes place, the neighboring nodes share that information with other nodes, and after some time all the nodes would know about the transaction. The process is quite rapid, so it would only take a few minutes for everyone on the network to know about the event.
With the help of “Virtual Voting” protocol, every node validates the transaction and then it gets added to the ledger.
Another ambitious addition to the distributed ledger without the blockchain family is the DAG (Directed Acyclic Graph). DAG was invented as an alternative approach to Blockchain DLT. That’s why this distributed ledger without blockchain does offer all the features of blockchain but with greater improvement.
Even though it’s an alternative, the structure of this ledger is really different. One of the major advantages of DAG distributed ledger implementation is the ability to offer fee-less Nano-transactions. It’s because the scalability improves as the network grows.
In simple terms, the more transaction occurs on the network, the faster it will be able to settle them. To clear things up, let’s see how DAG really works.
How Does DAG Work?
DAG happens to go on a different route regarding reaching consensus. The distributed ledger system stores transaction processes on the nodes. Here, every member on the network is called a “node” just like blockchain.
All the nodes on the network validate transactions on the ledger and also is represented by validated transactions. Any node can initiate transactions, however, to validate them they have to verify at least two of the previous transactions on the ledger.
After he/she validates them, his/her transaction will get confirmed. The more a person validates, the more his/her transactions become a valid transaction on the distributed ledger database.
So, if a transaction has a longer branch of previously validated transactions, it will carry the most weight in the ledger. However, an algorithm will randomly select the previous two transactions for each member to validate.
Because if it doesn’t the members will only validate their transactions and leave another behind.
This is actually a wonderful new form of consensus to achieve greater scalability. Due to this nature of the distributed ledger implementation, companies that require a greater volume of transactions every second should use this.
It’s one of the recently distributed ledgers without blockchain – Holochain DLT is said to be one of the most advanced levels of ledgers out there. The company Holochain that created this new form of DLT is giving the tech developers a new way to create decentralized apps.
One major change from other distributed ledger without blockchain is that this one is agent-centric instead of data-centric structure. This network avoids using any global consensus protocol by providing every agent with their very own forking system. Just this change solves all issues with scalability and keeps the network intact even after network growth.
Read More: Holochain Ultimate Guide
How Is This Distributed Ledger Technology Different?
In traditional ways, all the other nodes on the network are forced to have a global consensus and verify the whole network. However, Holochain changes that nature. The process is similar to its name. The name of this distributed ledger database came from the concept behind this architecture, and that is a hologram.
In the hologram, if you want to create a 3D pattern, you’ll need specific light beams and interact them in a way to create the image. Holochain is similar. It uses individual modules to create the whole ledger system.
Here, every node keeps their very own distributed ledger and communicates with it through its own unique signature. For example, think of the whole network as a river following in a direction. Here, every node is feeding into the river of ledgers through their small streams and creating the river as a whole. If one of the streams gets offline, the distributed ledger database won’t be affected by it.
How Does Holochain Work?
It’s simple, every node will have their very own ledger, but that ledger will revolve around a specific set of values called the “DNA.” According to the developers, this DNA ensures that any node on the network trying to add new information on the public ledger will get validated.
A node will be sent out information to other nodes to get them validated on the network. If other nodes on the network can verify his/her information with the DNA, then they relay this message to other nodes on the network.
However, if someone tries to hack into the network and would try to store false data on the network, they will have different DNA. So, if someone wants to falsify a transaction, it will hard code itself off the chain and operate from a different change chain with different rules. Other nodes on the network will now verify it with the DNA before accepting the information.
And once they find dissimilarities, they will reject it and broadcast it across the network and warn others of this malicious node.
The process is pretty neat and foolproof. And this is why it’s gaining so much popularity.
5. Tempo (Radix)
Like other distributed ledger without blockchain, Tempo is said to be a relatively new contribution to the system. Like any other platform, it will preserve the sequence of the information on the ledger. However, it also offers to timestamp along with other functionalities as well.
Radix DLT is the company that came up with this brilliant new tech. You can use this distributed ledger without blockchain for private and public modules as it doesn’t require any modification at all. One of the plus points is that you won’t be needing any heavy hardware component either. It’s extremely light and can even work on your mobile devices.
With Tempo you will be able to create your own decentralized applications, token, coins, transact extremely fast and many more.
The distributed ledger database runs on three major principles:
- Have a cluster of networked nodes
- Global ledger distributed among the cluster of nodes
- Special algorithms for timestamping events on the ledger
Every instance on this distributed ledger database is known as the Universe. Within the Universe, every event is called an “Atom.”
How Does Tempo DLT Work?
It’s a bit different than other distributed ledger database on the market. Any node can choose to carry a subset of the full global ledger with him/her. The subset of the ledger is called shards, and every node carrying a shard will get a unique ID for their subset of the ledger. So, the nodes aren’t required to carry the burden of the global ledger on the network.
This ensures that the network can carry a larger amount of load, thus increasing scalability.
When a node wants to validate transactions, it uses Logical Clocks do that. The usual timestamping of the distributed ledger database isn’t capable of reaching consensus on its own. It’s because the perspective of time changes from person to person.
So, instead of matching when it occurred, it sees what occurred before it. If a previous transaction was A and now a new transaction B happened, the nodes will see whether there was transaction A before B.
So, here, nodes will record the event sequence rather than the actual time of that event. The properties of distributed ledger technology are really evolved for its time and slowly gaining popularity.
Chapter-4: Features of Different Types of DLTs
Blockchain Features –
Blockchain distributed ledger database is surprisingly super immutable. It’s one of the best features of this ledger system. Immutability means no one on the network can corrupt it in any way. In this distributed ledger, once you add anything to the ledger, you won’t be able to alter it, delete it or even reverse it.
So, it will stay as a permanent record, and no one will be able to touch it. But before adding anything to the ledger, it will go through a consensus process and get validated.
Hacking this DLT is nearly impossible due to its decentralized nature and cryptographic encryption. The level of security this DLT offers is astonishing. The nodes make transactions using cryptography where every record on the network gets encrypted. Utilizing public and public key the transacting party ensures no one can intercept between a transaction.
There are several validation models, and as no one has access to modify it, Blockchain becomes a solid ledger to store personal information without worrying about the consequences.
Typical banking systems can take several days to make transactions. But with these properties of distributed ledger technology, you’ll be able to make faster settlements. The technology came a long way and can now offer a relatively faster amount of time for anyone to send money.
Using these people can make global payments whenever they can. They won’t have to wait for several days for their loved ones to get the money. Also, the minimalistic fee will save you a huge amount of money in the long run.
Blockchain supports a wide range of consensus algorithms for blockchain to validate a transaction. Consensus mechanisms are a way to reach an agreement between nodes on the network. When you are dealing with millions of nodes on the network, it gets extremely difficult to reach an agreement without the help of consensus.
As this is a trustless environment, only the algorithms can help them maintain the distributed ledger. It’s one of the special features of Blockchain.
DAG Features –
Near Infinite Scalability
Due to the distinctive nature of the properties of distributed ledger technology, this one offers new infinity scalability. If you look at other DLTs, you’ll notice how the scalability decreases when the network starts to grow. But not in this ledger.
Here, the scalability will increase with the network growth. Every node has to validate at least two of its previous transactions in order for their transaction to get confirmed. The more the node validates, its transaction becomes more valid. Also, it lowers the hashing power needed to validate previous transactions.
Micro and Nano-transactions
As the nodes on the network will need to validate previous transactions, it results in fee fewer transactions on the network. Therefore, with DAG distributed ledger solutions the opportunity of micro-transactions over this decentralized channel becomes an everlasting concept.
No one could introduce micro transaction in blockchain DLT for their relatively growing transaction fees. However, DAG offers a transaction fee free protocol, so anyone on the network would be able to make Nano to Microtransactions in an instant. This is one of the profound features of this tech.
Comparing to other properties of distributed ledger technology DAG is quantum-resistant. Other technologies are secure, but with technological innovations, they will most likely be susceptible to quantum computers. Quantum computers offer a superior level of computing technology, and with this, it’s possible to attack even the strongest security systems.
However, DAG comes with Winternitz One-Time signature scheme to have a firewall that even the quantum computer can break into. However, this feature may vary from different DAG companies.
Masked Authenticated Messaging (MAM)
For now, I’ve only seen this feature specifically in Tangle’s DAG. However, it’s a splendid way to exchange information with other nodes without worrying about security checks. As the properties of distributed ledger technology are quantum-resistant, nodes can exchange information with specific parties through encryption and authentication.
Parallelly Lined Transactions
Once a transaction gets validates, it will align parallel with other transactions. Usually, these transactions are relatively new on the ledger. Typically, every transaction on the network has a link to with previous transactions. But in doing so, the ledger will become too much complicated and big and would be hard to maintain it.
The network has a width target and will regulate it in order for the system to compensate for a large growing network base.
You will also be able to transact really fast with this type of nature.
Hashgraph Features –
Anyone on the network is free to create a signed transaction anytime they want. After they create it, other nodes will know about it and using a Byzantine process they will be able to reach consensus with the order of the event.
The higher level of fairness makes this distributed technology susceptible to influencers. No one can influence other nodes into changing their agreement before the nodes agree on it. Once they agree on a specific transaction, the influencer won’t have any power over it whether he likes it or not.
Once a node initiates a transaction, it will let randomly choose a neighboring node and relay that information. So, it’s kind of like random gossip sequence where you would select the node nearest to you and tell him/her all about what you know.
Gossip about Gossip
Once random gossip occurs and the transacting node notifies its closest node about it, the node will relay that information to one of its neighboring nodes is a similar manner. This process will continue until all the nodes on the network know about the information. This process is Gossip about Gossip because here you’ll be gossiping about a previous random gossip.
It should only take a few minutes for everyone on the network to know about the transaction.
Unique Data Structure
The ledger logs down every gossip sequence on the network in an orderly fashion. This is to make sure that everyone on that network knows about the changes. The ledger will log down the starting point to the end point to compare if every node knows about the transaction.
This unique distributed ledger uses Virtual Voting system to validate each transaction. If 2/3 of the whole network agrees with the transaction, then it’s considered valid. However, there are other elements in play here. Virtual Voting may happen more than once, and it will count how many Famous witnesses are in that count. After that, it will get fail or passing mark.
In this case, the network would choose some transactions and ask for each one if they had occurred in a sequential matter or not? If most of the witnesses answer yes then that event is called Famous witness as most of the nodes knew about it relatively faster.
These witnesses can then later be used to validate new transactions.
This concept ensures that the probability of consensus is always one. Nodes have multiple paths connecting to one another, and if two people can see other people strongly, then they can know what that person will vote. Therefore, they will vote the same.
Holochain Features –
One of the most eye-catching features of this distributed ledger is that it’s agent-centric. In a typical data-centric structure every node on the network is forced to verify single transactions from the transaction queue and add that up in the chain. However, in this structure, the more it keeps adding, the slower it gets.
However, in agent-centric systems like Holochain, you will be able to maintain your own history log and share independently without having nay forced consensus. Every node has their own ledger, and they can maintain them all by themselves.
The different nature of the ledger makes the system much more energy efficient than others. Why? Because here you won’t be needing any mining equipment’s to run heavy consensus mechanisms to validate transactions.
As you need to only maintain your version of the distributed ledger, it will take only a minimalistic device to store it. You can even run Holochain from your phone, and it won’t take more energy than usual use.
That’s why it ensures energy efficiency, which will save you a lot of money in the long run.
True Distributed Ledger
What does a true distributing ledger mean? In most cases, you’ll see all the nodes on the network carrying the load of the whole ledger on their devices. But does that reach the true distribution we need?
One of the major features of the Holochain is that it can reach the true level of distribution across the network. As its agent-centric, everyone runs their own ledger on their devices, and when needed they can communicate with the main ledger using their private key. Here, every node works as a separate entity and in the end forms a whole new functioning unit.
By utilizing the holographic model for the architecture, any developer can now invent decentralized applications that can scale in many ways leading to true properties of distributed ledger technology. It will ensure every node to operate independently. They will only need to synchronize when needed and if other users agree.
It means that the user will get the full control over their actions and data. No one would be able to access them and take advantage of it. This gets rid of the third-party schemes where companies sell out information to other companies for their own gain. It also promotes healthy user empowerment.
Security and Scalability
Holochain distributed ledger offers the highest level of security due to their special feature called the “DNA.” In case of any malicious person trying to send out malicious or invalid information to other nodes, he would have to go through the DNA of this system. Before accepting any new information, all nodes are prompted to verify the DNA of the sender with their own set of DNAs.
As the malicious person would have to change the DNA in order to send out invalid data, it won’t match with the existing one and thus will get banned from the chain. Other nodes will also get a warning about his actions and will remain cautious before accepting any new information.
Also, the network is highly scalable, as the personal ledger of every node will only be stored in a limited fashion. Therefore, it would increase the scalability. In a theoretical approach, if there are enough nodes on the network, this distributed ledger is able to handle unlimited transactions.
Tempo Features –
This is a unique method to make sure that the distributed ledger solutions Tempo is able to store every Atom exiting in the Universe. The ledger is designed in a way to be scalable in a horizontal way, support a wide range of semi-structured information and be able to update all entries.
Let’s talk abbot the sharding process. The global ledger on the network will be chopped up into smaller subsets of that ledger. These smaller parts are called “shards.” Every shard comes with its own unique identification code and is distributed among the nodes.
The local ledger operating on individual devices can choose to store shards or all of it. The process guarantees that every shard will contain all the Atom in a correct sequence and it will also determine which node will take which Atoms.
It’s kind of like pieces of a puzzle, that once put together will reveal something spontaneous. Here, in this case, the puzzle pieces are shards, and the result is the globally distributed ledger.
To make sure every shard has up-to-date information about the distributed ledger, the Tempo DLT initiates a Gossip protocol. With this protocol, the nodes on the network communicate with each other and relay information regarding their shards.
This protocol of the properties of distributed ledger technology has been proven to be one of the most efficient ways to propagate information in this type of architecture. Gossip protocol is similar to Hashgraph’s random gossip sequence.
The nodes on the network information about any new configuration and relay the information to other nodes. Other nodes then optimize the information and synchronize their shards accordingly.
This process is necessary as nodes will need updates shards to validate any new transactions happening on the network. Gossip protocol may as well announce metadata about other nodes they are directly connected with.
Another one of the great properties of distributed ledger technology is the Logical clock. Logical clocks are at the core of this ledger system. Here, it means an ordering sequence of the relative events on the network and using this a node can validate a transaction.
In this ledger, every node contains a logical clock locally, with increasing integer value that will represent the overall number of the events which that specific node witnessed. They will increase this number every time they see a new event that they didn’t see before. When storing any event, it will also store the logical clock number with it. This number helps to validate new transactions with past transactions.
However, only new Atoms on the network will be considered as an event.
Chapter-5: Notable DLT Platforms
This is one of the most popular DLT blockchain examples on the market nowadays. Ethereum runs on blockchain distributed ledger. Even though many might think Ethereum is similar to bitcoin, but there are tons of differences.
This DLT blockchain example performs much better in any field compared to bitcoin. Instead of having limited options, you’ll be able to create any kind of operations on Ethereum. It’s mostly for implementing decentralized apps. Ethereum first introduced their very own Ethereum Virtual Machine. This software runs solely on the platform and will allow developers to run any kind of programs. Lately, Enterprise Ethereum is getting heavy traction from different companies.
So, you could think it as a development zone for a new decentralized application. Other than this Ethereum also introduced Smart Contracts, which is the perfect tool to settle payment automatically. Vitalik Buterin is the founder of this technology.
This is also another wonderful enterprise level DLT blockchain example. Hyperledger Fabric is one of the renowned blockchain distributed ledger platforms with a modular architectural design. They provide enterprise-level solutions with greater scalability, flexibility, resiliency, and confidentiality.
This DLT blockchain example was designed to support a lot of pluggable applications using different types of components. It will also accommodate a large number of intricacies and complexities of the typical economic system.
Hyperledger Fabric isn’t a permissionless distributed ledger, but it’s permissioned. So, not everyone will be allowed on the network. Here, they also offer to store multiple formats of data in the distributed ledger. Using them, you will also be able to create different ledgers for your personal channel; it’s mainly for competitors that don’t want to reveal their pricing to their intermediate competitor. Linux is currently backing up this new distributed ledger technology.
It started back in 2015, with the open sourced R3’s Corda platform. Corda blockchain is a distributed ledger platform that is based on the blockchain. R3 is one of the world leading consortium DLT blockchain example where some of the biggest financial companies have come together.
The numbers for their partners have gone high in the 60+ zone. Even though this platform was purely designed for banking purposes only, you can also use this in other sectors such as – government, supply chain, healthcare and many more.
Corda offers one of the fastest and reliable outputs out there in the market.
You could think it as a pioneer of a new distributed ledger technology – The DAG. IOTA came into being back in 2016 when blockchain DLT started taking over the world but wasn’t able to quite fulfill all the requirements.
With DAG IOTA manages to solve one of the most significant issues – Micro-transactions. Paying too much to get our transaction verified was putting a negative impact on the whole distributed ledger technology. However, IOTA managed to save the day.
IOTA calls the DAG distributed ledger system their Tangle network, and it’s in the core of their platform. Even if the nodes keep growing there won’t be any effect on the micro-transaction scheme. With DAG DLT, higher scalability could be reached.
IoT sectors will largely benefit from this platform, and it would be perfect for a large IoT network.
Read More: Beginner’s Guide to IOTA Blockchain
There’s another platform that utilized the DAG distributed ledger technology – Byteball. Though the DAG platform IOTA offered free transactions that are not the case here. In Byteball, you’ll have to pay a very small amount of fee. However, you would be able to enjoy extreme fast transaction speed.
In Byteball there is no risk of 51% attack, and you will be able to transact privately. Something that you won’t see in other DAG platforms. To keep everything running fair, Byteball uses a validation mechanism. This mechanism has the supreme influence over the network. It also offers a great deal of scalability, so you won’t have to worry about slower output in any scenario.
Learn more about what is Byteball? The first DAG platform
With another popular form of distributed ledger technology Hashgraph, you’ll see Hedera Hashgraph ruling the market. Originally, Swirlds actually came up with the idea of the Hashgraph. However, they don’t have any running network based on that. Instead, Hedera Hashgraph bought the technology from them. Learn more about Hashgraph and Hedera Hashgraph here.
Hedera Hashgraph is super light and extremely fast. Other than that, this company boasts about their fairness and security. Other features include their very own digital currency, storage units, and smart contracts.
Using this platform, developers can build extremely different kind of decentralized apps, which will outperform blockchain DLT quite easily. The transaction fees are extremely low, and you will be able to do micropayments with it.
A network of Internet Acceleration or NOIA is another popular Hashgraph distributed ledger technology platforms on the market. However, this platform is rather unique. They offer a distributed CDN (Content Delivery Network) using the nodes to offer a better internet performance.
With their integration of distributed ledger technology, you will be able to enjoy every feature available on the Hedera Hashgraph platform. Well, it’s because the Hashgraph DLT is based on the Hedera Hashgraph company.
Other than that, NOIA is completely permissionless, meaning anyone can join the network and utilize the bandwidth as they need. It’s still a relatively new platform based on Hashgraph.
Even wonder how distributed ledger technology would be if we use it in our daily social media life? Mingo is a great example of that. It uses Hashgraph DLT to build up its framework. Think of it as a messenger aggregation platform where most popular chat apps will come together as one.
As far as we know all the messaging software can’t communicate with each other till now. It means you can’t message someone from Skype to Facebook. But with this unique platform, now you’ll be able to do a lot more than that. This platform supports a wide range of popular apps such as – Twitter, Facebook, Slack, Discord, Stream, Skype and many more.
It will also have a utility crypto coin to back up any in-app purchases. Other plugins include Gaming or roaming plugins. As of now, it’s live on Android; the IOS version is still in process. This could be the life-changing distributed ledger technology usage we have been looking for.
This platform introduced an entirely different type of distributed ledger technology in the tech world. It utilizes Holochain DLT, just like its name. Holochain is a fantastic platform, to begin with. To preserve users’ right this distributed ledger platform introduced a different kind of model architecture.
It utilizes a holographic data storage structure, which ensures every node on the network will get to maintain their own data. So, there isn’t any risk of third-party companies to steal other people personal information.
Mainly the platform revolves around agent-centric agreement and provides each node with their individual ledger system. This process ensures the truly distributed nature that every distributed ledger technology should have.
Using Holochain, you’ll be able to create new and improved decentralized applications. Supply chain management, sharing apps, vendor relationship management, government, social media and resource management are few of the use cases of this new platform.
Reaching consensus is extremely easy and depends mostly on the nodes. You would only have to synchronize the data in the DLT when you need. That’s why this platform is quite suitable for mobile devices too.
Another relatively new player changing the traditional distributed ledger technology scene is – Radix DLT. Radix DLT runs on Tempo distributed ledger technology. Unfortunately, it’s the only one currently running on Tempo. The company claims to offer a more scalable and faster output than any other DLTs in the market.
Their completely different approach will finally be able to give users the ability to mine from any kind of devices such as television, modem or even mobile phones! Mining will be accessible to everyone, so it’s safe to say the platform is public.
The distributed ledger technology is relatively more efficient than blockchain and DAG. However, it’s still quite an immature phase, so it’s best to wait to see the final output of this new DLT.
Chapter-6: Applications of Distributed Ledger Technology
Trading is one of the crucial distributed ledger use cases. The DLT is best known as the trading ground of cryptocurrencies. Typically, the trading business is risky and somewhat involves emotional decisions too. And when you have to deal with typical banking systems, it leaves a lot of paperwork and therefore becomes quite obsolete over the time.
Not to mention the bad players on the market who always sabotages the marketplace for their personal gain. Distributed ledger solutions here can provide a transparent method to trade. Not mention eliminating the paper works and reliability on banking system would surely reduce a lot of processing time in the long run.
Also, these DLTs are quite full proof, so no one would be able to manipulate them as they please.
The distributed ledger solutions, in this case, will stop your irrational decisions and help to preserve your assets in a better way. It will also provide a secure wallet source where you will be able to store all your digital assets without any risks.
Enroll Now: Enterprise Blockchains and Trade Finance Course
Distributed ledger solutions can really change the typical scene of entertainment industries. Nowadays a good artist doesn’t actually benefit that much while they work under a company. Many artists make money through streaming, and the process can be quite hectic. It’s one of the popular distributed ledger use cases.
Along with Distributed ledger solutions, any artist can get their earned money through smart contracts where the network will look over the process. The DLT can also ensure better value for the artists and help him get connected to other entertainment channels.
Distributed ledger technology projects can also be a significant factor in gaming. The gaming industry is growing simultaneously, and a DLT-based network will help gamer achieve a better user experience.
Distributed ledger technology projects can truly shine in the world of production. A network that links to all workers can ensure larger outputs in a short amount of time. You may already notice that distributed ledger solutions fit in the manufacturing niche quite profoundly and can make the system most efficient and cost friendly. It’s another popular distributed ledger use cases.
However, the whole process of connecting these workers along with the manufacturing is still not on the table. What distributed ledger technology projects can do here is to provide an ecosystem to look over the workers and take rational decisions based on the output.
Companies will benefit even more and will be able to meet up with the customer demand. Learn more about the companies using blockchain technology here.
Supply chain management is a crucial part of the production industry. Many organizations are now investing in algorithms that offer a better solution. However, they are still struggling with 100% customer satisfaction.
Powered by the distributed ledger technology projects organizations would be able to administrate every process from manufacturing to shipping. Logistics processes will ensure full customer satisfaction every time. The Distributed ledger technology would be able to track the raw materials and luxury goods.
It can also assess the customer requirements better. In a way, everything will be more streamlined.
Another one of the best distributed ledger use cases is the cybersecurity. Now everyone is connected through the internet. People are moving towards a total digital lifestyle.
Therefore, cybersecurity now is the top priority of any company or individual. Hackers are becoming more and more stealth, and billions of money get hacked away just for the lack of security.
With the help of Distributed ledger technology projects, now any people can feel safe roaming around the internet. The network is already almost hack proof. And with DLT in the mix, no hacker will be able to penetrate your firewall. The network itself will become the firewall and won’t need additional software to look over it.
The technology is capable of storing all the patient information, and the doctors would be able to make a good diagnosis based on the information. It can support the doctors in analyzing the symptoms and start the treatment right away. Healthcare is one of the greatest distributed ledger use cases. Read more about blockchain for healthcare here.
It would also be able to assists in scientific discoveries utilizing a great deal of data within a short time. It can also connect the patients with their doctors through distributed ledger technology powered apps. The technology is also capable of protecting any patient information and provide the sole control to the patient only.
We all know how we are leading towards next-generation power – “Smart Cars.” But a distributed ledger technology will be able to take it to a whole another level. Not only the technology will be able to help you connect to drivers completely, but it will also ensure anti-theft processes. It’s another popular distributed ledger use cases.
Every data on your car will be available on the network. Using distributed ledger technology projects, the owner then be able to track down the car very easily just by debugging the information from the network. It will also be able to look over the hardware parts of your smart car. Wouldn’t that be awesome?
The drivers would be able to get a fair trade when they are meeting up with their clients. Due to the disruptive impact on the supply chain, blockchain in logistics is getting much traction.
Utilizing contractual documentation with distributed ledger technology projects is another great use case. The network provides a greater deal of security to store all legal contractual documentation on that, such as wills, bank statements, property bills and many more. The DLT is more than capable of preserving it from outside hackers.
Another great aspect is to use it to validate inheritances. Smart contracts on this type of network can make this process hassle-free.
Distributed ledger technology can be the next generation platform for election. Transparent elections are necessary, but under human authority, things get tampered. Illegal activities, in this case, will be stopped if everyone uses a distributed ledger technology network to vote.
Every vote will get added to the network where it can’t get tampered with, and the algorithm then can dissect them and make the call. Every process will be transparent, and all the citizen will get the fairness of voting they deserve.
Other activities such as the law department will also benefit from distributed ledger technology. Together with a decentralized distributed ledger technology neural network, there won’t be any scope for illegal activities.
Read More: Blockchain For Government: Decentralization At The Core
Internet of Things
Internet of things actually indicates a lot of connected devices with one network. Usually, this service providing companies to provide the users with a common network where they connect their network and relay useful information from one device to another.
However, IoT mostly revolves around a centralized environment, which is risky in the long run as it can easily steal your personal information. Here, distributed ledger technology can provide security for the Internet of Things with its decentralized system. It’s another popular distributed ledger use case as blockchain and IoT goes hand-in-hand.
It can also offer a better ecosystem to deal with operational challenges. Using it, people can freely connect their devices to the network and relay information without having to worry about security issues.
Distributed ledger technology projects and e-commerce is a match made in heaven. Both of them deal with transactional information, so it seems a perfect fit to introduce DLT as the main technology. Mainly e-commerce plays a huge role in the marketplace; however, it’s mostly influenced by big players and doesn’t promote fairness in the game.
DLT has the ability to offer better options for good merchandiser and promote fairness. It can connect users with better merchandisers. Also, tamper proofing this industry would increase more interest in common people.
Global Payment Method
It’s another popular distributed ledger use cases. This technology has the ability to become a global payment ecosystem. It already offers and can indeed meet with the demands of the growing financial demands. Global payments in a typical banking system require a lot of time, and at most time many people can’t send money overseas in times of need.
Also, you can’t pay for everything with just a single source of the payment system. To eliminate this problem, DLT can become the bridge between the sender and the receiver. It can provide faster, safer transactions. The best part is that it can also provide a source to include digital currencies and fully transform the financial sectors, eliminating fiat currencies.
Chapter-7: Challenges DLT Needs to Overcome
Uncertainty of Regulations
Distributed ledger technology has always dealt with regulatory issues. It’s not an uncommon scene here. Most of the distributed ledger platforms doesn’t include any specific law or regulation on their networks. This lack of regulation or limited regulation is compromising user rights on the network.
Uncertainty is making the DLT more volatile, and people are investing in cryptos associated with DLTs are falling victim. Not to mention that these platforms don’t actually hand out rights to their nodes. So, even if somehow you lose your token on the network due to a hack, there won’t be any backup for it.
Due to the circumstances, distributed ledger technology is largely failing to attract people and innovators. If this technology wants to shine, then it has to integrate any sorts of regulatory rules that will provide protection for the people’s assets.
Limited Evidence of Global Impact
Even though DLT is making is the way in the market it still lacks the one much-needed ingredient – Globalizations. For any technology to evolve, there needs to be a craze or demand in the market from the common people. How DLT can be globally implemented is still a theoretical approach. There isn’t much hard evidence of present global impact.
But the lack of marketing is making this new technology remain in the dark. Even though there’s a lot of people that know about distributed ledger technology, it’s still not enough. Many countries banned using this technology as it doesn’t necessarily abide by the law.
Also, people don’t quite understand the mechanisms behind it due to the lack of proper understanding. If distributed ledger technology wants to step into the limelight of the tech world, it needs to be globally accepted and implemented. Targeting only specific market in the world can’t promise a 100% success rate.
Immaturity of the Technology
The first distributed ledger technology was the blockchain, and it was introduced through the Bitcoin back in 2009. Well, it’s been a very long time, but due to the systems complex nature, many developers couldn’t fully grasp the technology yet.
Moreover, the blockchain had quite a few shortcomings. Improving them and offering better technology has been the priority in the last few years. Many companies did come a long way. But as the distributed ledger technology is a vast field, many are trying to come up with a more efficient model.
However, perfecting these models need time. Also, as the DLTs will keep growing how it will impact the network? Yes, many DLTs promise infinite scalability, but still, it’s only in theory.
If in practice, things don’t work out, then they would have to improve it again and again. That’s why distributed ledger technology is still considered to be immature, and most people are avoiding it due to this nature.
Protecting Data and Maintaining Security
Data protection and maintaining security is another major drawback that distributed ledger technology needs to overcome. The purpose of every new tech is to put a global impact. But if it gets integrated into the global aspect, more people will join the network. However, maintaining security and protecting data becomes a much more difficult task as the network grows.
There have been multiple scenarios where blockchain distributed ledger couldn’t handle the security issues. As a result, there have been reports of many vulnerabilities. Also, after the DAO hack and blockchain security concerns, many started refraining themselves from distributed ledger systems altogether. As this framework doesn’t have any governing authority, security is the most needed feature here.
So, for future development of this technology, the DLT needs to maintain security and protect all sorts of data on the network at any means.
Overcoming Privacy Issues
Privacy is another concern for the mass people. Various enterprises are shying away from integrating distributed ledger technology. A most prominent reason is the public ledger system. These companies feel that sharing their activities on the ledger with the public or their competition would result in their downfall.
However, there have been permissioned or federated distributed ledgers too. Another fact is that, even though some of the distributed ledgers is permissioned, still the people getting access to the ledger will be able to see each other’s transactions.
This way individual privacy gets ruined. But as of now, there has been some distributed ledger technology that focuses more on the user’s right and privacy. If they can fully utilize this scheme, then DLT will surely prevail in the future.
Conflict with Traditional Approaches
Distributed ledger technology doesn’t really go with the traditional ways. Most people consider it as a good alternative to typical banking systems. As the whole network is quite a transplant, there’s very little chance of fraudulent activities on the network.
However, the lack of law is making this system directly clashing with the traditional approaches. Government institutions are questioning the integrity of the technology. There’s a big chunk of distributed ledger technology companies that don’t even have proper license to avoid any governmental influences.
It can be both ways – No governmental force can exploit the network, and it would be a fairground, on the other hand, the people would be deprived of their legal rights. The whole concept of DLT conflicts with the already existing approaches. The technology needs to prove its worth to be fully acceptable.
Chapter-8: Future of Distributed Ledger Technology
You must be wondering, what the future of this new technology is? Let’s shine some light on possible outcomes. If distributed ledger technology keeps blooming like this, then we would probably see a lot more intensification in terms of today’s integrations.
What it means is that there are already many high-end organizations trying to implement this new technology and changing the typical ways of the tech world. However, if distributed ledger technology can actually manage to overcome its limitations, then globalization would be possible.
Data is the new type of oil right now, and these ledgers are meant to provide a great way to collect them in a sequential manner. The internet is changing our lifestyle, and with DLT we will be able to have greater control over it.
Other protocols such as streaming, encrypting and sending billions and billions of data through this channel is the primary outcome. Obviously, to convert everything into a digital system, we would need to work with cryptocurrencies as well.
So, there should be a cryptocurrency marketplace on the rise very soon. It’s safe to say we’ll also see –
- Government systems based on DLT
- Need for the crypto banking system.
- Full transparency in industries.
- Ecosystem connecting different social chains.
- Security protocols based on DLT
These are just a few of the futuristic analysis of this growing technology. However, everything will depend on how much this technology can actually fulfill all our needs and whether it’s capable of handling a global impact.
Want to read a simpler version of this comprehensive guide? Check out this article — Distributed Ledger Technology: Simply Explained
Chapter-9: Final Words
With the invention of distributed ledger technology, a new form of revolution has started – communication and information gathering. Using this tech, we can gather both static and dynamic data sequences. So, it can be a huge step for us. Distributed ledger technology can allow us to go beyond the typical database system and utilize it in everyday applications.
It would be less about only collecting information but more about how we can utilize that information for economic growth. A greater DLT with more efficiency is yet to be invented. Obviously making this new tech perfect would take time but we can hope for a better outcome soon.
Who wouldn’t love living in a world where transparency prevails, right? Let’s just see what the future holds for us.
Want to learn more about the fundamentals of blockchain technology? Check out this free blockchain course now!