This introductory guide offers a brief discussion on what is distributed ledger, its core features, and how blockchains and DLTs are two different technologies.
The distributed ledger technology (DLT) is the backbone of blockchain technology. All blockchains inherently use a distributed ledger to function. In fact, blockchain is one of the technologies under the umbrella of distributed ledger technology.
Of course, distributed ledger technology is a complex technology and requires a deeper understanding of multiple concepts related to this technology. This article tries to offer a brief introduction to the concept of DLTs.
What is Distributed Ledger Technology?
Distributed ledger is a digital database that runs on a distributed network. It is spread over diverse locations, networks, and beyond boundaries. The main idea behind distributed ledger is that any central authority does not control it and hence offers transparency.
Each node of the network takes part in the distributed system. Each of them knows the ledger as they have an exact copy just like other nodes in the network.
The distributed ledger systems are extremely fast. It doesn’t take much time to reflect change across the network.
Distributed ledger technology is an excellent choice in this age of cyberattacks. With a distributed ledger, it becomes hard for hackers to hack the database. This is because everything is transparent and it is easy to trace back to the hacker. Also, to hack, the hacker needs substantial computational power which might be not possible for almost the majority of them out there.
Read More: What is DLT?
Unique Features of a Distributed Ledger
By using distributed ledgers, there is no need for centralized authority. A distributed network is all about decentralization. It is a network of ledger or contracts that is maintained by nodes. The nodes can be merged into blocks which makes it even easier to maintain larger distributed network ledgers. Without the need for a central authority, all the information stays secure.
However, to enable the distributed network, technology such as cryptography is required. The data can be used with the help of cryptographic signatures and keys. For further study, you should learn more about hashing in cryptography.
Anything that is stored on the distributed ledger is immutable. This means that once stored; it cannot be changed. Immutability makes it even harder for hackers to try to hack the distributed ledger network. Furthermore, the absence of the central authority means that it is also free from any intentional change as well.
Blockchain vs Distributed Ledger Technology (DLT)
Someone who is still learning the fundamentals around blockchain technology often makes the mistake of thinking DLT and blockchain as the same technology. Rather than making things complicated, you can remember one simple thing —
Blockchain is a type of distributed ledger but every distributed ledger is not blockchain.
While blockchain has a particular block structure, DLTs are not bound to follow the same structure as the blockchains. Distributed ledgers can follow different data structures. The same thing can be said about following a data sequence.
Another big difference is that blockchains MUST need a power-hungry consensus algorithm to function. But distributed ledgers don’t need a consensus algorithm. That’s why distributed ledgers also are less power-hungry and more scalable.
The main reason why distributed ledger technology is so compelling is the fact that it can be used to power blockchain. The blockchain is a specialized database that uses DLTs.
Read More: Blockchain vs Distributed Ledger Technology
Check out the following table on distributed ledger vs blockchain
|Structure||A database spread across different nodes; can have different structures||Follows a particular structure consisting blocks and chains|
|Sequence||Can have different data sequence patterns, depending the technology type||Only follows the data sequence designed for blockchains|
|Need of Consensus||Doesn't need a consensus algorithm||Consensus algorithm is mandatory|
|Availability of Tokens||No||Might have token economy|
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Distributed ledger technology is still in the infant stage, but that shouldn’t discourage companies to utilize it to make their business more effective. DLT is also incremental which means that it can be scaled easily. It can act as a cornerstone of future technologies and solutions that can make life easier for every one of us.
DLT solves a lot of problems that the current world is going through. Not only it is capable of storing essential data, but it also solves customer problems such as protection, integrity, speed, and so on. It also reduces the environmental footprint with the reduced use of paper.