Distributed Ledger Technology (DLT)

Written by Max Hinschman

Introduction

Distributed ledgers are databases that are shared by multiple participants in a network. The main purpose of the distributed ledger is to eliminate the need for the need of a “trusted” central party to maintain and update entries of the ledger. Ledgers are simple records of data that have existed for as long as humans have engaged in transactions that need to be recorded. Ledgers made the transition from physical paper based to digital ledgers in the 1980’s but remained managed by a single party. However, advancements in technology have made it possible to develop a system that eliminates the need for a third party.

In a distributed ledger, no single node can alter the state of the ledger without the consent of the other participating nodes. When changes are made and validated by other nodes, the process can be completed as quickly as a few seconds. The information in a distributed ledger is stored using cryptography and is unlocked through the use of private and public keys. The fact that the ledger is shared across multiple parties makes the possibility of hack much less likely. The attacker would have to change the ledgers held by the majority of nodes in the network.

Blockchain is the most well known and commonly used of the distributed ledger technologies, with the most famous example being Bitcoin. Blockchain distributed ledgers have a network of nodes working to validate transactions through various means of achieving consensus.

The decentralized nature of the distributed ledgers provide a level of security far greater than a centralized alternative can ever provide. Distributed ledgers also gives access and control of data to the participants of the network. The technology is still in its early stages so there are many still many inefficiencies that need to be solved but the technology is continuing to be deployed across many different industries and uses cases.

Suggested Reading

Distributed Ledger Technology on Altcoin Magazine

What’s the Difference Between Blockchain & Distributed Ledger Technology? by Anthony Back

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