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DISTRIBUTED LEDGER TECHNOLOGY


You all must have heard of many technical terms in the crypto world such as ledgers and distributed ledgers. Well in order to understand what distributed ledger technology is, we need to apprehend what a ledger itself is.




A ledger in cryptocurrency is a record-keeping system. Its main objectives are many. Such as, it maintains the anonymity of its participants, their respective cryptocurrency balances, and a record of all the transactions which were executed between the participants of the network.


WHAT IS DISTRIBUTED LEDGER TECHNOLOGY


A Distributed ledger refers to technological infrastructure, a digital system that records asset transactions at numerous places simultaneously. It basically uses cryptography to store data and only with cryptographic keys and signatures, authorized users can access that data.


The technology also creates an immutable database, which means information, once stored, cannot be deleted and any updates are permanently recorded for posterity.


HOW DOES THE DISTRIBUTED LEDGER TECHNOLOGY WORK


Distributed ledgers are held, reorganized, and controlled by individuals called nodes. On the network, every transaction that takes place is recorded and a conclusion on the development of the database is created by each node.


Firstly, when a transaction takes place it is processed, then based on that transaction, voting is carried out on the changes completed on that database. Then all the nodes participate in the voting and if at least 51 % of them agree, then the transaction is accepted on the database.


After this, the nodes update the versions of the database so that all the devices or nodes will be of the same version. Then, this new transaction is written on the block on the blockchain.

In the blockchain, nodes in the Proof-Of-Work are also called miners.


PROPERTIES OF A DISTRIBUTED LEDGER TECHNOLOGY


SECURED- All transactions are individually encrypted.


ANONYMOUS- The identities of the participants are either anonymous or pseudonymous.


UNANIMOUS- All network participants agree to the validity of all the records.


TIME STAMPED- A transaction timestamp is recorded on the block.


DISTRIBUTED- A copy of the ledger is given to all the participants to ensure transparency.


IMMUTABLE- All the validated or encrypted records are irreversible and cannot be changed or tampered with.


DIFFERENT TYPES OF DISTRIBUTED LEDGERS


Blockchain is just one type of distributed ledger technology. Apart from this, there are many other types of DLTs too such as DIRECTED ACYCLIC GRAPH (DAG), HOLOCHAIN DLT, and TEMPO (RADIX).


ADVANTAGES OF DISTRIBUTED LEDGERS


THE NEED FOR A THIRD PARTY IS ELIMINATED


Even though it is not a necessity to operate the distributed ledgers without a third party, it does help in saving a lot of time and money in certain cases. Thus in a supply chain business results can be written directly by sensors to the blockchain.


IT IS A HIGHLY DECENTRALISED NETWORK


Distributed ledgers, inherently are highly decentralized networks. As the database is spread globally and there could be many chances of hacking, the decentralized nature provides an additional layer of security to these networks.


SECURE, TAMPER-PROOF AND IMMUTABLE


In distributed ledgers, the entries of various transactions happen in the database. Thus, once the records are written, they cannot be tampered with, by any other party until the ledgers are distributed.


HIGHLY TRANSPARENT


Distributed ledger technologies are highly transparent. They allow all the stored information to be freely and easily available to all its users. Hence, it provides with a significant amount of transparency which many industries require today.


DIFFERENCE BETWEEN DISTRIBUTED LEDGER AND BLOCKCHAIN


  • Blockchain technology implements CRYPTOGRAPHY BASED SECURITY to verify and secure transactions. Even though some DLT systems use some form of cryptography, it is not the same for all DLT systems.


  • DLT systems do not store the transactional data in the form of a chain-based structure whereas Blockchain technology systems do store it in that way.


  • Moreover, blockchain technologies use platform-wide tokens or coins to enable transactions, verify records, pay for transaction fees, etc. Such tokenization is not used for standard DLT systems.


The line between blockchain and distributed ledgers is very thin. Blockchains are also distributed ledgers but of a special type.








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