The Distributed Ledger (DLT) is an umbrella term that covers varying technologies, including blockchain, that describes the chronicling and sharing of transactions across many systems in a computer network. Often, the DLT is mistaken as being the same as the term blockchain. However, they do not share the same features, despite originating from the same concept
Ostensibly, a DLT provides a decentralised database that has the capability to be overseen by multiple participants. It is free of any central authority. Its log of records means the transparency is always there, meaning it is exceptionally difficult to hack.
Meanwhile, the blockchain refers to a chain of blocks, which is a type of DLT. It is merely a type of the technology that the DLT facilitates.
How Does A DLT Work?
The DLT is another example of the democratization of modern day crypto banking.
Used in almost every industry where data is collected and used, the DLT is sustained by a vast network of nodes, which keeps track of the ledger, confirms any information, and provides a general analysis of the data’s accuracy. It is a technology that has reduced the heavy workload of data auditing.
Here are five basic takeaways about DLT technology works. We will put it as simply as possible.
- All information stored on a DLT is protected by cryptography, which is a cybersecurity practice that embraces complex methods to keep any message secure.
- A copy of the ledger is always stored on DLT network-based devices (or nodes). The tiniest change in ledger, such as shifting data from one block to another, is automatically recorded. Each node has a copy of the ledger.
- If there is an overall consensus about the validity of the latest ledger, all transactions are quickly ratified and provide the foundations for any future transactions.
- Blockchains are impossible to alter once a network has reached a consensus. It’s how they develop.
- For any fraudulent activity to be successful on a DLT, it would require a mass, highly organised hack attack that happened all at once, all at the same time. It is basically impossible.
What Are The Benefits Of A DLT?
Some positives are more obvious than others, so let’s break down why the DLT is likely here to stay for centuries to come.
- Decentralization: DLT completely removes reliance on a central authority, reducing single points of failure and increasing system resilience and security.
- Transparency: Transactions are recorded on an immutable ledger, enabling full visibility and auditability, fostering trust among participants.
- Security: Cryptographic techniques make DLT resistant to tampering, hacking, and fraud, providing a secure environment for digital assets.
- Efficiency: DLT eliminates intermediaries, reducing transaction costs, delays, and administrative overhead, speeding up processes and improving resource allocation.
- Improved Traceability: Every transaction is time-stamped and recorded, making it easier to track the movement and ownership of assets across the network.
What Industries Rely On DLTs?
It is hardly surprising to see some of the most common and important industries in societies relying on DLTs, given its reputation for flawless security.
Here are five examples in which a DLT is used in everyday business:
Real Estate: Buying a house was once a paperwork-intensive practice. DLTs greatly reduce the requirement for paperwork and firewalling security. Smart contracts means the transfer of property can be automated.
Healthcare: Patient records and data are impregnably secure under the guise of a DLT, which is why they are becoming increasingly popular in this sector.
Banking and Finance: It goes without saying that the transfer of money in trading requires the utmost security. Smart contracts are the norm now for the execution of deals and destroying the requirement for any time-consuming intermediaries.
Is DLT Here To Stay?
Put simply, yes.
At least for the foreseeable future, it’s difficult to see any rival technology knocking DLT off its perch.
Indeed, it’s likely to continue to grow across several sectors to meet the increasing need for transparency and security, the significant trend to decentralisation, and its integration into new-age technologies, namely Artificial Intelligence (AI).
There are still some DLT mountains to climb – regulatory uncertainty and scalability spring to mind – but its fundamental democratic principles, its embracing of decentralisation, and the sheer safety and security it allows its users means it is going nowhere anytime soon.
FAQs
1. What is Distributed Ledger Technology (DLT)?
DLT refers to a decentralized database system where records (or “ledgers”) are maintained across multiple locations or participants, ensuring transparency, security, and immutability of data without relying on a central authority.
2. How does DLT differ from traditional databases?
Unlike centralized databases, DLT stores copies of the ledger across various nodes in a network, ensuring that no single entity controls the data. This enhances security and redundancy.
3. What are the key benefits of DLT?
DLT offers benefits like enhanced security through cryptography, increased transparency, lower costs by removing intermediaries, improved traceability, and decentralization, which reduces reliance on a single trusted party.
4. Can DLT be used for anything other than cryptocurrencies?
Yes, DLT has applications beyond cryptocurrencies. It is used in supply chain management, digital identity, voting systems, healthcare, and financial services for secure, transparent, and efficient record-keeping.
5. How is data on a DLT network protected?
Data on DLT is protected by cryptographic techniques, where each transaction is verified by multiple participants in the network, and once recorded, the data is immutable and tamper-resistant.
