Distributed Ledgers are one of the fundamental concepts that Blockchain is built off of. Often both concepts are used interchangeably, however they are different. Blockchain is made of several concepts such as smart contracts, protocols etc. and distributed ledgers are just one of those concepts. In this article we are going to take a look at what distributed ledgers are, its benefits and how blockchain uses distributed ledger technology.
Distributed Ledger Technology (DLT) can be used to store digital databases of transactions securely and accurately, in a decentralised, permanent way across many different sites or geographic locations. Each record in the ledger is stored with a cryptographic signature and can only be accessed using a key. A distributed ledger consists of a network of nodes, such as computing devices, where each node is known as a participant. Data is shared and synchronised across all nodes in the distributed ledger enabling each node to verify any updates to the ledger which is useful against preventing cyber attacks.
Most organizations use a centralized ledger to store their data records. Their data is still maintained at various locations and updates to the centralized ledger are then propagated periodically to the other data locations. This type of ledger setup is prone to cyber attacks and there are delays between updates of records. A decentralized distributed ledger, on the other hand, prevents cyber attacks as all nodes in the network would have to be attacked at the same time by more than one participant for it to be successful. Another benefit of a distributed ledger is that updates to the other nodes in the network take place a lot quicker since the nodes are connected in a peer to peer fashion allowing data to be shared simultaneously making it much more efficient. Unlike a centralized ledger, a distributed ledger does not require a centralized authority to verify transactions and ensure no changes to the records have taken place because each node has a copy of the history of all the records in the ledger and can verify each transaction itself by confirming with other nodes.
Now that we know what a distributed ledger is and some of its benefits. Let’s take a look at how blockchain uses distributed ledger technology as its foundation. Blockchain is a type of distributed ledger where transactions are grouped as blocks with an immutable, cryptographic signature and appended together. There are many blockchains that use distributed ledgers as a type of protocol, and some of the most popular include Ethereum, Hyperledger Fabric, R3 Corda and Quorum.
Distributed Ledgers ensure that blockchains are secure, immutable and decentralised over a number of nodes in different locations. Distributed ledgers can be used in almost any industry from governmental corporations to financial institutions, transforming the way reviews and audits are performed while ensuring the security and immutability of your information. Even though the concept of distributed ledgers is still fairly new to many organizations, there are many benefits to adopting it into your business especially for your business’s blockchain projects.