Distributed ledger

A distributed ledger (also called a shared ledger, or Distributed Ledger Technology, DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions.[1] There is no central administrator or centralized data storage.[2]

A peer-to-peer network is required as well as consensus algorithms to ensure replication across nodes is undertaken.[2] One form of distributed ledger design is the blockchain system, which can be either public or private.

Distributed Ledger

The distributed ledger database is spread across several nodes (devices) on a peer-to-peer network, where each replicates and saves an identical copy of the ledger and updates itself independently. The primary advantage is the lack of central authority. When a ledger update happens, each node constructs the new transaction, and then the nodes vote by consensus algorithm on which copy is correct. Once a consensus has been determined, all the other nodes update themselves with the new, correct copy of the ledger. [3][4] Security is accomplished through cryptographic keys and signatures. [5][6][7]

Etymology

The meaning of the word "blockchain" remains controversial. While some people state it is synonymous with a distributed ledger (and most of generalist press tends to use it with this meaning), others argue that technically it would only apply to linear blockchains such as the one Bitcoin or Litecoin use and not to directed acyclic graphs such as the ledgers based on Iota, Tangle, or Hedera Hashgraph algorithms. Therefore according to the latter definition, not all distributed ledgers have to necessarily employ a chain of blocks to successfully provide secure and valid achievement of distributed consensus: a blockchain is only one type of data structure considered to be a distributed ledger.[4][8][9]

Distributed ledgers are mostly known because of their use as cryptocurrencies, even if technically speaking the cryptocurrency and the underlying ledger are two different things. A cryptocurrency, in practice, can be used in order to provide incentives to keep the nodes up and running. Other possible uses beside cryptocurrencies include smart contracts and file storage.

Applications

In 2016, numerous banks tested distributed ledgers for international payments.[10] Incumbent banks are investing heavily in distributed ledgers as a cost-saving measure and a way to reduce operational risks.[2] The future use of distributed ledgers is expected to monetize the Internet of things in a programmable economy.[11][12]

Types

Distributed ledgers may be permissioned or permissionless regarding if anyone or only approved people can run a node to validate transactions.[13] They also vary between the consensus algorithm. (Proof of Work, Proof of Stake, or Voting systems). They may also be mineable (you can claim ownership of new coins contributing with a node) or not mineable (the creator of the cryptocurrency owns all at the beginning).

See also

References

  1. ↑ Distributed Ledger Technology: beyond block chain (PDF) (Report). UK Government, Office for Science. January 2016. Retrieved 29 August 2016.
  2. 1 2 3 Scardovi, Claudio (2016). Restructuring and Innovation in Banking. Springer. p. 36. ISBN 9783319402048. Retrieved 21 November 2016.
  3. ↑ Maull, Roger; Godsiff, Phil; Mulligan, Catherine; Brown, Alan; Kewell, Beth (21 Sep 2017). "Distributed ledger technology: Applications and implications". FINRA. Retrieved 25 September 2018.
  4. 1 2 Ray, Shaan. "The Difference Between Blockchains & Distributed Ledger Technology". Towards Data Science. Retrieved 25 September 2018.
  5. ↑ UK Government Chief Scientific Advisor. "Distributed Ledger Technology: beyond block chain". Gov.uk. UK Government. Retrieved 25 September 2018.
  6. ↑ Brakeville, Sloane; Perepa, Bhargav (18 Mar 2018). "Blockchain basics: Introduction to distributed ledgers". IBM Developer. IBM. Retrieved 25 Sep 2018.
  7. ↑ Rutland, Emily. "Blockchain Byte" (PDF). FINRA. R3 Research. p. 2. Retrieved 25 September 2018.
  8. ↑ Distributed Ledger Technology (DLT) and blockchain (PDF) (Report). World Bank. 1 December 2017. Retrieved 17 February 2018.
  9. ↑ Y., Adam (20 May 2018). "Distributed Ledgers & Blockchain: there is a (slight) difference". Medium. Retrieved 25 September 2018.
  10. ↑ "Central banks look to the future of money with blockchain technology trial". Australian Financial Review. Fairfax Media Publications. 21 November 2016. Retrieved 7 December 2016.
  11. ↑ "The CIO's Guide to Blockchain". Smarter with Gartner. Gartner. 29 June 2016. Retrieved 4 December 2016.
  12. ↑ Miraz, Mahdi; Ali, Maaruf (2018). "Applications of Blockchain Technology beyond Cryptocurrency". Annals of Emerging Technologies in Computing (AETiC). 2 (1): 1–6. Retrieved 25 September 2018.
  13. ↑ "Blockchains & Distributed Ledger Technologies". Blockchain Hub. Missing or empty |url= (help); |access-date= requires |url= (help)
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