Crypto Alphabet

What is a distributed ledger technology (DLT)?

The decentralised nature of cryptocurrencies allowed decentralised management of these currencies, and led to the emergence of a new concept: Distributed Ledger Technology (DLT).

Cryptocurrencies rely on DLT to provide an indestructible record of transactions to prevent theft, forgery, and double-spending.

Distributed Ledgers are multi-organisational databases with a super audit trail. Instead of relying on a central third party to witness and record transactions, they rely on a consensus mechanism of validation.

Once a transaction has been validated, it is assigned a cryptographic signature and recorded on the ledger. That record is timestamped. A copy of the amended ledger is distributed to all nodes, making the ledger hard to destroy.

In a distributed ledger system, each member of the network (node) holds a localized, synchronized copy of the ledger.

Distributed ledgers are characterised by resilience and immutability, as tampering or destroying one node doesn’t affect the entire system, nor the continuity of the ledger.

On the downside, distributed networks can be markedly slower, as any updates must be agreed upon by most, if not all, nodes.

What are the benefits of DLT?

As one of the future solutions, DLT brings a number of benefits, including:

  • Built in authentication
  • Selective and built in data distribution
  • Tamper proof history recording built in
  • Smart contracts allow business processes and data validation in the shared space
  • Built in resilience