What is Distributed Ledger Technology (DLT)?
What is Distributed Ledger Technology (DLT)?
Distributed Ledger Technology is a type of database that is used to maintain a continuously growing list of data records that are secured from tampering and revision.
The technology was first developed in 2008 by Satoshi Nakamoto, who published the idea of a decentralized digital currency called Bitcoin.
It is a protocol that enables the secure functioning of a decentralized digital database. DLT allows for the storage of all information securely and accurately using cryptography.
How Does Distributed Ledger Technology (DLT) Work?
Distributed ledgers use independent computers, called nodes, to record, share and synchronize transactions in their respective electronic ledgers (instead of keeping data centralized as in a traditional ledger).
What Is the Purpose of DLT?
DLT is a protocol that enables the secure functioning of a decentralized digital database.
Distributed networks eliminate the need for a central authority to keep a check against manipulation. By eliminating third-party intermediaries and increasing automation, DLTs have the potential to greatly reduce transaction fees and overall processing costs.
Why Is Blockchain Called a Distributed Ledger Technology?
Blockchain is referred to as DLT because it is a digital ledger of transactions that are distributed across the entire network of computers (or nodes) on the blockchain.
Distributed ledgers use independent nodes to record, share, and synchronize transactions in their respective electronic ledgers instead of keeping them in one centralized server.
Categories of Distributed Ledger Technology (DLT)
Distributed ledgers can be classified as private, public, permissioned, permissionless, or any combination of the two.
Public/Permissioned
Allows applications to be deployed or removed without anyone being notified, revealing their identity, or meeting any application criteria. The nodes that comprise the network and run the applications must be invited to join.
Private/Permissioned
This type of network has no decentralization. Applications and network nodes that run them must both be invited to join the network and meet certain requirements or provide proof of identity. Any party may be eliminated at any time and without notice.
Public/Permissionless
This is the most decentralized network type. Applications can be deployed in production or removed without notifying anyone, revealing their identity, or meeting any application criteria requirements. Furthermore, nodes on the network can join and contribute freely and anonymously, typically in exchange for the network’s native cryptocurrency.
Private/Permissionless
Applications in production must be invited to join the network and can be removed at any time without warning. The network’s nodes, which run the applications, can join and contribute freely and anonymously, typically in exchange for the network’s native cryptocurrency.
Types of Distributed Ledger Technology (DLT)
Blockchain
Without a doubt, Blockchain is the most popular type of DLT in the world right now. The ledger stores transaction records in the form of a chain of blocks, similar to a long list of records.
The digital information stored in the blocks includes the time, date, and transaction specifications. Furthermore, Blockchain blocks include the sender’s information as well as a unique ‘digital signature’ to ensure anonymity.
The blocks in a Blockchain contain a special ID known as the ‘hash,’ which distinguishes and synchronizes transactions. The hash function provides dependable support for distinguishing all transaction blocks in the ledger.
Hashgraph
Hashgraph stores multiple transactions on the ledger with the same timestamp. In this type of distributed ledger implementation, all network transactions are provable.
The Hashgraph Gossip protocol is used to convey all kinds of information across the network, primarily about transactions.
Each network node can broadcast information about a new transaction (known as “events” and pre-signed). Every node will randomly select a neighboring node to relay this information to. The event will then be combined with other received data by a node before being relayed to other nearby nodes.
When a transaction occurs, neighboring nodes share the information with other nodes until all nodes are aware of the transaction after some time.
Using the “Virtual Voting” protocol, each node validates the transaction and then adds it to the ledger.
Directed Acyclic Graph (DAG)
A Directed Acyclic Graph (DAG) differs from other DLT types due to its consensus mechanism.
DAG is a graph with no directed cycles. This means that there are no loops and every node has at least one incoming edge and at least one outgoing edge.
With network expansion, DAG is capable of supporting Nano-transactions and improving scalability.
Every node on the network must provide proof of transactions on the ledger and may initiate transactions. Nodes must confirm their transaction by verifying at least two previous transactions on the ledger.
As a result, transactions with longer branches from previously validated transactions are more likely to be accepted.
DAG could be used by businesses that have to deal with large volumes of transactions.
Holochain
Holochain DLT is referred to as one of the most advanced levels of ledgers out there. It provides every agent with its very own forking system, that way, avoiding using any global consensus protocol.
Holochian uses individual modules to create the whole ledger system. Every node keeps its very own distributed ledger and communicates with it through its own unique signature but that ledger will revolve around a specific set of values called the “DNA.”
Tempo (Radix)
Tempo is a newer feature that combines the advantages of timestamping with other DLT features. Tempo’s main advantage is that it can be used without modification for both public and private modules.
Furthermore, no notable hardware additions would be required to create your decentralized applications, coins, or tokens.
The distributed ledger database is built on three fundamental principles: a networked cluster of nodes, a distributed global ledger, and special algorithms for timestamping events on the ledger.
What’s the Difference Between DLT and Blockchain
DLT is a decentralized database managed by multiple participants, across multiple nodes. Meanwhile, Blockchain is a type of DLT where transactions are recorded with an immutable cryptographic signature called a hash.
Are All Blockchain DLTs?
All blockchains are DLTs but not all DLTs are blockchains. That’s because blockchain is considered to be a form of DLT while not the only form. With blockchain, you are still dealing with what amounts to a database.
Disclaimer: The opinions expressed in this blog are solely those of the writer and not of this platform.
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