Distributed Ledgers
A distributed ledger is a database that is consensually shared and synchronized across multiple sites, institutions, or geographies, accessible by multiple people. It allows transactions to have public "witnesses." The participant at each node of the network can access the recordings shared across that network and can own an identical copy of it. Any changes or additions made to the ledger are reflected and copied to all participants in a matter of seconds or minutes.A distributed ledger stands in contrast to a centralized ledger, which is the type of ledger that most companies use. A centralized ledger is more prone to cyber attacks and fraud, as it has a single point of failure.Underlying distributed ledgers is the same technology that is used by blockchain, which is the technology that is used by bitcoin. Blockchain is a type of distributed ledger used by bitcoin.
Distributed Ledger
Definition
A distributed ledger is a database that is shared and synchronized across multiple sites, institutions, or geographies, accessible by multiple people. It allows transactions to have public 'witnesses.' Every participant in the network can access the shared records and has an identical copy. Any changes or additions to the ledger are reflected and replicated to all participants within seconds or minutes.
Origin
The concept of distributed ledger technology (DLT) dates back to the 1990s, but it gained widespread attention after Satoshi Nakamoto published the Bitcoin whitepaper in 2008. Bitcoin uses blockchain as its distributed ledger, making DLT a hot topic in the fintech industry.
Categories and Characteristics
Distributed ledgers are mainly divided into two categories: blockchain and non-blockchain. Blockchain is the most common type, achieving data immutability by dividing data into blocks and linking them in chronological order. Non-blockchain distributed ledgers use other methods to achieve data distribution and synchronization, such as DAG (Directed Acyclic Graph).
Blockchain features include decentralization, transparency, and immutability, but its drawbacks are poor scalability and slower transaction speeds. Non-blockchain distributed ledgers may have advantages in scalability and speed but might not be as secure and transparent as blockchains.
Specific Cases
Case 1: Bitcoin. Bitcoin is the earliest and most famous blockchain application. It uses distributed ledger technology to create a decentralized digital currency system where all transaction records are public, transparent, and immutable.
Case 2: Hyperledger Fabric. Hyperledger Fabric is an enterprise-oriented distributed ledger platform that allows companies to create private, permissioned blockchain networks for higher privacy and control.
Common Questions
1. Is a distributed ledger completely secure? While distributed ledgers enhance security through decentralization, they are still susceptible to 51% attacks and other forms of cyberattacks.
2. What is the difference between a distributed ledger and a blockchain? Blockchain is one implementation of a distributed ledger but not the only one. Other forms of distributed ledgers include DAG, among others.
