What Is Distributed Ledger Technology?

Over time, cryptocurrency-based distributed systems using similar record-keeping mechanisms became popular. Eventually, the terms public ledger and distributed ledger became almost synonymous. To distance themselves from the hype and volatility associated with cryptocurrencies, larger companies like Google, Amazon, and Volkswagen began using the phrase distributed ledger technology. This article delineates distributed ledger technology.

Simply put, distributed ledger technologies are designed to disseminate business information to company stakeholders (either publicly or privately). Conceptually, they’re similar to a database distributed over several computing devices or nodes. Each node maintains an identical copy of the entire ledger while working independently from other nodes. As no central authority manages data in a distributed ledger, independent nodes are responsible for updating the ledger and recording transactions. Before doing so, however, all nodes must first vote on these updates to ensure agreement. Once these nodes reach an agreement (or consensus), each node on the distributed ledger updates itself to the latest agreed-upon version.

The various consensus methods used to facilitate blockchain transactions (like Proof of Work, Proof-of-Stake, Delegated Proof of Stake) continues to grow. However, while blockchain technology is the first fully functional implementation of distributed ledger technology, Directed Acyclic Graphs and other hybrid technologies are also being used to implement distributed ledger systems.

Source: nakamo.io

Distributed ledger technologies remove the financial burdens associated with ‘trust’. Being ‘trustless”, they have little or no need for banks, notaries, and regulatory compliance officials. Consequently, they’re begetting various financial innovations, from loyalty and rewards to smart contracts to payments to trading and raising capital (ICOs). Not incidentally, they’re also providing greater transparency and accountability within the financial world. In short, they’re revolutionizing the way people related to money and technology.

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