Is it Digital Ledger Technology or Blockchain?
Those familiar with the concept of blockchain must know that it is working on a decentralized system, and cannot be mutated. Blockchain is the same technology behind well-known cryptocurrencies like bitcoin and dogecoin. It is also the technology behind NFTs, another up and emerging trend.
However, the word DLT is a bit obscure and in my opinion, it doesn’t get its due credit. Let us see some details about DLT first.
What is DTL?
DLT is Digital Ledger Technology. It can utilize different architectures and protocols to adjust security and scalability. It primarily focuses on the idea of decentralization, i.e., data is available for reference and change to all.
For example, if you make a transaction on any decentralized platform, the details of that transaction will likely be visible to all on the network or the local peers depending on the structure of the system. In this way, all transactions are verified by node users themselves.
This eliminates the requirement of a central authority. With the lack of central authority to control the system, the chances of manipulation decrease by a huge margin.
Then comes the question of how secure the information would be using this technology?
Well, to answer that DLT uses cryptographic signatures and keys to enable only authorized users to access the data. Cryptographic keys are a pair of two encryption keys, a public one and a private one. Only both together can access the data.
DLT creates an immutable database, which means information, once stored, cannot be deleted and any updates are permanently recorded. That is no one can forge any transaction.
Plus, the decentralization of data using a P2P network increases security because all nodes have a copy of the ledger.
This means that the attacker will have to simultaneously attack all nodes of a network.
DLT Vs Blockchain
But wait! Doesn’t all of this sound like blockchain technology? Don’t you wonder whether they are the same?
They indeed have too many similarities. This is because Blockchain itself is a type of DLT. Different DLTs use different algorithms, protocols and store data differently. Blockchain is simply a DLT that stores data in the form of chains. However, this is not the case for all DLTs. A DLT could be any structure used as a ledger.
Just the way blockchain is used for finance and commodity trading, other DLTs can also be used. They can be used to transfer real estate deeds, update patient records, maintain supply chain data, and much more.
Currently, the legal profession is looking at how it can use DLT to process and execute legal documents. Banking on the factors of immutability and the transparency of decentralization.
Where do we see DLT being used?
DLT has great potential to revolutionize the way governments, institutions, and corporations work. It can help governments with tax collection, the issuance of passports, recording land registries and licenses, and the outlay of Social Security benefits as well as voting procedures.
Of the different DLTs, the one gaining a lot of popularity these days is Ethereum, which is a public blockchain and utilizes smart contracts to make trades. It focuses on decentralization and the use of NFTs to make transactions. Ethereum based softwares and networks, independent of the chain, are being tested by many companies including Microsoft, IBM, JPMorgan Chase, Deloitte, Visa and Amazon are testing the platform.
Let us give a brief look at the other types of blockchains that could be gaining popularity.
Other DLTs
Holochain is another type of DLT different from the blockchain. Here data is not stored in the form of blocks, needing validation, but instead, each node has its own chain and can only be processed by that particular node. Local circles of trust provide data integrity in the absence of centralized authorities.
DAG, Directed Acrylic Graph, has no blocks. Instead, each transaction on DAG is linked to multiple other transactions. The advantage of DAG is that its structure is like that of a tree rather than a chain. Meaning there can be many branching outs, making it ideal for application in IoT. However, it does have some issues related to the consensus of transactions.
Hyperledger is a collaborative project led by the Linux Foundation that creates enterprise-focused distributed ledger technology. This open-source project is a permissioned DLT, controlled by a central authority of authorities. Thus creating an ideal concoction of security through immutability and structure through permissioned DLT.
Currently, Amazon, PayPal and Mastercard use hyperledger for general retail transaction monitoring, transaction monitoring and financial services and insights.
The different types of DLTs, all offer successful solutions to many real-world problems today. All of these offer varying levels of scalability options, decentralization options and security. So the choice of DLT to be used is completely dependent on the use case.
Now I hope when someone says blockchain is the future, you will remember that not only blockchain but DLT as a whole might be leading us into the future.
