Distributed ledger

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A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions.[1] There is no central administrator or centralized data storage.[2]

A peer-to-peer network is required as well as consensus algorithms to ensure replication across nodes is undertaken.[2] One form of distributed ledger design is the blockchain system, which can be either public or private.

Distributed Ledger[edit]

The distributed ledger database is spread across several nodes (devices) on a peer-to-peer network, where each replicates and saves an identical copy of the ledger and updates itself independently. The primary advantage is the lack of central authority. When a ledger update happens, each node constructs the new transaction, and then the nodes vote by consensus algorithm on which copy is correct. Once a consensus has been determined, all the other nodes update themselves with the new, correct copy of the ledger. [3][4] Security is accomplished through cryptographic keys and signatures. [5][6][7]

Terminology[edit]

Schematic overview about the DLT terminology
Schematic overview about the DLT terminology

The distributed ledger technology consists of different DLT concepts, which mainly differ in the way transactions are validated and stored. Some popular DLT concepts are blockchain, block directed acyclic graphs (blockDAG), and transaction-based directed acyclic graphs (TDAG).

These DLT concepts have different, concrete implementations called DLT designs. Bitcoin and Ethereum for example are concrete implementations of blockchain. These implementations can be distinguished by specific features (e.g. security and performance), which are called DLT properties. These properties are further divided into DLT characteristics. Each DLT design has an individual configuration of DLT characteristics, which has to be a good fit for the requirements of a given use case. Exemplary these requirements could be high scalability, high throughput and a high level of anonymity.[8]

Applications[edit]

In 2016, some banks tested distributed ledgers for payments [9] to see if investing in distributed ledgers is supported by their usefulness.[2]

Types[edit]

Distributed ledgers may be permissioned or permissionless regarding if anyone or only approved people can run a node to validate transactions.[10] They also vary between the consensus algorithm. (Proof of work, Proof of Stake, or Voting systems). They may also be mineable (you can claim ownership of new coins contributing with a node) or not mineable (the creator of the cryptocurrency owns all at the beginning).[citation needed]

See also[edit]

References[edit]

  1. ^ Distributed Ledger Technology: beyond block chain (PDF) (Report). UK Government, Office for Science. January 2016. Retrieved 29 August 2016.
  2. ^ a b c Scardovi, Claudio (2016). Restructuring and Innovation in Banking. Springer. p. 36. ISBN 9783319402048. Retrieved 21 November 2016.
  3. ^ Maull, Roger; Godsiff, Phil; Mulligan, Catherine; Brown, Alan; Kewell, Beth (21 Sep 2017). "Distributed ledger technology: Applications and implications". FINRA. 26 (5): 481–489. doi:10.1002/jsc.2148.
  4. ^ Ray, Shaan (2018-02-20). "The Difference Between Blockchains & Distributed Ledger Technology". Towards Data Science. Retrieved 25 September 2018.
  5. ^ UK Government Chief Scientific Advisor. "Distributed Ledger Technology: beyond block chain". Gov.uk. UK Government. Retrieved 25 September 2018.
  6. ^ Brakeville, Sloane; Perepa, Bhargav (18 Mar 2018). "Blockchain basics: Introduction to distributed ledgers". IBM Developer. IBM. Retrieved 25 Sep 2018.
  7. ^ Rutland, Emily. "Blockchain Byte" (PDF). FINRA. R3 Research. p. 2. Retrieved 25 September 2018.
  8. ^ Kannengiesser, Niclas; Lins, Sebastian; Dehling, Tobias; Sunyaev, Ali. "What Does Not Fit Can be Made to Fit! Trade-Offs in Distributed Ledger Technology Designs (PDF)". Retrieved 2019-04-02.
  9. ^ "Central banks look to the future of money with blockchain technology trial". Australian Financial Review. Fairfax Media Publications. 21 November 2016. Retrieved 7 December 2016.
  10. ^ "Blockchains & Distributed Ledger Technologies". Blockchain Hub. Missing or empty |url= (help)