DEFINITION of Distributed Ledger Technology

Distributed Ledger Technology refers to the technological infrastructure and protocols that allows simultaneous access, validation and record updating in an immutable manner across a network spread across multiple entities or locations.

Distributed Ledger Technology, more commonly known as the blockchain technology, was introduced by bitcoin and is now a buzz word in the technology world given its potential across industries and sectors. In simple words, the Distributed Ledger Technology is all about the idea of a ‘"decentralized" network against the conventional "centralized" mechanism, and is deemed to have far-reaching implications on sectors and entities that have long relied upon a "trusted third-party."

BREAKING DOWN Distributed Ledger Technology

The Distributed Ledger Technology (DLT) is made of keywords:

  • Distributed reflects its decentralized nature opposed to a centralized silo of database.
  • Ledger is simply a connotation for a database of records.
  • Technology is the protocol which enables the working of such a database in a decentralized way, eliminating the need for a central authority to keep a check against manipulation.

DLT allows for storage of all information in a secure and accurate manner using cryptography. The same can be accessed using "keys" and cryptographic signatures. Once the information is stored, it becomes an immutable database and is governed by the rules of the network.

The idea of a distributed ledger is not totally new, and many organizations do maintain data at different locations. However, the same is a connected central system which updates each one of them periodically. This makes the central database vulnerable to cyber-crime, and prone to delays since a central body has to update each distantly located note.

The very nature of a decentralized ledger makes them immune to a cyber-crime, as all the copies stored across the network need to be attacked at the same time for the attack to be successful. Additionally, the simultaneous (peer-to-peer) sharing and updating of records make the whole process much faster, more effective, and cheaper.

Distributed Ledger Technology has great potential to revolutionize the way governments, institutions, and corporations work. It can help governments in tax collection, issuance of passports, record land registries, licenses and outlay of Social Security benefits as well as voting procedures. The technology is making waves in industries such as finance, music and entertainment, diamond and precious assets, art, supply chains of various commodities, and more.

In addition to start-ups, many big companies such as IBM and Microsoft are experimenting with the blockchain technology. Some of the most popular Distributed Ledger protocols are Ethereum, Hyperledger Fabric, R3 Corda, and Quorum.