What is it?
Distributed Ledger Technology (DLT) basically implies a new and rapidly evolving approach for recording and sharing information across multiple data stores. Each of the data stores (i.e., ledgers) has the same data records, subject to maintenance and control through a distributed network of computer servers, referred to as nodes. You can thus think of DLT as a distributed database with certain unique properties.
Blockchain is just a variant of DLT that uses cryptographic and algorithmic approaches to create and verify a continuously expanding, append-only data structure that gradually turns into a chain of transaction blocks that serve the role of a ledger. Diving into the working of DLT can also help in further refining your knowledge of DLT.
The nodes initiate new additions to the database through the creation of a new data ‘block’ which includes the records of different transactions. Then, the information about the new data ‘block’ is shared across the whole network in the form of encrypted information. As a result, Blockchains ensure that transaction details are not publicly available.
Then, all the participants in the network evaluate the data block and verify its validity according to the pre-defined algorithmic validation methodT. The pre-defined algorithmic validation method is also known as the Blockchain consensus mechanism. When the data block is validated, all participants can add the block to their own ledgers, creating, hence a ‘chain of blocks’: The Blockchain.
To summarize, DLT ensures that changes to the ledger are reflected throughout the whole network, and all network members have a detailed, identical copy of the whole ledger at any specific instance. One can clearly notice that the functionalities of DLT are primarily responsible due to two core components.
The first core aspect of DLT-based systems or infrastructure is the ability for storage, recording, and exchange of digital information across different, consenting parties without the need for any central trust authority or record-keeper. The second core component of DLT refers to avoiding double-spending, i.e., sending the same digital asset or token to multiple parties. Without a central controlling authority, the risk of double-spending is quite high, especially between parties that do not know each other.
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