What is Distributed Ledger Technology? Understanding simplified!
Distributed Ledger Technology or DLT is basically a digital system that helps in recording transactions of assets. The DLT records the transactions and the details of the transactions and stores them in multiple places at the same time. Distributed ledgers do not rely on central administration functionality or data store like traditional databases.
This video helps you understand the basics of Distributed Ledger Technology (DLT) which is completely different from Blockchain. Let’s have an overview!
It is important to remember that blockchain is a type of distributed ledger. Blockchain requires a sequence of blocks, while a distributed ledger does not. In addition, distributed ledgers do not require any proof of work, thereby providing better scaling options. Distributed ledger does not have any need for data structure in blocks. Distributed ledger is just a database spread throughout different regions, participants, and sites.
Another notable type of distributed ledger technology is Hashgraph. Hashgraphs are non-blockchain distributed ledgers and use the Gossip protocol. The consensus in Hashgraphs happens through virtual voting protocol in which if two-thirds of the network nodes validate a transaction, it becomes valid. Therefore, Hashgraphs is ideal for enterprises that have high-speed transaction use cases.
Directed Acyclic Graphs (DAGs) are also another prominent entry among distributed ledger technologies. The nodes have to initiate transactions, and validity of the transaction depends on verification of two previous transactions. So, nodes that validate more transactions have higher possibilities of validating their transactions on the DAG distributed ledger. The use of quantum computing proof through a signature scheme distinguishes DAG from other distributed ledger technologies.
The next notable example of non-Blockchain distributed ledger technology refers to Holochain. Holochain is different from other distributed ledger technologies. Holochains do not follow global consensus protocol. Holochain utilizes a network of individual modules for creation of the complete ledger system. Every node serves as a contributor to the river of ledgers through small streams, and interruption in a stream would render the node offline without affecting the distributed ledger database.
Tempo is another non-blockchain global distributed ledger technology. The bigger ledger constitutes components known as shards which have their own unique identification code, distributed across the nodes. In this way, Tempo does not burden nodes with the whole global distributed ledger, thereby providing an opportunity for scalability.
Each of the distributed ledger technologies DLTs stands out for a unique feature.
- Blockchain is specifically dominant because of its immutability.
- DAG is a preferred DLT in use cases for its capability to ensure near-infinite scalability and quantum resistance.
- Hashgraphs are credible instruments for fostering the transparency of transactions in distributed ledgers.
- Holochains are agent-centric distributed ledgers. So, nodes can work as independent units
- Tempo provides the advantage of modularity.
In the long run, DLTs have to overcome prominent challenges such as regulatory uncertainty, infancy of the technology, privacy challenges, and data safeguards, and integrity maintenance.
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