As we have heard the term Digital Ledger Technology a lot, we are wondering how about introduce our readers to it. It is a digital system for recording the transaction of assets. The transactions and their details are recorded in multiple places at the same time. Unlike traditional databases, they do not have a central data storage or administration functionality. In this article, we will discuss the purpose and properties of Digital Ledger Technology.
Distributed Ledger Technology
It is usually referred to as “the technological infrastructure and protocols that allow the simultaneous access, validation, and updating of records that characterize distributed ledgers.” It works in a computer network that is spread over different locations. Blockchain is one notable example of distributed ledger technology.
History of Ledgers
We are all familiar with the term Ledger, and the concept is not new. The data have been kept on paper or software by the organization, but they were controlled by a certain authority. This technology helped to make the tasks time-efficient and error-free making it more accurate and trustworthy.
Ledgers have been used to record transactions and data for thousands of years on paper most of the time. They became digitized with the use of computers. A central authority supervised these ledgers. Just like, banks always verify the financial transactions that they process.
With the upgradation in technology, the record-keeping is now kept with the help of cryptography. This includes advanced algorithms, and strong computational power, which makes it more practical.
The economic activities need to be transparent as they are expanded to more regions nowadays. Traditional ledgers sometime missed out on details resulting in errors, hacks, or record tampering. This upgradation in technology is a savior for businesses.
Functions of Distributed Ledger Technology
- In a distributed ledger, each node processes and verifies every item, which in turn generates a record for each item. This verifies the accuracy of each item. It can be used to record static data, such as a registry, and dynamic data, such as financial transactions. The ledger uses cryptography to securely store data, cryptographic signatures, and keys to allow access only to authorized users. This helps them to create an immutable database, which means information, once stored, cannot be deleted and any updates are permanently recorded for posterity.
- Each copy of the ledger is put on the node, where each node can be viewed, verified, and modified. This ensures trust and transparency. Different industries like financial services, healthcare, pharmaceutical industry, and supply chain management are the early sectors that have used ledge technology.
- The structure of the ledger shows how information is gathered and recorded from a single location to a decentralized system where the users can have access to view and modify. Due to its transparency, it has been able to gain users’ trust. There are fewer chances of fraud as well.
- There is no third party which is an advantage over the other technologies.
Properties of Distributed Ledger Technology
The properties of the ledger technology are as follows:
- Programmable: A blockchain is programmable (i. e smart contracts)
- Distributed: All network participants have a copy of the ledger for complete transparency
- Secure: All records are individually encrypted
- Immutable: Any validated records are irreversible and cannot be changed.
- Anonymous: The identity of the participants is anonymous or pseudonymous
- Unanimous: All network participants agree to the validity of each of the records.
- Time-Stamped: A transaction timestamp is recorded for the individual blocks.
Examples of Distributed Ledger Technology
The are many examples of ledger technology. The list is as follows:
- Blockchain is the best example of DLT. It uses it by bundling the transactions into blocks that are chained together. It is then broadcasted to the nodes in the network, powering bitcoin and other cryptocurrencies.
- Tangle is adapting itself toward IoT ecosystems. The Eclipse Foundation and the IOTA Foundation created the Tangle EE Working Group. It is described as “a permissionless, feeless, scalable distributed ledger, designed to support trustworthy data and value transfer between humans and machines.”
- Other examples include Corda, Ethereum, and Hyperledger Fabric.