In this article, you will learn what is distributed ledger technology. If you want to learn about blockchain systems, you will need to learn the underlying concepts. One such crucial concept is Distributed ledger technology. Blockchain and distributed ledger technology work on the same concept. And that is why Blockchain is said to be a type of distributed ledger technology used for specific purposes.
What is Distributed Ledger Technology?
The Distributed ledger technology distributes a copy of the same version of digital ledger to each node in a point to point network. That is, a record or digital ledger is shared between all the participants of a network. This eliminates the need for a centralized authority having control over the ledger.
It is a technology that provides a framework for a lot of related technologies like Blockchain. As we know, a decentralized peer to peer network is like a large web that has a lot of points of connection. Similarly, the distributed ledger technology operates on a decentralized network that has a lot of nodes irrespective of their location. Thus, such a network can expand over the entire globe.
In such a network, each node has its own private copy of the ledger and is free to carry out transactions with any node in the network directly. They do not need to mediate a transaction or request access to the ledger through a centralized authority. Every time the ledger is updated, every node gets to refresh it. Such a system also helps in establishing trust between the nodes in a network. It is by the means of mathematical procedures and algorithms like hashing, cryptography, and digital signatures.
Distributed Ledger Technology And Blockchain
Blockchain is a type of Distributed Ledger Technology that is specifically used to record and share financial transactions. Blockchain was first used as an underlying technology to facilitate Bitcoin transactions. It is a peer-to-peer distributed network. Whenever two nodes within the net to exchange tokens, the details of the transaction are sent to all the nodes for verification. The other nodes verify a transaction by the means of a digital signature procedure. The transaction details are also secured using the process of cryptography and hashing.
All the transactions are stacked in a block and this block is given a unique identity in the form of its hash value. Also, every block is linked to its previous block using the hash value of the previous block. In this way, these blocks of transactions form a long chain that is unbreakable. This gives this technology the name blockchain as it is an immutable, tamper-proof log of sensitive data and transaction activity.
Thus, a blockchain securely stores digital ledgers having files, money tokens, smart contracts, media, health records, or codes. Anyone having the right to access this ledger can have access to this content.
Bottom Line
Blockchain and distributed ledger technology is not essentially the same thing. DLT is an underlying concept for Blockchain's blueprint. And this article explains about what is distributed ledger technology.
