What does a Distributed Ledger mean in Blockchain?

Last Updated on June 15, 2022

Distributed Ledger technology

Ledgers have been at the centre of economic transactions since the dawn of time, recording contracts, payments, buy-sell agreements, and the movement of assets and property. With the invention of paper, the journey that began with recording on clay tablets or papyrus took a giant leap forward. Ledgers have been at the centre of economic transactions since the dawn of time, recording contracts, payments, buy-sell agreements, and the movement of assets and property. With the invention of paper, the journey that began with recording on clay tablets or papyrus took a giant leap forward.

A distributed ledger is a decentralised ledger of any transactions or contracts that is maintained across multiple places and persons, obviating the need for a central authority to keep an eye on things. A central authority is not required to authorise or validate any transactions in this manner.

Cryptography is used to safeguard and precisely store all of the information on the ledger, which can be accessed via keys and cryptographic signatures. Once the data is saved, it becomes an immutable database governed by the network’s rules.

What is a Distributed Ledger?

A distributed ledger is a database that is shared and synchronized by a group of people across many sites, institutions, or countries. It allows for public “witnesses” to be present during transactions. Each network node’s member has access to the recordings shared across the network and can possess an identical copy of them. In a couple of seconds or minutes, any modifications or additions to the ledger are reflected and replicated to all participants.

A distributed ledger differs from a centralised ledger, which is the type of ledger used by the majority of businesses. Because it provides a single point of failure, a centralised ledger is more vulnerable to cyber assaults and fraud.

The technology that underpins distributed ledgers is the same as that which underpins blockchain, which is the same technology that underpins bitcoin. Bitcoin uses a distributed ledger called the blockchain.

Distributed Ledger Technology (DLT)

Distributed ledger technology (DLT) refers to the technological architecture and protocols that enable distributed ledgers to allow simultaneous access, validation, and updating of information. It operates on a computer network that spans several companies or places.
It employs cryptography to securely store data, as well as cryptographic signatures and keys, to ensure that only authorised users have access.

The technology also produces an immutable database, which means that information can’t be erased once it’s been saved, and any updates are saved for posterity.

By transferring record-keeping from a single, authoritative place to a decentralised system in which any relevant entities can read and amend the ledger, this architecture marks a substantial change in how information is received and shared. As a result, all other entities are able to see who is accessing and altering the ledger. DLT’s transparency instils a high level of confidence among participants and almost eliminates the possibility of fraudulent activity in the ledger.

Consequentially, DLT eliminates the requirement for entities using the ledger to rely on a trusted central authority or an outside, third-party provider to control the ledger and function as a check against manipulation.

How Distributed Ledgers Work

Individuals known as nodes hold, restructure, and control distributed ledgers. Each node constructs the database on its own. Every transaction that occurs on the network is evaluated, and each node creates a conclusion about the database’s evolution.

Voting is done on the database modifications that have been finalised based on the transaction. The vote is done by all nodes, and the new transaction is allowed on the database if at least 51% of them agree. Following that, the nodes update the database versions so that all of the devices or nodes are on the same version. The new transaction is recorded in a blockchain block.

Miners are the nodes in a Proof-of-Work blockchain. A miner is rewarded for successfully inserting a new transaction into a block. It necessitates a computer with devoted power 24 hours a day, seven days a week. Miners are in charge of computing the cryptographic hash for new blocks. The reward is given to the miner who correctly finds the hash first.

Miners that devote more processing power to finding the hash will have a better chance of succeeding. However, as more blocks are generated, finding subsequent hash scales gets more difficult. The purpose is to keep the block generation speed constant.

Benefits of Distributed Ledgers


Devices on a dispersed network are more autonomous and not reliant on a central system, whereas those on a centralised network establish a single point of failure for all connected services. Any malicious attempt to alter or attack a distributed database would necessitate the compromise of a large number of connected nodes (perhaps thousands), making hacking almost impossible.

Each block in a blockchain data structure is secured with an algorithm meant to prevent data augmentation as a cryptographically based technology. Today, bitcoin exchanges use this component to protect the security of financial transactions.

Cost Savings

As modifications to the database are processed in a shared P2P economy, each participating node on an IoT network uses its own processing capacity to validate each request. With hundreds or thousands of linked nodes contributing computing capacity to handle a single request, firms spending vast sums of money to maintain, update, and secure a centralised service will see considerable cost savings.

Smart Contracts

Smart contracts are a computing protocol that automatically performs a specific action between linked applications when predefined criteria are satisfied. Consumer products such as air conditioners, for example, might utilise smart contracts to send an automatic command to the manufacturer informing them that maintenance is required when performance monitoring readings fall outside of normal ranges. Another example is the tracking of items in a supply chain, which could result in a record being updated after a barcode is scanned (e.g., UPS or DHL package tracking).

Device Management

The capabilities of device management will be enhanced by using a distributed architecture with DLT that allows devices to communicate directly with one another. Actions like distributing software patches, firmware upgrades, and security fixes can be transmitted in a highly controlled, expedited manner by connecting peer-to-peer (P2P) rather than through a central broker.

Audit Trails

The immutability of DLT’s ledger and, as a result, the ability to audit all occurrences in the ledger is one of its key advantages. Changes to the ledger that have been successfully authenticated cannot be removed or changed, ensuring the record’s correctness and security. This useful feature of DLT is especially useful for IoT systems that involve financial transactions or many stakeholders in the supply chain.

Data Reliability

DLT is an apparent benefit for firms employing IoT technologies to collect and analyse key performance indicators (KPIs) that require greater security. The risk of erroneous or trash data being ingested for analytics is considerably decreased because modifications to a distributed database must go through numerous levels of DLT validation. For IoT solutions that span a supply chain, such as linked logistics, connected construction, and others, having highly dependable and secure data is critical.

Future of Distributed Ledger Technology

Experts in this field propose DLT as a solution to many of the problems that exist on the internet, claiming that it will dramatically address many of these issues. The “Internet of Value” is how Distributed Ledger Technology is referred to. With the help of the internet, transactions and processes will take place in real time.

With efficient solutions, Distributed Ledger Technology has the ability to impact finance or banking, cyber security, healthcare, government, data security, and other areas. Enterprises and visionaries are now faced with the task of forming networks of organisations that can use DLT to dramatically alter how they share and store data, as well as inventing in areas where DLT can enable totally new processes and business models.

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