Distributed Ledger technology = blockchain?

Distributed Ledger Technology (DLT) and blockchain are often mentioned in the same sentence. In fact, a DLT is different from blockchain. They are not the same. In this blog I will discuss the DLT. What is DLT?

Centralization 

At present, central systems are still widely used. Companies and government agencies still use central servers where data is stored. If you need information and you want to retrieve it, then you have to retrieve it from a central database. The central server authorizes your request and it will then be shared with you.

The problem with central systems is that if the server fails due to a malfunction or a hack, no one can then access the databases and no services can be provided.

Such a server also contains a lot of sensitive information that should not fall into the hands of rogue players. If hackers gain access to passwords, they have potential gold in their hands. They can also gain access to bank accounts and sensitive company information. They can delete this information or lock down the server until a ransom is paid.

DLT is an answer to centralized systems and the vulnerabilities associated with them. DLT provides not only security (digital signature, Merkle root and hashing technique), but also transparency (all transactions are publicly available).

What is DLT?

In a DLT, there is no central system. Multiple central systems are used. All of these central systems are interconnected. When a user wants to make a transaction or request data, they connect to one of these systems to make the transaction or request data.

So it is nothing more than a network of different systems that are linked together. So users connect to one of these systems to perform an action. This can be a transaction or a request for data. If a user has made a transaction with one of the systems, this system will then share the transaction with the other systems that are connected to the DLT network. So this looks like peer-2-peer networking. A network of PCs connected to the Internet. Files can be exchanged between the PCs in this network. 

How does Peer-2-peer work? This works as follows: the owners of the PCs open up certain folders on their PC to the other participants in the network. Conversely, they can also download files from folders belonging to other network participants. This is called file exchange or file sharing. It usually involves music files, but movies or text documents can also be exchanged. Well-known programs used for this purpose are: Kazaa (Lite), LimeWire, and Bittorrent. 

The difference between a DLT and blockchain

So DLT is incredibly similar to blockchain. And that's not surprising because blockchain is a form of DLT. Blockchain is always DLT but DLT is not always blockchain. As we just saw, peer-2-peer also falls under DLT. So there are many more forms of DLT. Blockchain is just one of the existing DLTs.

Every participant in the network or node of the blockchain has a copy of all transactions of the blockchain. The nodes also store the data of these transactions. If you want to participate as a node, you have to make a piece of hardware available. You download all transactions onto your own PC and you can start working as a node. These nodes are connected to each other. A node does nothing more than store all transactions and validates transactions after miners have verified them on the blockchain. In fact, it is not miners that determine whether a transaction is verified on the blockchain, but nodes. If the nodes approve a transaction, then that transaction is valid and can be stored on the blockchain.

Do you want to be a bitcoin node yourself? You can!