What is Distributed Ledger Technology?

Distributed ledger technology (DLT) is database that exists amongst multiple locations or amongst several participants. DLT is commonly implemented as a digital system for recording the transaction of assets where transaction details are recorded among multiple databases at the same time. The main difference from traditional databases is that distributed ledgers do not have any centralized data storage or administration functionality.

DLT is often equated and used interchangeably with blockchain technology. However, DLT is a generalized term describing technologies which distribute records or information among all participants. The confusion stems from the fact that blockchain was the first fully functional implementation of DLT, which took the form of Bitcoin in 2009.

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Blockchain is still the most common and popular form of DLT. Blockchain is based off a linked list data structure. The novel aspect of blockchain structures which enhances the usefulness over regular linked list is its distributed nature as well as two different hashing structures:

  1. Hash chains that links the blocks together which attributes to the immutability of the ledger.

  2. Hash Trees that are internal to each individual block that allow for very quick transaction look-ups.

However, in a network with multiple transactions from different entities, it becomes increasingly hard to link data across blocks, as iterating through a linked list data structure can be very computationally intensive. For instance, as the Bitcoin and Ethereum chains grow, it becomes increasingly more difficult to verify the entire integrity and correctness of the chain itself.

Some other DLT projects that are not blockchain technologies are IOTA’s Tangle Network, Hashgraph, RaiBlocks, NANO, and Holo Chain. Each are built off of traditional data structures such as Directed Acyclic Graphs (DAGs) and Hash Tables, just as blockchain is an extension of linked lists. As DLT research continues to tamper and enhance the ideas of DLT, new and emerging DLT systems may challenge traditional blockchain systems that have dominated DLT for the past 10 years.