The terms distributed ledger technology (DLT) and blockchain are often used interchangeably. In this article, we will discuss Blockchain Vs DLT. These days, blockchain, decentralization, and distributed ledger technology (DLT) are the most talked-about technologies. There are differences between these technologies. But they are interrelated also. Because a lack of knowledge creates confusion among technology enthusiasts, we expect both technologies to transform the world in the future.
Before going into details, let’s discuss these terms in brief.
Several nodes or computers exist in the distributed ledger, a distributed database across these devices. A ledger is maintained on each node and independently records every data change on each node. Each node verifies the transaction using a voting or consensus algorithm. However, the participation of all nodes or consensus mechanisms can depend on the rights granted. In simple words, sometimes all nodes will participate in the process, and sometimes only a few with permission will process the change in the database.
Once all permissioned nodes give a go-ahead signal, DLT records a transaction in the ledger, and all nodes might receive an update message. This feature is one of the primary advantages of this technology, as it ensures transparency. No single authority governing distributed ledger technology provides a great deal of security. Nodes have time to verify the transaction verification, resulting in zero chance of corruption in the ledger. Industries like the financial industry are adopting this technology and gaining popularity because of its transparency.
Blockchain Vs DLT
What is a Distributed ledger?
A distributed ledger is the parent technology of blockchain. The popularity of blockchain technology has increased more than the core concept of distributed ledger technology. Blockchain does not have a central governing authority. This feature means all the nodes have their copy of the ledger. Each new transaction gets updated automatically. Transactions are encrypted before being stored in the ledger.
Blockchain networks are entirely decentralized, with strict computational protocols for computational trust. They store data as blocks that are linked with each other. Only adding operations are allowed in the blockchain, which means the data cannot be deleted or edited once entered. Every transaction on that blockchain remains in the history of that chain.
What is Blockchain?
Blockchain is a kind of distributed ledger. Every distributed ledger is not a blockchain. For instance, Dalda is the first brand in India that introduce hydrogenated vegetable cooking oil. But, still today, people use the word Dalda synonymously with vegetable ghee. One of the crucial differences between DLT and blockchain is the method of achieving consensus. There are various ways for consensus in the blockchain, including Proof of Work (PoW) and Proof of Stake (PoS). But, with DLT, a consensus is essential.
Difference Between DLT and Blockchain
1. Block Structure: In the case of the distributed ledger, the database is structured over various nodes. They used multiple ways to represent the data in each ledger. Whereas in a blockchain, data is stored as immutable blocks.
2. Sequence: There is no particular sequence of data in the case of a distributed ledger. In this manner, a blockchain differs from a distributed ledger. Data blocks are arranged in a specific sequence.
3. Power Hungry Consensus or Proof of Work: Distributed ledgers are more scalable. Power-hungry consensus algorithms and other forms of consensus are necessary for blockchain. This blockchain consensus is beyond traditional DLTs, thus gaining popularity.
4. Real-Life Implementations: Blockchain implementation in real-life projects is more straightforward, thus catching the attention of developers. Big technology giants like Alibaba, Oracle, and IBM offer clients blockchain solutions. Many distributed ledger variants are available but still need to be developed because of fewer real-life implementations.
5. Tokens: Tokens or currencies are not part of the DLT. For anti-spamming activities, these tokens are beneficial. Anyone can establish a node for blockchain. Even though modern blockchain systems are trying to come out of cryptocurrency setup, most blockchain systems use some tokens or cryptocurrencies. Tokens and associated smart contracts play an essential role in blockchain technology.
Applications of DLT and Blockchain
We can find a large variety of blockchains in various industries. First-ever cryptocurrency in the world, Bitcoin, is based on a blockchain platform. After the success and establishment of Bitcoins and altcoins, the blockchain is being adopted by many other industries apart from the crypto and financial industry. Distributed ledgers like R3 Corda, IBM Fabric, and Digital Asset Holdings are popular applications using distributed ledgers.
Why does everyone want to compare blockchain and distributed ledgers?
The most important characteristic of blockchain vs. DLT is its openness to innovations and ideas. The Crypto and finance sectors are launching innovative products and projects every day, and these technologies are becoming more and more enjoyable. Altcoins like Solana, Litecoin, Ethereum, etc., are like Bitcoin. They are gaining popularity as open-source projects.
Advantages of DLT and Blockchain Implementation
The decentralization of nodes is one of the most significant advantages of DLTs. It eliminates the prominent intermediary from the network and ensures control over information and user flow.
Transparency is a necessity in many industries, including banking and finance. Billions of transactions can be handled using distributed ledgers with transparency. The speed of transaction processing is much more than the traditional database systems.
In the case of cryptocurrency, transparency is allowed using blockchain, as each transaction can be visible publicly. The data and transactions are secured. Every addition of data passes through security checks, and the activity log is stored in the blockchain. Smart contract algorithms ensure high-level encryption to create a tamper-proof environment.
Final Thoughts: I hope you have a clear idea about the difference between the two technologies, blockchain, and DLT. DLTs differ from blockchains in terms of architecture, but the basic idea is the same. Blockchain is a distributed ledger backed by cryptocurrencies. Technology enthusiasts believe that digital currency and decentralization can solve many existing problems in the finance industry. If you have queries, please reach out. Team Blockchain Shiksha would be happy to help you.© Follow Us on LinkedIn
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