What is a Distributed Ledger? – Blockchain Beginner’s Guide
Ledgers have been around since the beginning of time and are essentially the foundation of accounting. In the beginning, people would use wooden tally sticks, clay, papyrus, paper and even stones. But when computers came along in the 1980’s and the 1990’s, the old paper records were then digitized, normally through manual data entry.
These early-stage digital ledgers would mimic accounting and cataloging of what was then a paper-based world. Even with everything going digital, it is the paper-based institutions that still remain the backbone of money, seals, society, bills, written signatures, certificates, and even the use of double-entry bookkeeping.
How Was Distributed Ledger Technology Created
Through certain breakthroughs in cryptography and advances in computing power, partnered with the discovery and the use of several newer algorithms, distributed ledgers have been created.
How a Distributed Ledger Works
A distributed ledger is basically a database that is held and updated by each node, also referred to as a participant) in a larger, preexisting network. The distribution of the database is unique as there are no records that are communicated to any nodes belonging to a central authority but are constructed independently and held by every node in the network. That means that each and every node within the network is able to process every single transaction, and then coming to their own conclusions. They then go on to vote on the conclusions they came to, to make sure that there is a majority that agree with the solution that they came up with.
After a consensus has been reached, the distributed ledger has then been updated, with each node maintaining their very own identical copy of the updated ledger. It is this architecture that allows a new dexterity as the system of record goes farther than simply being a database.
With distributed ledgers, there is a dynamic form of media that has capabilities and properties that are able to go much farther than any static paper-based ledger. To sum up distributed ledgers in one sentence, they allow you to secure and formalize new types of relationships within the digital world.
With the invention of the distributed ledger, comes a revolution in how you are able to gather and communicate information. It can be applied to a registry (static data), as well as transactions (dynamic data). By utilizing distributed ledgers, you are allowing its users to move past simple custodianship of a database. The users will be able to divert energy to how they are using, manipulating and even extracting value from the databases. Distributed ledgers are more about managing the entire system of record, and less about how to maintain the database.
Final Thoughts on Distributed Ledger Technology
While distributed ledgers are considered a ‘newer’ technology, they are allowing databases to be consensually synchronized and shared across a network that is spread across multiple geographies, sites and institutions. All of the transactions are ‘witnessed’ by the public, making the chances of a cyber attack that much more difficult. This technology has not even come close to reaching its full potential and is going to be the way of the future.