DLT technology; introduction and 4 key features

What is dlt? Distributed ledger technology revolves around technology-based infrastructure and protocols that enable simultaneous access, validation, and update of a series of records in a networked database. Buying Bitcoin from a platform and transferring it through the BTC blockchain-based network will result in a transaction. A database is distributed in a decentralized network of Bitcoin miners called the Bitcoin Blockchain to register and validate the information related to this transaction.

The answer to the question “What is dlt?” can be stated: DLT is an encrypted and distributed database where records and information about transactions are stored. These data storage tools for any entity, including Institutions, computers, etc., can be accessed anywhere in the world. This article provides a comprehensive review of dlts. In the following, we will explain “what are the features of a DLT,” “what are the uses of a distributed ledger,” and “what are the advantages of using DLT technology.”

What is a DLT distributed ledger?

Distributed ledger technology refers to the underlying protocols and infrastructure that allow computers in different locations to send and confirm transactions and update records synchronously across a network.

The idea of a distributed ledger based on a typical activity record between computers and shared across different locations is not new. Organizations (e.g., supermarket chains) that have multiple branches or offices throughout a particular country or the world use such offices.

However, in a traditional distributed database, a system administrator typically assumes vital functions necessary to maintain integrity across all or a few versions. The simplest way is for the system administrator to keep a master copy of the ledger, periodically updated every so often and shared with all network participants.

But in more modern versions, DLTs consist of blockchains whose infrastructure allows users to see who created or modified those blocks. A distributed ledger reduces the need for data auditing and ensures that data is reliable. Also, these tools allow access to only those who need that information.

New DLT-based systems, notably Bitcoin and Ethereum, are designed to work without a trusted authority. Bitcoin maintains a distributed database in a decentralized manner using a consensus-based validation procedure and cryptographic signatures. In such systems, transactions are performed peer-to-peer and distributed in batches in blocks across the network for validation.

Because ledgers based on the organization of data records operate on a platform of separate but interconnected blocks, these types of DLTs are often called “blockchain technology.” The blockchain-based version of the distributed ledger has successfully powered Bitcoin for several years; however, it is not without problems. Working with this system is expensive Because the power required in the “proof of work” process to complete the calculations requires a lot of equipment and electricity consumption.

This set of proof-of-work consensus algorithm properties is unsuitable for many financial market applications. Therefore, current wholesale payment applications have abandoned DLTs based on this consensus method in favor of protocols that modify their consensus process to allow for increased confidentiality and scalability. Examples of dlt protocols currently being tested by central banks include Corda and Hyperledger Fabric.

Korda is another distributed ledger that verifies each transaction individually and immediately, unlike the Bitcoin blockchain, which puts multiple transactions into a block and then verifies the blocks. Korda replaces the blockchain with a system similar to the architecture used in notary public offices. Notaries are designed to use a trusted authority and allow for agreement to be reached by sharing information limited to a single transaction rather than a set of transactions. In the following, we introduce more types of dlts. Of course, before that, we briefly describe the features of a distributed ledger.

What is the Dlt distributed ledger feature?

A distributed ledger-based system has some key features that make it unique compared to centralized ledger solutions. Simply put, DLT is best defined as a synchronized and replicated ledger that works in a distributed manner.

The key features of a DLT are:

What is Immutable in DLT?

A distributed ledger uses cryptography to create an immutable and secure storage platform. This technology ensures that the stored data cannot be changed.

What is Append Only in DLT?

With DLT, data is consolidated into a distributed ledger, and a complete history of transactions is provided. This makes DLTs a fundamental difference from a traditional database, where data can be changed at specific times. In a conventional database, it is possible to change and manipulate data, either internally or by external agents. Still, this is very difficult and probably impossible in a distributed ledger Because the data is only appended and cannot be deleted or edited.

What is distributed in DLT?

Another key feature of the dlt distributed ledger is its distributed nature. In fact, there is no single center where data is stored in these systems. Instead, there is a duplicated counterpart of the ledger at different nodes in the network. Of course, some DLTs, like Corda, store and distribute data in other ways.

What is shared in DLT?

Since a distributed ledger does not have a single entity and is shared between nodes, some nodes are responsible for having a complete copy of the catalog. While other nodes only have the necessary information to function and make them efficient in transactions.

How does DLT distributed ledger work, and how does it work?

As mentioned above, DLTs allow data to be stored securely and accurately using encryption. For this, in DLT, data is made available using cryptographic “keys” and signatures. In other words, when information is stored in a dlt, it can be converted into an immutable database managed using programming and coding.

Because the distributed ledger is decentralized, private, and encrypted, it is less susceptible to cybercrime because, for an attack on a distributed ledger to be successful, all copies stored across the network must be attacked simultaneously. In addition, sharing and updating the data recorded in a DLT with new records in short periods significantly limits the attack time for hackers. As a result, it becomes impossible or costly to do so altogether.

Any device in a distributed ledger network that stores a copy of the ledger is called a controller node. A grid can have any number of controller nodes. Any changes to the roster, such as data transfer from one block to another, are recorded on all nodes. Since each node has a copy of the ledger, each publishes its version with the latest transactions, thus ensuring transparency and immutability.

A transaction is finalized in the verification network when all nodes agree on the validity of the latest updated ledger version. The transaction is then encrypted and used as a basis for subsequent transactions. Blockchains evolve, and each contains encrypted information about previous blocks, making them impossible to change.

Use of distributed ledger technology in industries

A distributed ledger is created for various purposes. One of the main things is that they are used as a platform for scaling and using other media. One of the most well-known distributed ledgers is IBM’s Hyperledger Fabric, which provides a modular and scalable DLT platform. Several businesses have used this system in many industries, including aviation, education, healthcare, insurance, manufacturing, transportation, and facilities.

Supply chains can benefit significantly from distributed ledger technology, as many factors have made their traditional systems inefficient and prone to corruption or loss, which DLTs are an excellent option to address. Fujitsu, a global data and information technology company, has designed some DLT-based systems to increase transparency in the supply chain industry and prevent fraud by securing and tracking data.

For example, Fujitsu’s Rice Exchange was created to trade rice, ensuring that information on sources, prices, insurance, transportation, and settlement is recorded in a dlt. All data is automatically entered and secured by the platform. Therefore, it cannot be changed, and any user can access any data and find detailed information about the whole process.

How does DLT distributed ledger work, and how does it work?

As mentioned above, DLTs allow data to be stored securely and accurately using encryption. For this, in DLT, data is made available using cryptographic “keys” and signatures. In other words, when information is stored in a diet, it can be converted into an immutable database managed using programming and coding.

Because the distributed ledger is decentralized, private, and encrypted, it is less susceptible to cybercrime because, for an attack on a distributed ledger to be successful, all copies stored across the network must be attacked simultaneously. In addition, sharing and updating the data recorded in a DLT with new records in short periods significantly limits the attack time for hackers. As a result, it becomes impossible or costly to do so altogether.

Any device in a distributed ledger network that stores a copy of the ledger is called a controller node. A grid can have any number of controller nodes. Any changes to the roster, such as data transfer from one block to another, are recorded on all nodes. Since each node has a copy of the ledger, each publishes its version with the latest transactions, thus ensuring transparency and immutability.

A transaction is finalized in the verification network when all nodes agree on the validity of the latest updated ledger version. The transaction is then encrypted and used as a basis for subsequent transactions. Blockchains evolve, and each contains encrypted information about previous blocks, making them impossible to change.

Use of distributed ledger technology in industries

A distributed ledger is created for various purposes. One of the main things is that they are used as a platform for scaling and using other media. One of the most well-known distributed ledgers is IBM’s Hyperledger Fabric, which provides a modular and scalable DLT platform. Several businesses have used this system in many industries, including aviation, education, healthcare, insurance, manufacturing, transportation, and facilities.

Supply chains can benefit significantly from distributed ledger technology, as many factors have made their traditional systems inefficient and prone to corruption or loss, which DLTs are an excellent option to address. Fujitsu, a global data and information technology company, has designed some DLT-based systems to increase transparency in the supply chain industry and prevent fraud by securing and tracking data.

For example, Fujitsu’s Rice Exchange was created to trade rice, ensuring that information on sources, prices, insurance, transportation, and settlement is recorded in a dlt. All data is automatically entered and secured by the platform. Therefore, it cannot be changed, and any user can access any data and find detailed information about the whole process.

Aside from the above industries, other situations have proven the value of DLT-based solutions. Some other examples of specific applications of distributed ledger technology include:

Record transactions: A dlt records inputs and outputs. It also enables secure, transparent, decentralized data without a central authority. This technology can record any transaction even without any financial disruption.

• Secure identities: dlt is suitable for creating a secure and fraud-free digital identity for people Because it can provide a reliable way to verify identity and prevent personal information theft.

Collect votes: DLT can be used to create a secure and transparent voting system that can prevent fraud and ensure the integrity of the voting process. As mentioned above, DLTs allow users to record transactions (financial or non-financial) in a transparent, immutable, and open-interaction ledger. This increases the fairness and credibility of a set of votes.

• Smart contract execution: The distributed ledger enables innovative contract agreements that are automatically completed based on prevailing conditions.

• Demonstrate ownership: DLT can record property transactions, creating a transparent and tamper-free license and property transfer record. Although there are limitations to transferring the actual ownership of physical assets to the platform of a distributed ledger, a DLT can provide an immutable source of truth about ownership.

What are the types of DLT distributed ledgers?

There are three types of distributed ledger technology, which we will briefly explain below:

• Licensed (Permissioned)

Permissionless

Hybrid

licensed

Licensed networks are private. They are designed to operate in a closed ecosystem where the user must gain access through a KYC-based method. After authentication, users can access authorized network capabilities or authorized distributed ledger systems. In a permissioned network, representative validator nodes are responsible for validating transactions within the network.

The network can also be designed so that a few users have limited access to network functions. This feature is handy for businesses that want to use blockchain without publicizing their data.

unlicensed

Unlicensed distributed office systems or networks are public networks. By definition, users do not need authorization and authentication to participate in such networks. A permissionless distributed ledger system allows everyone to perform transactions, validate blocks, and interact with the network. The critical point in these systems is freedom of action. The best example of a permissionless network is Bitcoin itself.

Bitcoin was the first digital currency that used blockchain technology. In bitcoin dlt anyone can send or receive BTC. No restrictions exist on who can use it, regardless of location, laws, and other factors that govern how transactions are conducted.

hybrid

The last type of dlt we will discuss is a hybrid distributed ledger system that combines the previous types and provides a network that takes advantage of both. Hybrid dlts are an excellent choice for businesses because they can decide which aspects of the system to keep public and which parts to keep private.

What are the advantages of Dlt distributed ledger?

Distributed ledger technology has many advantages over more traditional central ledger systems, some of which we recall in this section:

• Since dlt is a decentralized system, there is no central authority for control. This makes DLTs more resilient to attacks and less vulnerable to system-wide failures. Also, since DLT uses cryptographic algorithms to secure data, tampering with or falsifying records is nearly impossible. This increases data reliability and reduces the risk of fraud.

• dlt enables transparent access to data and transactions, giving users greater visibility into system operations. This issue may lead to more users and customer attraction due to the transparency and accountability of the records.

• Distributed ledger technology can simplify processes by eliminating intermediaries and automating transactions through smart contracts. Since smart contracts may be executed automatically when contract conditions are met, there may be less need for human interaction or management. This, in turn, can reduce costs and increase efficiency.

• Finally, DLTs can expand the use of financial instruments Because some people may not have access to traditional banking services. Since DLTs often rely only on an Internet connection, people with only this level of access can access a wide range of services. As a result, this gives more scope to use different platforms and networks through interoperability.

I have frequently asked questions about DLT technology.

What is DLT technology?

In short, the distributed ledger refers to the computer’s fundamental protocols and infrastructure. It allows users in different locations to send and confirm transactions and update records synchronously across the network.

What is the application of DLT?

This technology is used in various fields and industries. Among the main applications of a distributed ledger are recording transactions, creating a secure digital identity, collecting votes, implementing smart contracts, proving ownership, etc.

What are the types of DLT?

There are three types of distributed ledger technologies: permissionless and hybrid.

What is the future of DLT?

No doubt distributed ledgers have a bright future. Especially when they offer a great feature set for businesses; also, this technology can solve some fundamental social and economic problems the world is suffering from.