What Is Distributed Ledger Technology (DLT)? – MakeUseOf

DLT has more going for it than blockchain alone. Here’s an explanation of how distributed ledger technology works, plus some of its other uses.
Using a combination of replicated, shared, and synchronized digital data, distributed ledger technology (DLT) is the infrastructure that allows for simultaneous access to digital records. With a backup of data across several physical locations, DLT obtains a consensus that makes it possible to have virtually zero downtime.
Blockchain is arguably the most famous example of DLT, but far from the only one. So, what exactly is a distributed ledger—and how is it used in everyday life?
A distributed ledger makes it possible to process transactions without involvement from third parties. Unlike a database, distributed ledgers have no central administrators or singular storage facilities.
Managed by multiple participants, a distributed ledger relies on a decentralized network that spans multiple buildings, locations, and even countries. Using consensus algorithms, this peer-to-peer network helps ensure the replication across nodes.
Depending on the type of DLT, there are four types of consensus algorithms—proof of work, proof of stake, voting systems, and hashgraphs. Used to achieve the necessary agreement on a single data value or state of the network, consensus mechanisms are fault-tolerant and help maintain multi-agent systems. In addition, intermediaries are no longer necessary for processing, validating, or authenticating transactions.
A distributed ledger can be both public or private. Determined by the accessibility of the ledgers or the nodes, distributed ledgers can have varying levels of permissions for various users.
Blockchain technology is a type of distributed ledger technology that is immutable. Maintained by a decentralized network, blockchain creates a permanent ledger by using cryptographic signing. With blockchain, groups of records or blocks become linked together in a chain that is publicly traceable.
Unlike other types of DLT, blocks in blockchain follow a particular sequence and use proof of work mechanisms. Through solving arbitrary mathematical problems, proof of work helps prevent bad actors from gaming the blockchain system. For this reason, blockchain is often referred to as the most exciting application of DLT so far.
Related: What Is a Blockchain And How Does It Work?
A non-blockchain DLT can be built with the architecture of both private and public data storage. While blockchain requires a global consensus, DLT can achieve consensus without having to validate the entire chain. So, although DLT is often associated with the creation of cryptocurrency, not all of its applications require tokens.
Compared to blockchain, you might find that other forms of DLT are more scalable. However, it also has less practical implementations because of security reasons. As the technology evolves, there’s still a lot of room for measures that can make related systems more effective overall.
However, it’s important to understand that while blockchain is immutable, it’s not necessarily invulnerable. An overreliance on blockchain also opens up issues related to data encoding, such as malware.
While a new type of technology, DLT has the potential to revolutionize several industries. Here are a few of them.
A lot has been said about how DLT, especially blockchain, can be used to improve the financial sector as a whole. Not only can it be used to send money across the world almost instantly, but it is also significantly cheaper and more accessible. For individuals who live in areas with a poor infrastructure and a lack of access to traditional banks, DLT makes it possible to join the digital economy seamlessly.
For many countries with difficult topography, the voting process can be difficult and time-consuming. By employing DLT, governments can benefit from improving the speed, efficiency, and reliability of their voting practices. In fact, it can even increase the voter turnout for elections and lessen the possibility of fraud, which is often a heated topic of discussion for mail-in voting practices.
As streaming becomes a primary channel for artists to share their work, DLT makes it possible to directly attribute royalties in an effective manner. With DLT, streaming providers can streamline accounting measures to pay artists within a reasonable timeline and with fewer fees. Additionally, artists and producers can also avoid corruption by distributors by having a precise ledger of transactions.
With DLT, real estate developers and agents can have a better sense of a property’s history. Compared to traditional listing services, DLT makes previous ownership, renovations, and sales transparent. With this, real estate buyers can have a more holistic understanding of a property before purchasing.
Using DLT, doctors won’t need to ask for your patient history every single time you check in. With a single QR code or number, patient records can be accessed across hospitals in the world. Not only can this help doctors make more informed diagnoses, but it can also help patients during emergencies where they cannot immediately share their patient history.
For companies that manage global supply chains, DLT makes it possible to build consensus over shared facts. With this, it is possible to increase efficiency and visibility. Aside from this, it can reduce the possibility of fraud when it comes to high-value goods, leading to overall less wastage and higher profits.
As for non-profits, DLT can drastically reduce the cost of distributing aid across borders. For example, the World Food Program (WFP) used a blockchain-based system for proof of deliveries in Syria. Using a protocol, the WFP reduced transaction costs by up to 98 percent.
When it comes to DLT, there’s definitely more than meets the eye—and we’ve only scratched the surface on what it can do.
From government, healthcare, entertainment, and business, distributed ledger technology can make many aspects of our lives more effective, efficient, and safe. While it's not without its share of security risks, the pros outweigh the cons for most situations.
With an increasing number of eyes on DLT, there’s no doubt that its possibilities will reveal themselves with time. As with all new types of technology, there’s always a learning curve when it comes to practical applications. Thankfully, blockchain is already doing its part by leading the charge.
Is blockchain technology really the best for those demanding transparency?
Quina spends most of her days day drinking at the beach while writing about how technology affects politics, security, and entertainment. She is primarily based in Southeast Asia and graduated with a degree in Information Design.
Join our newsletter for tech tips, reviews, free ebooks, and exclusive deals!