Wikipedia defined A distributed ledger (also called a shared ledger, or referred to as distributed ledger technology) as a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. There is no central administrator or centralised data storage
BREAKING DOWN ‘Distributed Ledgers’
A distributed ledger can be described as a ledger of any transactions or contracts maintained in decentralized form across different locations and people, eliminating the need of a central authority to keep a check against manipulation. All the information on it is securely and accurately stored using cryptography and can be accessed using keys and cryptographic signatures. Once the information is stored, it becomes an immutable database and is governed by the rules of the network. While centralized ledgers are prone to cyber-attack, distributed ledgers are inherently harder to attack because all the distributed copies need to be attacked simultaneously for an attack to be successful. Further, these records are resistant to malicious changes by a single party.
Since ancient times, ledgers have been at the heart of economic transactions – to record contracts, payments, buy-sell deals or movement of assets or property. The journey which began with recording on clay tablets or papyrus, made a big leap with the invention of paper. Over the last couple of decades, computers provided the process of record keeping and ledger maintenance great convenience and speed. Today, with innovation, the information stored on computers is moving towards much higher forms – which is cryptographically secured, fast and decentralized.
Distributed ledger technology has great potential to revolutionize the way governments, institutions, and corporate work. It can help governments in tax collection, issuance of passports, record land registries, licenses and outlay of social security benefits as well as voting procedures. The technology is making waves in industries such as finance; music and entertainment; diamond and precious assets; artwork; supply chains of various commodities; and more. While the distributed ledger technology has multiple advantages, it’s in a nascent stage and is still being explored to adopt in the best possible ways. The future of centuries old ledgers is decentralized. Source: Investopedia
Blockchain vs. Distributed Ledger
Think of blockchain and distributed ledger in the same way you might think of Kleenex and facial tissues. The former is a type of the latter, but it has become so popular that it becomes engrained in people’s minds as what the product actually is.
Blockchain tech is essentially a shared database filled with entries that must be confirmed and encrypted. An easy way to understand it is as a type of highly secure and verified shared Google Document, in which each entry in the sheet depends on a logical relationship to all its predecessors.
The name blockchain refers to the “blocks” that get added to the chain of transaction records. To facilitate this, the blockchain uses a cryptographic signatures called a hash.
Advantages of Using a Distributed Ledger Like Blockchain
Blockchain tech offers a way to securely and efficiently create a tamper-proof log of sensitive activity (anything from international money transfers to shareholder records). The conceptual framework and underlying code of blockchain is useful for a several financial processes because of the potential it has to give companies a secure, digital alternative to banking processes that are often bureaucratic, time-consuming, paper-heavy, and expensive.
Distributed ledgers such as blockchain are exceedingly useful for financial transactions because they cut down on operational inefficiencies (which ultimately saves money). They also provide greater security due to their decentralized nature, as well as the fact that the ledgers are immutable.
Distributed Ledger Technology Beyond Blockchain
Blockchain may be the most widely-known distributed ledger technology (DLT), but the future of DLTs will depend on collaborative efforts. James Wallis, Vice President of Blockchain Markets and Engagements for IBM, told the Association for Financial Professionals that “you’ll see uses for DLT that you can’t even think of today” but that this will involve “a level of sharing that hasn’t really existed before.”
Should DLTs become standard, they could revolutionize “Know Your Customer (KYC),” the process through which a business identifies and verifies the identity of its clients. Broader identity management would also become much simpler.