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Distributed ledger and how does it differ from a Blockchain?

What is a distributed ledger and how does it differ from a Blockchain?

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Ledger system go all the way back to times of ancient history. Their primary purpose was to act as a medium for storing information for accounting purposes in order for it to be easily accessible by pertinent individuals. The advent of computer technology, new cryptographic developments, and complex mathematic algorithms have allowed ledgers to become distributed. The idea of these distributed ledgers is relatively new as well as Blockchain technology. Let’s take a look at the similarities and differences between the two databases.

What are Distributed ledgers?

Essentially, a distributed ledger is a type of complex database that spans across many countries, institutions, users, and even sites. They are entirely decentralized for the purpose of eliminating the need for a central regulatory authority, or intermediaries like lawyers, notaries, regulatory bodies, compliance officers, and even banking institutions. All of the data and information stored on a distributed ledger can be authenticated and validated by the participants of a distributed ledger, which are known as nodes in the ledger ecosystem.

Information can only be added to a distributed ledger once it is validated by all of the participants once a mutual network consensus has been reached. This is done to maintain security, immutability, and transparency. Additionally, all data on a decentralized ledger is time stamped and accompanied by a distinctive cryptographic signature, or key if you may. Also, they are designed in such a way that everyone can view all of the information on the ledger such as dates, times, transaction history. This ensures that all data is always accurate for audit purposes and possesses no hiccups in its validity. Distributed ledgers are perfect for maintaining a trustless ecosystem without the need for certain third parties.

What on earth is a Blockchain?

It’s vital to understand that a Blockchain is but a single type of distributed ledger. Many people do not know that there can be many different types of Blockchains with varying characteristics. This is in part due to the popularity of the Blockchain associated with bitcoin overshadowing the others. Blockchains function on a consensus based, replicated, synchronized, and shared digital data system. For example, once a transaction takes place on the Bitcoin Blockchain, miners rush to validated the transaction by solving a cryptographic algorithm using computer processing power. Once a transaction is validated, it is time stamped and added to a block on the Blockchain with other operations, which are then linked to the other blocks using a unique cryptographic signature, known in the cryptoworld as a “hash”.

Additionally, all info on a Blockchain can easily be searched using the cryptographic hash key and validated by anyone with access to the internet. Blockchains possess different mechanics like mining, special permissions, private and public Blockchains. However, all such Blockchains are built upon cryptocurrency and bitcoin concepts.

Conclusion

Distributed ledgers and Blockchains definitely overlap in use cases as well as terminology. As a matter of fact, distributed ledgers can be synchronized and implemented with or without a Blockchain and its underlying mechanisms. A great way to wrap your mount around everything that was discussed, is to think of a Blockchain is a replicating ledger database or even journal. Which means that identical copies of its data are stored on every node in the network. While in a distributed ledger, individual nodes may have different information pertaining to varying data and actions.

To summarize, the differences between Blockchains and distributed ledgers are relatively thin and generally come down to the consensus model that is used to validate, store, and copy data. Now, while the differences are thin, it is wise not to confuse the two systems as ultimately, they do mean different things. Additionally, a distributed ledger can be linked with a Blockchain for specific purposes.

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