What is Distributed Ledgers?
1006 reads · Last updated: December 5, 2024
A distributed ledger is a database that is consensually shared and synchronized across multiple sites, institutions, or geographies, accessible by multiple people. It allows transactions to have public "witnesses." The participant at each node of the network can access the recordings shared across that network and can own an identical copy of it. Any changes or additions made to the ledger are reflected and copied to all participants in a matter of seconds or minutes.A distributed ledger stands in contrast to a centralized ledger, which is the type of ledger that most companies use. A centralized ledger is more prone to cyber attacks and fraud, as it has a single point of failure.Underlying distributed ledgers is the same technology that is used by blockchain, which is the technology that is used by bitcoin. Blockchain is a type of distributed ledger used by bitcoin.
Definition
A distributed ledger is a database that is shared and synchronized across multiple sites, institutions, or geographies, accessible by multiple people. It allows transactions to have public 'witnesses'. Each participant at each node of the network can access the records shared across that network and have an identical copy. Any changes or additions to the ledger are reflected and copied to all participants within seconds or minutes.
Origin
The origin of distributed ledger technology can be traced back to the creation of Bitcoin. In 2008, Satoshi Nakamoto (a pseudonym) published the Bitcoin white paper, introducing blockchain technology, a form of distributed ledger. The advent of blockchain marked the widespread application of distributed ledger technology, especially in the financial sector.
Categories and Features
Distributed ledgers are mainly categorized into blockchain and non-blockchain types. Blockchain is the most common form, characterized by decentralization, immutability, and transparency. Non-blockchain distributed ledgers may not use the chain structure of blockchains but still maintain distributed data storage and synchronization. The advantages of distributed ledgers include increased transparency and security, but they also face challenges in scalability and energy consumption.
Case Studies
A typical case is Bitcoin, which uses blockchain as a distributed ledger to record all transactions. Each Bitcoin node maintains a complete history of transactions, ensuring system transparency and security. Another example is IBM's Hyperledger Fabric, an enterprise-grade distributed ledger technology that allows businesses to share data in a permissioned network, suitable for scenarios like supply chain management.
Common Issues
Investors using distributed ledgers may encounter scalability issues, as the network's processing speed may decrease as data volume increases. Additionally, while distributed ledgers enhance security, they are still vulnerable to a 51% attack, where if one entity controls more than half of the network's computing power, it can alter the ledger.
