Technology strives to make everything better — communication, transportation, learning, business, even writing. But it doesn’t stop at that, technology also seeks to improve the keeping of records. It attempts to make bookkeeping more secure and trustworthy. That is the innovation that Distributed Ledger Technology offers.
The most common form of DLTs is blockchain technology. The birth of Bitcoin in 2009, (although it wasn’t the first cryptocurrency) brought to the fore countless mind-blowing applications DLTs offered in the financial sector, banking sector, payments systems, even in the Arts (in the form of NFTs).
Blockchain, as the name suggests, is a chain of ‘blocks’ of data. Data, which could be in any form, is entered into ‘blocks’ and strung to the previous block of data in a repetitive cycle that eventually forms the “blockchain”.
What is so innovative about DLTs?
You might be asking, has tech not improved record-keeping through the use of computers and their programs (like MS Excel)? What makes DLTs different from conventional databases?
Decentralisation here means data is stored on several nodes of a network, without a third-party administrator. Imagine a digital ‘record book’ that is in the custody of several people simultaneously.
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Advantages of DLTs
- Security of data
The old bookkeeping system involves the use of just one main journal (be it a hard or soft copy).
But this process is vulnerable to compromise and seriousness because anybody with a duplicitous intent could alter it by just getting his hands on the “source copy”.
This feature limits arbitrary use of unchecked control of data (or anything stored on the blockchain) by a compromised node.
- Authenticity of data
DLTs seek to achieve authenticity. This they do by incorporating decentralization in their operations.
On distributed ledgers, the details of all transactions are available to all.
Every unit of new data is sent to all nodes within the network. This enables any node in the network or anyone with a blockchain explorer to view data on the blockchain. This expels all chances for misrepresentation of data.
- Absence of third-party bodies
Nobody has to coordinate or facilitate transactions before they are carried out. Data can be written automatically to the database through algorithms. This saves time, money and aids privacy.
Practical Applications of DLTs
Cryptocurrencies and other digital currencies are applications of DLTs.
- Means of storage
- DeFi (Decentralised Finance)
Beyond Bitcoin, DLTs open up new dimensions of advancement in the financial sector through DeFi platforms and DApps. The development of P2P (peer to peer) systems is revolutionizing the payments sector.
Tech has once again taken the world further, increasing the ease of doing business; as all these are only made possible through the system that facilitates the immutability of records. What do you think of these innovations? Let us know in the comments section.