What Is Distributed Ledger Technology?

Understanding the basics of DLT

Distributed Ledger Technology

Distributed Ledger Technology (DLT) is the widely accepted term describing the intersection of computer science, mathematics, and cryptography in the digital space. 
 
The combination of these three disciplines allows for trust and transfer of value across vast, borderless, and distributed, peer-to-peer, networks of computers; also known as nodes, which are spread across global locations.
 
Since centralization is counter to the design of such technology, vast node distribution is critical to the strength and trustworthiness of the network. In the image above, the distributed financial institutions are also representative of an individual’s personal device.
 
These nodes enable a synchronized distributed database to exist because each node replicates and stores an identical copy of a ledger.
A ledger is a permanent record of all settled economic transactions and accounts. Evidence of these physical financial journals have been found dating back to 2600 B.C.
 
The architectural design of DLT makes information stored within it immutable and permanent in the digital space – a first in human history. DLT varies in 2 forms, and currently, 2 structures. They are:
 
Form 1) Permissionless (Public)
Form 2) Permissioned (Private)
 
Structure 1) Blockchain
Structure 2) Directed Acyclic Graph (DAG)

Borderless

Distributed Ledger Technology is the first technological solution that goes beyond borders and displaces centralized authority.

Secure

The combined disciplines of Mathematics, Computer Science, and Cryptography enable security in an intangible space.

Distributed

A distributed, secure, and trustworthy technology means "power" is allocated horizontally and equally.

Transparent

Pseudo-anonymous transactions on a permissionless, shared public ledger enforces trust and visibility.

Permissioned DLT

A permissioned DLT is a closed environment much like an intranet. A private network of nodes is operated, deployed, and managed by a centralized operator or organization.

More Data Privacy

A closed, permissioned DLT model ensures information remains private and protected.

Authorized Accessibily

The nature of a closed model approach requires individuals or groups to be approved.

Less Secure & Expensive

Small networks = lower cost = high potential of manipulation or attack. Large networks = higher cost = less potential of manipulation or attack.

Zero Network Effects

Closed networks do not benefit from the advantages of network effects. Private networks beginning from zero are focused on a limited pool of users.

Permissionless DLT

A permissionless DLT is an open environment much like the internet. A public network of nodes is operated, deployed, and managed by distributed operators or organizations.

Reduced Privacy

While privacy is reduced, it is also perceived as transparent. More appropriately, the term is pseudo-anonymous.

Open Accessibility

Permissionless DLT protocols are open source and accessible by anyone, anywhere interested in improving the source code.

Cost Effective and Secure

Due to the open source nature, maintenance and security of the protocols are more robust and trustworthy.

Unlimited Network Effects

Open protocols enjoy quicker and significantly broader adoption. Such networks are stronger and resilient to attacks.

Evolution of Networks

The formation, growth, and evolution of networks could be considered a natural progression of relationships. Using the internet as an example we can attempt to illustrate the advances.

Centralized Networks

The "What is Internet?" 1990's brought us the public, and generally centralized, world wide web. The Internet Age of Information.

Decentralized Networks

The late 90's and early noughts gave rise to Google, Amazon, & Facebook. Often termed the "Cloud", this became the Age of Social Media Networks.

Distributed Networks

Satoshi Nakamoto's paper on the Bitcoin Blockchain in 2008 publicly, albeit silently, introduced the Age of Trust & Value. A decade later and DLT is here to stay.

Future Networks

No one knows what the next prominent shift in networks will be. However, we expect the next phase will involve tightly integrated cyber-physical traits we will interact with daily.

Now you know the fundamentals of DLT. Understand what a blockchain is:

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