why distribute ledger technology is important
dlt is important because it has the potential to transform how information is recorded stored and distributed the importance is often cited across three pillars security transparency and accessibility traditional ledger technology often has a central point of control with one single entity often in charge of the ledger dlt makes the ledger more resilient to attacks and less vulnerable to system wide failures as dlt uses cryptographic algorithms to secure data it also makes it more difficult to tamper with or forge records consider a traditional banking system where a banker is the central point in ensuring your transaction is recorded correctly in contrast consider a dlt solution built on a consensus mechanism where all distributed ledgers must be in agreement about how a transaction is recorded this validation of transactions allows greater trust among users and removes the power an individual might have to alter data centralized traditional ledgers often restrict access to specific individuals though this still holds value for sensitive information there are many use cases where it is more beneficial for all when data and information are broadly distributed and transparent consider the example above of voting having digitally distributed undisputable verifiable records of voting may enhance the believability of results dlt is also important as it holds the theory of reducing fraud and increasing accountability in the long term note how all transactions within a dlt system are able to be viewed by anyone with access to the dlt the information may be audited by anyone at any time potentially demotivating bad actors from entering into nefarious activity in such a public sphere last dlt may eventually be critically important to developing and emerging countries or regions where centralized technologies are limited think about the banking limitations of different countries around the world dlt boasts the ability to store and record transactions using only a network connection as opposed to a very niche and expensive connection such as a bank account at a specific bank as dlt is a relatively new technology that is still being explored and developed this presents opportunities for innovation and the creation of new applications and use cases in general because of the easier access to dlt solutions there are many positive implications notably the broad public s ability to communally access a shared network often has fewer bureaucratic hurdles distributed ledger technology consensus mechanismsa central facet of dlt is how transactions are approved when consensus needs to be reached among a disparate user base without a universally agreed upon system of how items are accepted within the dlt users of the dlt would be unable to agree on the validity of information this process of reviewing transactions is called a consensus mechanism and a dlt may leverage any of the following processes not all dlt applications will require a consensus mechanic note that consensus mechanisms are constantly evolving and only the more common approaches are listed below distributed ledgers vs blockchainseveral key factors distinguish blockchain from distributed ledgers in general blockchain is a specific type of dlt dlts may take various forms while a blockchain uses one specific infrastructure a linear system of blocks that records information blockchains often leverage a proof of work or proof of stake consensus mechanism whereas a dlt has a much broader range of mechanisms available in addition dlts are often more broadly used across industries as they can be leveraged for problems in those industries blockchain has historically been most associated with the financial sector as a means of recording a payment system the security behind either may also vary with blockchain having a very defined set of criteria within the dlt realm data can be chainedcan be encryptedprivate or public and permissioned but can be permissionlesscan be immutabledata is stored in chained files called blocks always encryptedgenerally public and permissionless but some are permissionedalways immutable