Distributed ledger

A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is the consensus of replicated, shared, and synchronized digital data that is geographically spread (distributed) across multiple sites, countries, or institutions.[1] In contrast to a centralized database, a distributed ledger does not require a central administrator, and consequently does not have a single (central) point-of-failure.[2][3][4]

In general, a distributed ledger requires a peer-to-peer (P2P) computer network and consensus algorithms so that the ledger is reliably replicated across distributed computer nodes (servers, clients, etc.).[2] The most common form of distributed ledger technology is the blockchain, commonly associated with the Bitcoin cryptocurrency, where the blockchain can either be either on a public or private network.[3]

In some cases, where the distributed digital information functions more as an accounting journal rather than an accounting ledger, an alternative term is used: RJT for Replicated Journal Technology.[5]

CharacteristicsEdit

Distributed ledger data is typically spread across multiple nodes (computational devices) on a P2P network, where each replicates and saves an identical copy of the ledger data and updates itself independently of other nodes. The primary advantage of this distributed processing pattern is the lack of a central authority, which constitutes a single point of failure. When a ledger update transaction is broadcast to the P2P network each distributed node processes a new update transaction independently, and then collectively all working nodes use a consensus algorithm to determine the new, correct copy of the updated ledger. Once a consensus has been determined, all the other nodes update themselves with the new, correct copy of the updated ledger.[6][7] Security is enforced through cryptographic keys and signatures.[8][9][10]

ApplicationsEdit

In 2016, some banks tested distributed ledger systems for payments[11] to determine their usefulness.[2] In 2020, Axoni launched Veris, a distributed ledger platform that manages equity swap transactions.[12] The platform, which matches and reconciles post-trade data on stock swaps, is used by BlackRock Inc., Goldman Sachs Group Inc., and Citigroup, Inc.[13]

TypesEdit

Distributed ledgers technologies can be categorized in terms of their data structures, consensus algorithms, permissions, and mining characteristics.[14] DLT data structure types range from simple linear data structures (blockchains) to more complex Directed Acyclic Graphs (DAGs) and hybrid data structures. DLT consensus algorithm types vary from conventional Proof-of-Work (PoW) and Proof-of-Stake (PoS) algorithms to more sophisticated DAG consensus building and voting algorithms. DLT permission types are generally either permissioned (public) or permissionless (private).[15] DLT mineability types are generally either 'Mined' or 'Non-Mined', where the latter typically indicates 'Pre-Mined' cryptocurrencies, such as XRP or IOTA.[16]

Although blockchains are the most common DLT type, other DLTs based on Directed Acyclic Graph (DAG) data structures, and hybrid blockchain-DAG approaches are gaining in popularity because they decrease transaction data size and transaction costs, while increasing transaction speeds.[17][18][19] Examples of DAG DLT cryptocurrencies include MIOTA (IOTA Tangle DLT) and HBAR (Hedera Hashgraph DLT).

Blockchain Tangle Hashgraph
Technology Blockchain Directed acyclic graph Directed acyclic graph
Copyright Open source Open source Open source
Consensus Proof-of-Work (PoW): SHA256-Hash Proof-of-Work (PoW): Check of Tangle tip Virtual voting
Openness Public ledger Public ledger Private ledger
Applications Bitcoin, Ethereum, various Altcoin DLTs IOTA Hedera Hashgraph
Efficiency (Tx/sec; TPS) Relatively Low TPS Relatively High TPS Extremely High TPS

See alsoEdit

ReferencesEdit

  1. ^ Distributed Ledger Technology: beyond block chain (PDF) (Report). Government Office for Science (UK). January 2016. Retrieved 29 August 2016.
  2. ^ a b c Scardovi, Claudio (2016). Restructuring and Innovation in Banking. Springer. p. 36. ISBN 978-331940204-8. Retrieved 21 November 2016.
  3. ^ a b "Crypto FAQ: What is Distributed Ledger Technology (DLT)?". CryptoCurrency Works™. Retrieved 2022-08-09.
  4. ^ "Distributed Ledgers". Investopedia. Retrieved 2022-08-09.
  5. ^ S, Surbhi (26 Jul 2018). "Difference Between Journal and Ledger". Developer works. Retrieved 22 Dec 2020.
  6. ^ Maull, Roger; Godsiff, Phil; Mulligan, Catherine; Brown, Alan; Kewell, Beth (21 Sep 2017). "Distributed ledger technology: Applications and implications". FINRA. 26 (5): 481–89. doi:10.1002/jsc.2148.
  7. ^ Ray, Shaan (2018-02-20). "The Difference Between Blockchains & Distributed Ledger Technology". Towards Data Science. Retrieved 25 September 2018.
  8. ^ "Distributed Ledger Technology: beyond block chain" (Press release). Government Office for Science (UK). 19 January 2016. Retrieved 25 September 2018.
  9. ^ Brakeville, Sloane; Perepa, Bhargav (18 Mar 2018). "Blockchain basics: Introduction to distributed ledgers". Developer works. IBM. Retrieved 25 Sep 2018.
  10. ^ Rutland, Emily. "Blockchain Byte" (PDF). FINRA. R3 Research. p. 2. Retrieved 25 September 2018.
  11. ^ "Central banks look to the future of money with blockchain technology trial". Australian Financial Review. Fairfax Media Publications. 21 November 2016. Retrieved 7 December 2016.
  12. ^ "Citi and Goldman Sachs go live with blockchain equity swaps platform - The TRADE". www.thetradenews.com. Retrieved 2022-05-20.
  13. ^ "BlackRock Joins Blockchain Platform Axoni for Equity Swap Trades". Bloomberg.com. 2021-09-07. Retrieved 2022-05-20.
  14. ^ "Crypto FAQ: What is Distributed Ledger Technology (DLT)?". Cryptocurrency Works. Retrieved 2022-07-28.
  15. ^ "Blockchains & Distributed Ledger Technologies". Blockchainhub Berlin. Retrieved 2022-07-28.
  16. ^ "Crypto FAQ: What is Distributed Ledger Technology (DLT)?". Cryptocurrency Works. Retrieved 2022-07-28.
  17. ^ Schueffel, Patrick (2017-12-15). "Alternative Distributed Ledger Technologies Blockchain vs. Tangle vs. Hashgraph - A High-Level Overview and Comparison". Rochester, NY. SSRN 3144241. {{cite journal}}: Cite journal requires |journal= (help)
  18. ^ Pervez, H. (2018). "A Comparative Analysis of DAG-Based Blockchain Architectures". ICOSST 2018. {{cite journal}}: Cite journal requires |journal= (help)CS1 maint: location (link)
  19. ^ "Crypto FAQ: What is Distributed Ledger Technology (DLT)?". Cryptocurrency Works. Retrieved 2022-07-28.