Distributed Ledger

What is a Distributed Ledger?

A distributed ledger is a database that is consensually shared and synchronized across multiple sites, institutions, or geographies. It allows transactions to have public "witnesses," thereby making a cyberattack more difficult. The participant at each node of the network can access the recordings shared across that network and can own an identical copy of it.

Key Aspects

1. Decentralization: No central authority controls the ledger.

2. Consensus: All participants agree on the state of the ledger.

3. Transparency: Transactions are visible to all participants.

4. Immutability: Once recorded, transactions are difficult to alter.

5. Security: Cryptographic techniques ensure data integrity.

How Distributed Ledgers Work

1. Transaction Initiation: A participant initiates a transaction.

2. Broadcast: The transaction is broadcast to all nodes in the network.

3. Validation: Nodes validate the transaction according to agreed-upon rules.

4. Consensus: The network reaches agreement on the validity of the transaction.

5. Update: The ledger is updated across all nodes.

Distributed Ledgers vs. Traditional Databases

1. Centralization: Traditional databases are typically centralized, while distributed ledgers are decentralized.

2. Control: Distributed ledgers are not controlled by a single entity.

3. Transparency: Distributed ledgers offer greater transparency to participants.

4. Immutability: Distributed ledgers are more resistant to alterations.

5. Redundancy: Each node in a distributed ledger has a full copy of the data.

Similar Terms

• Blockchain: A specific type of distributed ledger.

• Consensus Mechanism: The method by which distributed ledgers achieve agreement.

• Peer-to-Peer (P2P): The network structure often used in distributed ledger systems.

• Distributed Ledger Technology: The broader category of technologies that includes both DAGs and blockchains.