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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
Decentralization: No central authority controls the ledger.
Consensus: All participants agree on the state of the ledger.
Transparency: Transactions are visible to all participants.
Immutability: Once recorded, transactions are difficult to alter.
Security: Cryptographic techniques ensure data integrity.
How Distributed Ledgers Work
Transaction Initiation: A participant initiates a transaction.
Broadcast: The transaction is broadcast to all nodes in the network.
Validation: Nodes validate the transaction according to agreed-upon rules.
Consensus: The network reaches agreement on the validity of the transaction.
Update: The ledger is updated across all nodes.
Distributed Ledgers vs. Traditional Databases
Centralization: Traditional databases are typically centralized, while distributed ledgers are decentralized.
Control: Distributed ledgers are not controlled by a single entity.
Transparency: Distributed ledgers offer greater transparency to participants.
Immutability: Distributed ledgers are more resistant to alterations.
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.