Distributed ledger technology

Blockchain Only ‘ONE’ Type of Distributed Ledger Technology

The Era of Blockchain Systems

Blockchain introduced a new economic era popularly termed as the internet 3.0, simply because it’s the internet of value. It’s almost impossible to surf the internet today without coming across blockchain related headlines. This cutting-edge tool has disrupted the internet by influencing major economic sectors and players. With so much technological infrastructure being built on the blockchain today, it’s important to understand that blockchain is only one type of distributed ledger technology.

Apart from the confusion of blockchain being the only decentralized ledger technology, there’s also the confusion surrounding decentralization and the assumption that every blockchain is ‘decentralized’. This isn’t surprising because the whole blockchain shebang became suddenly overwhelming and it’s normal to get confused by all the different terminology, especially when there are no regulatory standards.

However, here we attempt to both literally and technically identify the roles each of these newly introduced concepts play in the new internet economy. For convenience, it’s acceptable to see blockchain as a ring inside a bigger circle, but it’s not the only ring in there.

What’s Distributed Ledger Technology?

A close to home analogy will be an accounting ledger used in many corporate organizations such as banks, to keep track of transactions. A digital ledger in the sense of being distributed has a more refined approach to the handling and validation of data. The files (ledger + data) which are distributed amongst many users (called nodes) can contribute to the data set independently, thereby, building a more resourceful data hub.

Breaking down distributed ledger technology as a literal frame is a concept of distributing copies of digital databases across multiple nodes (independent computer systems). Each of these nodes is connected with no central server making the distributed ledger network decentralized. Data entry validation is achieved through a consensus algorithm. In other words, it’s a broader term used to describe the concept on which blockchain applications are derived. Therefore, blockchain is a subset of distributed ledger technology.

What then is the Blockchain?

Technically, if the term ‘blockchain’ is to be taken literally, it relatively describes a system of data blocks connected by a string of some sort, such that transactions are logged into a block and continue onto the next block as soon as the current block is filled.

However, the more conventional interpretation of the blockchain is a system built after the likeness of bitcoin or trying to accomplish a decentralized system of storing, sharing and validation of data on a shared digital ledger through a consensus mechanism. Each of these new modifications has attempted to use different consensus models to upscale the original concept. This ‘remodeling’ brings about three types of ‘conventional’ blockchains – the public, the private and the federated.

And….we will be discussing these types in a later article, so stay tuned!


DLT explained by World Bank