What is Distributed Ledger Technology and wow does it work?

Distributed Ledger Technology (DLT) was there before Bitcoin and can be traced back to the early 2000s and even earlier, but the technology was reshaped by the birth of Bitcoin as it introduced the concept of blockchain, which is a distributed ledger that records all Bitcoin transactions in a decentralized and immutable manner. In that sense, the Bitcoin network became the first successful implementation of DLT, solving the problem of double-spending in the systems of digital currencies.

However, the emergence of alternative cryptocurrencies and blockchains to offer faster transaction confirmation times compared to Bitcoin has triggered many other potential uses of DLT in various industries. One example is the launch of Ethereum in 2015, which introduced smart contracts and enabled developers to create decentralized applications (dApps) on its Blockchain. This trend has expanded the use cases of Distributed Ledger Technology beyond just digital currencies. It became a technology with a wide range of applications across industries, including supply chain, finance, healthcare, and many more.

What is Distributed Ledger Technology?

DLT is like digital databases that a number of (nodes) computers share and update together on a network. It is used to keep a secure record of transactions and information, and there's no single node that has the authority to control this network, which is composed of many nodes.

How does Distributed Ledger Technology work?

Distributed Ledger Technology works like a digital notebook shared by many computers on a network. When someone makes a transaction, it goes to all the computers on the network to check and group with other transactions in time-stamped blocks. Each computer keeps a copy of all the transactions on the network. So, each computer checks the transaction to make sure it's valid, and if everything looks good, they all agree to add it to the notebook.

In that sense, everyone has a copy of the same notebook, which makes it very hard to tamper with the information because everyone is keeping an eye on it. This makes DLT a super secure and transparent way to keep records.

What are the use cases of DLT?

DLT is a digital system that has applications beyond just handling payments. Other than recording and verifying cryptocurrency transactions, DLT is also used for various types of transactions, such as recording the ownership of assets in a settlement system where the settlement involves updating the record of the ownership of assets when they are transferred. For instance, when you pay or transfer money, the settlement happens by reducing your account balance and increasing the receiver’s account balance.

DLT has a wide range of applications across industries, such as supply chain management, where it is used to track the movement of goods, verify the authenticity of products, and ensure compliance with regulations.

In real estate, DLT can be used to streamline transactions by providing a secure and transparent way to record property ownership and transfer.

It can also be used in healthcare to securely store and manage records of patients, ensuring data integrity and enabling efficient sharing of medical information among authorized parties.

As for the education sector, DLT can be used to securely store and verify academic credentials, certificates, and diplomas.

What makes DLT important and innovative?

The main advantage of DLT is its ability to provide security, transparency, and decentralization in various processes and industries. The security of this technology relies on its transparency and decentralized nature; there is no central point of failure, which reduces vulnerability to certain cyberattacks. DLT uses cryptographic techniques to secure data, making it extremely difficult for unauthorized parties to alter or hack information.

DLT also offers an immutable record because it is virtually impossible to change data after it is recorded on a DLT. This reduces the risk of fraud by ensuring the integrity of historical records. Additionally, DLT eliminates the need for intermediaries in many transactions, which speeds up processes, reduces costs, and increases efficiency. With the ability to create and execute smart contracts, which are self-executing agreements with predefined rules, DLT automates processes, reduces human error, and ensures the enforcement of contract terms transparently.

The technology also offers global accessibility to anyone with an internet connection, which makes its applications more available and inclusive. It also offers trustless systems, allowing people to engage in transactions without the need for trusting a central authority because trust is established through DLT itself, reducing the risk of disputes and fraud.

Distributed Ledger Technology has sparked innovation in many industries, leading to the development of new applications and business models. It has many innovative potentials, as its distributed nature makes it resistant to censorship, tampering, and system failures. Because it introduces a new way of managing data in a secure, transparent, and decentralized manner, DLT has the potential to improve many industries by its ability to increase security, reduce inefficiencies, and enable new forms of automation and digital interaction.