Throughout the human history, ledgers have an integral part of accounting systems. From the early medium like clay tablets, papyrus, and stone to the modern innovations like computers, there has a long journey. The papers got digitized to reduce chances of human errors. But, most of the ledgers and money instruments are still paper-based, be it currency, bills, certificates, or seals. In the recent times, development of cryptography led to a new digital order where distributed ledgers are used for accuracy in the system.
What Exactly Is Entailed in Distributed Ledgers?
In the simplest form, a distributed ledger is a database that’s independently stored and updated by every node or user in a large network. It is unique due to its distributed and decentralized nature. In this ledger, records aren’t transmitted by a single centralized authority to the different nodes or users. Rather, they are independently created and stored by each user. Here, every node must verify authenticity of transactions to ensure agreement by nearly 50% of the nodes. It has a process of voting called consensus that must be reached for updating the ledger. This entire system allows transparency and security of transactions enabled by a blockchain development company.
Options of Networks in a Distributed Ledger:
A distributed ledger is all about connecting various users through a network. This brings efficiency and accuracy in the process. Users have two main options for selecting the network:
A Public Network that offers permission-less invitations to join the network. For example, bitcoin is working on a public network. This digital cryptocurrency has witnessed great adoption worldwide with more people willing to use it for making digital transactions.
On the other hand, private network is a closed or permission-based network option. It entails a membership process for the participants. This option works best for the applications where regulatory compliance and speed are of the essence. Take help from a professional blockchain development company to make it an easy process.
Accountability Factor in the Distributed Ledger System:
In the distributed ledger system, records are shared and co-owned by network participants. It has a model similar to mutual ownership where accountability can be an issue in cases of human errors or frauds. If any change is to be made to consensus medium in ledger, it should be voted upon by the users. Changes can’t be implemented forcefully on the underlying source code. In this system, consensus is a pillar of privacy, performance, security, assurance, and governance.
The Potential Applications of Distributed Ledger:
There are many ways in which DLT can help the government. This technology can facilitate collection of taxes, issuance of passports, recording land registries, bill generations, and delivering the benefits. It also assures flawless supply chain for goods. Improvement of health care can be assured by an improved service delivery system.
Distributed ledgers are secure and there is no single point of failure to impact the entire system. The technology is resistant to unauthorized access and malicious tampering. Many governments have already implemented a distributed ledger system to conduct schemes like keyless signature infrastructure. It allows citizens to verify authenticity of their data on the government databases.
Differences between Blockchain and Distributed Ledger System:
A distributed ledger is a system for tracking and recording transactions reliably in a digitized format. This information is shared between participants. On the other hand, blockchain creates a distributed ledger using a chain of blocks. Both of these terms are used interchangeably. But, there are several differences between them. Governance is centralized in a few validator nodes for distributed ledger while it is decentralized in blockchain.
There is a high trust in participating users in distributed ledger technology. It is used by huge corporate organizations to manage their internal blockchain. But, there is a strong censorship resistance in blockchain technology.
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