DLT

Concept

Distributed ledger technology (DLT) is a secure way of conducting and recording transfers of digital assets without involving a central authority. The technology consists of a scattered network- a form of a distributed set up with multiple participants (individuals, businesses, etc.), who all share and synchronize copies of the ledger at their own ends. The ledger registers new transactions once added, and cryptographically secures them. The records are permanent and visible to all participants virtually in real time. The blockchain is a distributed ledger that functions without a central, trusted authority. The transactions are verified using a consensus protocol. The blockchain ensures the ledger is valid by connecting each block of transactions cryptographically to the previous block, and so on.

Collectively, DLT is the infrastructure and protocols (rules) whereby users with own computers and terminals (known as nodes), no matter their locations, can come up with, and validate new transactions. By means of DLT systems and processes, nodes can update records in a synchronized way across the network. As such, a distributed ledger represents a shared record of information that is stored in multiple locations, across the globe. If a record is updated on one of the contributing computers, then the records across all the computers also get updated. The protocols represents the rules of the distributed ledger (DL), defining how records are added, validated and synchronized. Furthermore, protocols validate the rights embedded in a digital asset stored on the network.

Ledger type

Distributed ledgers can be either “permissioned” or “unpermissioned.” With unpermissioned ledgers, which are available to the public, any participant or user can conduct and validate, or take part in validation of, a transaction. Permissioned ledgers may be public or restricted to trusted users. For restricted ledgers, only trusted users can conduct transactions. In other words, a ledger can be public, meaning that it is open for participation without restrictions in the network, or private, meaning that it is distributed to specific users that adopt a protocol for communication and validation.

Recording of transactions

A DLT can be used to record transactions, which are represented as secured blocks. Once a block or transaction is validated and approved, it is added to the ledger, which is called a chain – hence blockchain. The following distinct steps are followed: 1) a transaction is requested by a user 2) the transaction is represented online as a block 3) the block is broadcast to every user in the network 4) participants then approve the transaction as valid 5) the block is added to the blockchain as a permanent, transparent and immutable record of the transaction and finally 6) transaction is completed (an asset is created on the network).