‘Distributed Ledger‘ is the newest system or technology being followed in the way ledgers are being maintained. As we know a ledger is a vital database in any economic system, which maintains the credits, debits, loans or any other form of economic transaction. The way ledger is maintained has come a long way from clay based tablets to paper ledgers to computer or digital ledgers. See below:
Digital Ledgers vs the Distributed Ledger Technology (DLT)
Digital ledgers are the incumbent and widely followed ledger management system that we follow in this current age. The ledger is stored in a Central database or a computer server which is referred by anyone who needs to do so. Eventually we have realized that this ‘Central Database System or the Central Ledger System’ is prone to cyber attacks easily, by hacking the Central server.
In order to combat this, industries and businesses all over the world are slowly transitioning to a ‘Distributed Ledger System‘ (DLT) in which the data is distributed and copied across all the nodes or computers of a network. See the figure below:
A ‘Distributed Ledger’ is a kind of Database Management System in which, the data is consensually stored, shared and synchronized across all the nodes of a network. This means if data is added or logged in one of the nodes of the network, the algorithm of the network will enable the same data to be cloned in other nodes also. A Blockchain is a type or Use Case of a ‘Distributed Ledger‘.
Note: The ‘Network’ we referred to in the above definition can be a corporate office, a particular geographical location or even a country’s network of computer systems.
Distributed Ledgers are revolutionizing the way governments, institutions, and corporate work. It can help governments in tax collection, issuance of passports, record land registries, etc.
Reiterating the benefits:
The benefit of a Distributed Ledger and why economies are eventually transitioning to it, lies primarily in the fact that it cannot be hacked easily. As against a Central Ledger system in which you just need to attack a single central database, a hacker will need to tamper each and every node of a Distributed Ledger system, which makes it next to impossible to tamper. Any slightest of the tampering in one of the nodes is notified to other nodes in a fraction of few seconds and the algorithm asks for a verification from all other nodes.