Distributed ledgers do not have centralised, and allow multiple users to update, validate, and store the same database simultaneously. This makes DLT more reliable and eliminates the risk of one point of failure.
DLTs also enable the creation of smart contracts, which are self-executing transactions that can be programmed to confirm or execute agreements between parties. The technology offers transparency since each participant can see the same transaction data.
DLTs are a great alternative to central authorities, but they require a significant amount of computing power to run their consensus algorithms and perform transactions. To offset this cost, DLTs typically reward active participation by offering virtual currencies.
Blockchain is a kind of DLT however there are many others. For instance Directed Acyclic Graph (DAG) network has a different data structure as compared to a blockchain. It also employs a gossip protocol to exchange transaction data amongst nodes. The DAG is updated in chronological order, and the transactions are confirmed through a combination of virtual votes, hashing algorithm, and other protocols.
Distributed ledgers are an effective tool, but it’s important to know what they aren’t. They increase transparency and accountability, as well as security but they’re not a substitute for central databases. For a long time, organizations have collected data from various locations using paper or software silos. They only centralized the database on a regular basis. DLT allows these pieces of data to be instantly shared with other participants, while keeping identical copies in their devices or nodes. This will help avoid time-consuming and costly reconciliations and errors.