What is Distributed Ledger Technology?
Introduction to Distributed Ledger Technology (DLT)
Throughout recorded history, ledgers have been used to record transactions that have taken place between two more people.
In the ancient days, ledgers existed in the form of clay tablets, sheets of papyrus, and sticks of wood. As countries learned printing technology, we started storing this financial information in books.
After the technological revolution that made computers widely affordable, most businesses and individuals use switched over to computerized spreadsheets to store their financial information.
And while digital record keeping has completely revolutionized the way we store and calculate financial information, recent advancements in technology in the form of blockchain have made bookkeeping even more efficient thanks to a little invention known as the distributed ledger.
What Exactly Are Distributed Ledgers, Anyway?
To put it simply, the distributed ledger is the driving force behind what makes blockchain technology revolutionary – especially when it comes to sending and receiving money over the internet. Historically, digital transactions had little to no transparency.
Both parties had their own ledgers filled with their own records and financial information, which wasn’t shared with the other party, and this made deals opaque and risky.
With the invention of the blockchain, financial records of transactions were recording and sent over the network in a decentralized manner that increases transparency. Every single transaction that has taken place on the Bitcoin network is recorded in a distributed ledger and is accessible to the public.
More importantly, these records can never be deleted, hidden, or modified, and are always carried throughout the network – as long as the network exists, at least.
Most of the talks around the legality of Bitcoin and other cryptocurrencies have been centered on whether this technology can be used for illegal activities or not. This is mostly due to the fact that Bitcoin transactions are described as “anonymous,” leaving people worried that they can be used to fund illegal activities.
The truth, however, is that Bitcoin transactions are only somewhat anonymous, in that these transactions can’t be traced back to people’s personal information. Because the information recorded in distributed ledgers never goes away, frequent transactions can be pinpointed to specific wallet addresses over time.
And more recently, government agencies have had moderate success with using ledgers to connect people to illegal activities, like buying and selling drugs on the Silk Road back in 2011 and 2012.
Distributed Ledgers and Why They’re Revolutionary
The Bitcoin Core developers have been looking into increasing anonymity and privacy controls for those who want it. In the near future, we could see wallets which allow users to have a higher command of their privacy, for matters of both security and comfort.
Features such as adding random user transactions together are being worked on and researched extensively.
What’s even more interesting is that the distributed ledgers are also the reason why Bitcoin, in theory, is resistant to hacks. Because in order for that to happen, a group of hackers would have to hack all of the ledgers at the same time and make identical changes to each of them.
But it’s not the ability to send money across borders, or its semi-anonymity that makes Bitcoin and other blockchain technology revolutionary. It’s because they’re the concept of distributed ledgers increase the trust of every transaction.
Before blockchain technology became widely known, people turned to lawyers, financial institutions, and escrow services to help ensure that transactions went smoothly and the financial records were properly entered. Thanks to these ledgers, however, much of that is taken care of by the blockchain.
You don’t have to worry about someone retroactively changing the terms and conditions of your transaction or lying on the financial records. Payments through blockchain are automatically recorded on the ledger, where they’re unable to be tampered with after the fact.
Furthermore, the blockchain’s ledger also enables you to follow the money from start to finish. You’re able to track it from the moment the bitcoins leave your wallet up until they’re received by the other party.
This is an important feature because it allows you to always confirm whether money has been sent or received, effectively preventing dishonest people from lying about fulfilling their financial obligations.
Also, looking up bitcoin transactions are easier than ever. Simply go to Blockchain.info and paste the transaction hash number in the toolbar to see whether your bitcoins have been sent or received. You can also look up information and transaction history of wallets by pasting the wallet address in the bar as well.
Ultimately, distributed ledgers are the disruptive technology that’s changing the way we send and receive money.
They’re the reason why contemporary society has been investigating ways to integrate Bitcoin, Ethereum, and other cryptocurrencies into their companies to make sending and receiving money secure and transparent, while also cutting back on costs by reducing the need for lawyers, bankers, and compliance officers to help facilitate high-dollar transactions.