A broader understanding of Distributed Ledger Technology (DLT)

Distributed Ledger Technology

What is a Distributed Ledger?

A Distributed Ledger is a Digital Ledger that is used for keeping a track of transactions of any digital assets like cryptocurrencies. A distributed ledger is present and accessible by millions of clients simultaneously as it is stored on various nodes geographically spread across many sites and countries. As the name suggests, DLT has no centralized authority or a centralized storage of data. In a distributed ledger, each node verifies every transaction as to create a proof of authenticity for that particular transaction. A distributed ledger can be used to create both static as well as dynamic data. It can be utilized to create a registry which can act as a database for further referral, and also for storing real-time transactions.

Storing Data: Past, Present & Future

Records have been stored for the last many centuries in paper form. These transactions were then stored on computers by the start of the 20th Century. The major drawback still prevailed i.e. the need of a central authority for clearances, for example: Banks still need a central authority to grant permissions or access information.

With the invention of Blockchain and Distributed Ledger, the same records are now kept in a cryptographically protected, tamper proof manner. There is no need for any central authority to grant access to any information. Anyone can view the ledger for reference. Now, you must be thinking that what is confidential data doing out in the open, then here’s the beauty of Blockchain Technology and Distributed Ledger:  The data is stored cryptographically in something that’s called as a Hash Format. Now, a hash is a format that uses encryption to store and secure data. Blockchain technology uses a hashing software called SHA-256. Hashing involves an input string i.e. the text matter and an output that comes out in a hash format. Hashing solves the issue of the space required to store huge amounts of data. Hashing is very efficient because, if we consider the algorithm SHA-256, irrespective of the length of the input, the output will only be of 256 Bits. A hash encrypted text looks something like this- fc1da56bce39fa75cf46fde44d5c7110

For this hash code, the input string was “Blockchain is awesome”. This ensures maximum security of data and simultaneously solves the problem of space required for data storing.

Benefits and Features of DLT:

1) Security:

As we all know blockchain is one of the DLT’s. It provides an innate structural benefit for the database. In a centralized method of storing data, the problem of Single Point of Failure arises. In a distributed method of storing data, that problem is taken care of and the data is secured effortlessly.

3) Device Management:

By applying distributed architecture with DLT, the users are connected in a Peer-to-Peer (P2P) Network instead of a Client-Server Architecture as seen in a centralized architecture. This makes it very efficient to carry out actions like issuing security patches, software updates, etc.

2) Cost Saving:

By applying a P2P topology, millions of interconnected nodes work with their own computing capability to approve a single request. They also contribute their own computing power to the topology as opposed to huge firms spending large amounts on maintaining, securing and updating centralized network systems.

4) Immutability: One of the major benefits of Blockchain and DLT is immutability. A piece that is entered into the ledger once cannot be edited or deleted whatsoever. This takes care of data tampering while paying Income Taxes and while undergoing Audit.

Applications of Distributed Ledger.

As the basic understanding of DLT implies that it is mainly used for recording and storing transactions, the BFSI Sector has shown keen interest in applying Distributed Ledger Technology in carrying out transactions.

Although DLT Proponents think that DLT has applicability and utility in various different sectors including Government, business Dealings in addition to financial transactions along with BFSI Sector. Some experts believe that DLT can be also used in Tax Collection, Property Deed Transfers as well as Voting Procedures. They also believe that DLT can be used to draw up legal contracts and paperwork of that sort. DLT being still a primitive and fairly new technology, it’s applicability still has some grey areas and it is quite debatable.


To optimistically conclude, DLT is an efficient, cost saving technology of the future. If DLT is applied correctly the technology could become seamlessly crucial and change the ways in which data is stored drastically. It could be a revolution in the world of IoT & AI if implied aptly.

-Devansh Sharma          


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