Ledgers are records of transaction. Every transaction that happens in an organization is maintained on ledgers. The ledgers mainly contain the following –
- Who owns what
- Who has what
- Who owes what to whom
- What has happened in the past
These ledgers are traditionally under the control of a central authority who is trusted to keep the ledger error free, consistent and of course, continuously updated.
However, the central authority can always make decisions (without consulting the participants of the ledger) and recommend changes to the ledger that can result in the way deposit, withdrawal happens from the ledger.
With global expansion of trade and complexities of transaction, these ledgers have now been digitized and are available 24×7 across the globe in vast data centers. Downtime, frauds can prove to be catastrophic for the organizations involved.
Does not seem to be a good idea, isn’t it? Distributed Ledger Technologies (DLTs) come to the rescue.
Distributed Ledger Technology is a revolution in the way data is stored and communicated.
In a distributed ledger, every node processes data to verify and validate it and along with other nodes in the network ensures that the system always remains in consensus.
The importance of DLTs lie in the fact that they make the network and the data secure. This is because the data is not contained in a single node but across many nodes. So even if one of the nodes go rogue or become unavailable due to a failure, the others will continue to function as per the rules of the network maintaining the stability of the system.
Additionally, DLTs can speed up transactions by removing the central authority and thus reduce costs in carrying out transactions.