Distributed Ledger Technology (DLT) refers to digital transaction ledgers that store data blocks across a network of computer nodes. While often confused with blockchain, DLT is a broader category—blockchain is just one type of DLT.
A distributed ledger is a synchronized database shared across multiple locations. Each network node maintains an identical copy of the ledger, with updates replicated to all participants within seconds. DLT ensures security, decentralization, and integrity through consensus mechanisms.
Categories of Distributed Ledgers
DLTs can be classified into four primary categories based on access and control:
Public/Permissioned:
- Applications can be deployed without approval.
- Network nodes must be invited to join.
Private/Permissioned:
- Requires invitations for both applications and nodes.
- Centralized control with no decentralization.
Public/Permissionless:
- Fully decentralized; nodes join anonymously.
- Transactions often incentivized with native cryptocurrency.
Private/Permissionless:
- Applications require approval, but nodes join freely.
- Typically used for internal enterprise solutions.
Types of Distributed Ledger Technologies
1. Blockchain
Blockchain chains transactions into blocks, each containing:
- Transaction details (time, date, amount).
- Sender/receiver digital signatures.
- A unique hash ID for synchronization.
How Blockchain Works:
- A transaction is initiated.
- Nodes verify the transaction via consensus.
- Verified data is stored in a block and added to the ledger.
- The block receives a hash and links to the previous block.
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2. Hashgraph
Hashgraph uses a parallel structure ("Events") and the Gossip Protocol to relay transactions. Key features:
- ACID Compliance: Ensures Byzantine fault tolerance.
- Virtual Voting: Nodes validate transactions without mining.
Advantages:
- Near-instant consensus.
- Minimal storage requirements.
3. Directed Acyclic Graph (DAG)
DAG replaces linear blocks with a graph structure:
- Nodes validate two previous transactions to confirm their own.
- Scalability improves as the network grows.
Use Cases:
- High-throughput systems (e.g., IoT microtransactions).
4. Holochain
An agent-centric DLT where each node runs its own chain. Features:
- No global consensus needed.
- Ideal for decentralized applications (dApps).
5. Tempo (Radix)
Combines timestamping with DLT:
- Supports public/private modules.
- Uses sharding for scalability.
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FAQs
Q1: Is blockchain the same as DLT?
No—blockchain is a subset of DLT. All blockchains are DLTs, but not all DLTs use blockchain.
Q2: Which DLT is best for enterprises?
Private/Permissioned ledgers (e.g., Hyperledger Fabric) suit enterprises due to controlled access.
Q3: How does Hashgraph achieve consensus?
Via the Gossip Protocol and Virtual Voting, ensuring fast, fair transaction ordering.
Q4: Can DAG replace blockchain?
DAG excels in scalability but lacks blockchain’s robust security for high-value transactions.
Q5: What’s unique about Holochain?
It enables nodes to operate independently while contributing to a larger network.
Conclusion
DLTs like blockchain, Hashgraph, and DAG offer diverse solutions for decentralization. Choosing the right type depends on your needs—scalability, security, or control. Stay updated as these technologies evolve!