What is DLT?

Distributed Ledger Technology or DLT is a distributed ledger technology that allows data to be recorded and shared across a network. This involves several independent computers (called “nodes”), in contrast to the traditional registry, where the entire array of information is stored centrally.

The nodes in the system are closely related and interact with each other: each of them can make changes to the registry (independently of the others), after which all nodes vote and, when a consensus is reached, the registry is supplemented with new data.

Blockchain is considered to be the first effectively working and fully implemented example of DLT. It is important to understand that these concepts are not synonymous – blockchain is just one type of DLT and is just a subcategory of a broader concept.

Distributed ledger technology has several important features:

• not regulated by any central authority;
• recording, data sharing and transaction synchronization occur according to a consensus algorithm;
• data is stored simultaneously on multiple nodes.

Since control is transferred to all participants and distributed over the network, this provides the technology with a high level of transparency.

There are the following types of distributed ledgers:

• Public. It is an open source database. Any user can download the database and take part in the process of making changes. Scope of application: actively used in most cryptocurrencies.
• Private. Changes to private databases can only be made by a specific centralized organization. Information in them can be both open and limited for public access. Scope of application: Used by companies for internal information storage and auditing.
• Federated. Such databases are managed by a group of individuals. They do not allow everyone to enter new data (unlike open registries), instead, all changes are controlled by pre-selected communication nodes. Scope of application: mainly the banking sector.

One of the main advantages of DLT is the absence of intermediaries and a central administrator, which significantly increases the potential for fast and inexpensive transactions.

In addition, the innovative data storage technology is well protected from hacking, information is difficult to fake or make unauthorized changes. In order to succeed, hackers need to attack all communication nodes at once, unlike traditional databases.