Let’s talk about how people have created these misconceptions around DLT and blockchain that they both are the same thing just because of a misunderstanding. Many people question the credibility of blockchain because of the past scandals and presents DLT as more of a safer option for businesses who want to adopt the technology. That is why they consider the use of DLT in place of blockchain to make the idea sound less shady. However, it is quite the opposite when we look into the technical details of both the technologies. Blockchain is just a small part of DLT while DLT is a huge peer-to-peer network, similar to those big databases.
Now that we understand the problem, we can get into understanding the difference between the two and make a good sense regarding their applications in different industries.
Distributed Ledger Technology
The way the DLT systems deal with data by storing, processing, validating and authenticating it, portrays how DLT is decentralized to its core. It does not rely on a centralized server and distributes the responsibilities all across the network of different computers. The data storing process goes through a consensus amongst all the decentralized participants of the network and as they agree to the validity of an action, the data is time-stamped and given a unique cryptographic signature for safety reasons.
Those who may have an understanding of blockchain will notice that all of this sounds similar to how blockchain functions but blockchain works without any central authority. There is no central authority to keep tabs on the activity being performed on the blockchain. The DLT systems can still function even if there is a central authority assigned to some extent manage the network.
This clearly indicates that DLT is getting the benefits of both technologies as it adopts to decentralization and yet the control of the system remains in the hands of the owners of that DLT system. Therefore, big companies and enterprises prefer to adopt DLT system in order to process, validate and authenticate all sorts of data altercations. Depending on the structure, purpose and functioning of the network’s use case, it can be done privately or publicly similar to blockchain. It can be assumed as a foundational base for forming a blockchain but DLT is not obliged to construct a chain of blocks while handling data.
Blockchain comes out of distributed ledger technology which allows it to handle data and store it globally on thousands of servers. This data is stored in a block and every new information is added into a new block which goes on to make a literal blockchain. A new block is only formed when a consensus is reached amongst all the participants of the servers who agree to the validity of the data. Depending on the type of blockchain network is established, if it is public, then anyone can join the network and see everyone else’s data in real-time. If it is private, then a specific password is required for every participant to be able to enter in to the network. This way the risk of biased control of data is avoided altogether and all the stakeholders of the network become accountable for every action because blockchain is transparent and traceable.
Now that we know Blockchain is derived from the distributed ledger technology, it becomes quite clear that both of them are different when it comes to their application. DLT is more trusted by big enterprises because they value their control over their data meanwhile public sector companies prefer blockchain because it provides data accessibility for all the participants. There are different ways in which Blockchain can be used in real time for multiple industries to create greater value. Learn more about the applications of Blockchain by following this link.
Learn more about Blockchain in general here.