Difference Between Blockchain Technology and Distributed Ledger Technology

By Chetna Phour

Are Distributed Ledger Technology (DLT) and Blockchain technology same? The answer is no. But it is a common misconception which many people have. Most of the people use the term blockchain technology and DLT interchangeably. In this post, we are going to explore What is Distributed Ledger Technology? And What is the Difference Between Blockchain Technology and Distributed Ledger Technology?

What is Distributed Ledger Technology?

Most of the organisations use a centralized database which is available on a fixed location in contrast distributed ledger is a database which is available across several locations or among multiple participants. DLT is a digital database which records data and transaction history of assets on decentralized nodes. A node means a computer within the network which validates and record transactions. These nodes record transactions simultaneously across several nodes.

Distributed ledger is decentralized, so it does not require an intermediary or central authority to process, validate, or authenticate transactions. All files available in the distributed ledger are timestamped and have a unique cryptographic signature. All the participants of the distributed ledger can view all the records; DLT offers a verified and auditable history of all information which is stored on that particular dataset.

What is Blockchain Technology?

A blockchain is a form of Distributed Ledger. It is a shared database filled with entries which must be confirmed and encrypted. Blockchain creates an unchangeable ledger of data which is maintained by a decentralized network. On the decentralized network all records approved by consensus. After cryptographic signing blockchain technology links the group of records in a ledger to make a chain, it makes blockchain different from distributed ledger technology. Explore blockchain technology with our post 5 Things You Should Know About Blockchain.

Difference between Blockchain Technology and Distributed Ledger Technology

Decentralization

The governance in distributed ledger technology is usually centralized. There are few validator nodes which are identified, and other nodes may have the read access with the permission of validator nodes. As the governance is closed and the network of nodes is permissioned so the new nodes can join only with the permission of validator nodes. The governance in Blockchain technology is decentralized. In blockchain, there is a global distribution of all nodes, and each node has all the data of blockchain. Know more about How Does Blockchain Technology Work? Bitcoin uses blockchain technology which allows anyone to participate in the Bitcoin and Bitcoin mining process. Bitcoin blockchain and other similar blockchains aim to maximize the decentralization.

Trust in Institutions

In distributed ledger technology trust in participating nodes is very high. It makes sense when a leading corporate wants to organize its internal blockchain or when a corporate / industry / government wants to organize a consortium it is needed that all participants trust each other. In DLT censorship resistance is low since it is not a critical requirement while in blockchain technology censorship resistance is very strong with one vote per personal computer. However, the increased hash power in the hand of fewer decision makers has created doubts about the real censorship resistance of the blockchain technology for some people.

Tokens

In distributed ledger technology only selected invited and identified nodes can validate transactions. That is why distributed ledger technology usually does not require tokens except as an anti-spamming mechanism. While in blockchain technology the ability to run a node is open to everyone, but the top cryptocurrency Bitcoin has shown that running full nodes has become more difficult over time because of the size of the blockchain. In a public blockchain token is a fundamental aspect.

Blockchain is one type of distributed ledger though blockchain is a sequence of blocks and DLT does not require such kind of chain. It is designed to record transactions and bring transparency, security, and efficiency to the businesses. If you want to know more about blockchain technology, check out our post A Beginners Guide to Blockchain.