Blockchain vs. Distributed Ledger: What’s the Difference?

Blockchain vs. Distributed Ledger: What’s the Difference?

Due to Bitcoin and other cryptocurrencies, blockchain is becoming more popular. Blockchain technology is gaining traction among traditional centralized bodies such as governments and banks.

The distributed ledger technology is a new term making waves in the cryptocurrency world after Bitcoin and Bitcoin wallet. Blockchain is usually confused with distributed ledgers, but the reverse is also true. We will explain everything you need to know about distributed ledgers vs. blockchains in this article.

What is a Distributed Ledger?

Distributed ledgers are databases found in several locations or among several participants. The majority of companies, however, still use a centralized database that is fixed in location. Distributed ledgers, unlike centralized databases, are decentralized, so they do not require a central authority or intermediary for processing, validating, or authenticating transactions.

In addition, these records will only be stored in the ledger after the parties involved have reached an agreement.

What is Blockchain?

Blockchains are distributed ledgers with a specific technological foundation. After all records have been approved by consensus, a blockchain creates an unchangeable ledger of records.

There is a significant difference between blockchain and DLT in the cryptographic signing and linking of records in the ledger. Moreover, a blockchain’s structure and operation can be determined by its specific application, which allows the public and users to determine how the blockchain operates.

Blockchain and Distributed Ledger: What’s the Difference?

There are some differences between blockchain and distributed ledger, despite their similar sounding names. You can categorize blockchains and distributed ledgers, but not all distributed ledgers are blockchains.

To better understand the DLT vs blockchain technology comparison, we have listed some of the unique aspects of blockchain and distributed ledger technologies.

1. Block Structure

Blockchain technology differs from distributed ledger technology in its structure. In general, a blockchain consists of blocks of data. Nevertheless, this is not the original data structure of distributed ledgers. The reason for this is that a distributed ledger is essentially a database that is spread across many servers. The data can be represented in each ledger in a variety of ways.

2. Sequence

A particular sequence is followed by all blocks in blockchain technology. There is no need for a specific data sequence in a distributed ledger.

3. Proof of Work

The proof of work mechanism is usually used in blockchains. In addition, there are other mechanisms, but they typically consume a lot of power. The distributed ledger, on the other hand, does not require this type of consensus, which makes it more scalable.

In addition to the traditional DLTs scope, blockchain is just a subset of distributed ledgers. There is a significant difference between distributed ledgers and blockchain when it comes to proof of work.

4. Real-Life Implementations

Understanding the differences between blockchain and distributed ledger requires an understanding of implementation. Blockchain has many applications in real life due to its popularity, and many new uses are developing over time. In addition to big giants like Amazon, IBM, etc., that offer blockchain as a service solutions, a lot of enterprises are adopting the blockchain nature and integrating it into their systems slowly.

The distributed ledger technology core has recently been explored in depth by developers. Although there are several types of DLT in the tech world, few have been implemented in real-life situations. It will not be long before we begin to see real-life implementations of these technologies.

5. Tokens

In a distributed ledger technology, tokens or any currency are not needed. Blocking and detecting spam, however, may require tokens.

Blockchain technology allows anyone to run a node. It may be difficult to maintain a full node since it requires a considerable network. Furthermore, blockchain technology includes a token economy, which plays a fundamental role. In contrast, modern blockchain technology is striving to emerge from the shadow of cryptocurrency.

The advantages of using a distributed ledger such as blockchain

To create tamper-proof logs of sensitive activity, blockchain technology offers a secure and efficient solution. In comparison to traditional banking processes, blockchain technology provides an alternative that is safe and digital.

With distributed ledgers like blockchain, we can reduce operational inefficiencies and save money on financial transactions. Due to their decentralized nature and immutability, distributed ledgers like blockchains offer greater security to organizations.

Distributed Ledger Technology Beyond Blockchain

Blockchain is the most popular distributed ledger technology, but the future of distributed ledger technology is dependent on collaboration between the two.

IBM’s Vice President of Blockchain Markets and Engagements, James Wallis, believes that the uses of DLT will exceed what we can imagine today, but they will require a higher level of sharing.

Furthermore, DLTs could revolutionize Know Your Customer (KYC) if they become standard. Those who don’t know, KYC refers to the process of identifying and verifying clients’ identities. In turn, it will simplify the process of managing a wide range of identities.