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Industries are in an endeavor to revolutionize their businesses through Blockchain. This technology has proven to be an excellent experimental tool for businesses in their constant quest to become more efficient and provide greater value to their consumers. Blockchain has delivered new possibilities by making processes secure, transparent, and efficient.
Blockchain technology may sound a little complex in its purely technical definition. But in simpler terms, it is a type of database. But the way data is structured into a blockchain makes it different from a database. For convenience, one can say that every Blockchain is a database, but a database is not a blockchain.
Unlike a database, data or records on a blockchain are stored in groups called 'Blocks'. Each block has a certain storage limit, and once that limit is reached, the block is chained to a previous block, hence the name 'Blockchain'. The changes, made by a user with a unique signature, on these blocks are irreversible as it comes with a definite timestamp. This chain of data or ledger is not stored at a central geographical point. Rather they are stored on a decentralized network of systems, where each system is called a Node. These nodes verify the changes (transaction in case of cryptocurrency) made on the blocks and have an entire copy of the ledger stored locally, making them secure, transparent, and immutable. Hence, providing businesses with unparalleled advantages.
This system of decentralized authentication and storage is part of the 'Distributed Ledger Technology.
DLT is also a database that is stored at multiple locations and across multiple participants. The modification in these databases (or ledgers) is processed, verified, and validated by these participants through a consensus. These changes are time stamped and are immutable.
Enterprises that use DLT do not have a single point failure in their database and eliminate the need for an intermediary to verify the changes.
In a distributed ledger, all the participants can view the records to verify and audit the information on the dataset. The authority of every participant to verify modifications on the ledger is based on the rules of that particular ledger. Yet, the technology makes the ledger transparent to all the participants and makes it secure through a cryptographic signature.
When we look at the core concepts of Blockchain and DLT, there are many similarities between them. But, in essence, they are not two terms used to define a single technology.
There have been many advantages of Blockchain that have been discussed across various platforms. It is constantly mentioned as one of those technologies that will revolutionize industries and shape the future. Some of the well-known advantages of Blockchain that are consistent across various implementations are:
DLT is the parent concept of Blockchain and provides the same advantages as transparency, enhanced security, and removal of an intermediary. But as a technological implementation is concerned, there are other benefits of distributed ledgers as well. The first of many is scalability, as Blockchain is not always required to be the beneficiary of a decentralized network. Instances where proof-of-work and other blockchain exclusive features are not needed function better with simple DLT databases.
While every blockchain network is essentially based on DLT, every implementation of Blockchain comes under distributed ledgers. Yet, consortiums and enterprises like major banks can use non-blockchain distributed ledgers to secure their database.
Some of the industries that involve ongoing implementation and experimentation with distributed ledgers are:
Even though popular media and the general use of technical terms have made many think that 'Blockchain' and 'Distributed Ledgers' are interchangeable, people must know that both these technologies have some foundational difference between them. Distributed Ledger technology involves the distribution and decentralization of a type of database across multiple regions and participants. Whereas, Blockchain technology does the same but with a different data structure. The methods of consensus also differ between them, as they are unique to each decentralized network.
So, next time you come across the term blockchain, try to understand if it is in the right context.
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