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What is a Distributed Ledger?

What is a Distributed Ledger?

A distributed ledger is a records system in which the same information is held redundantly across many nodes in a network, and is essential to blockchain technology.

Centralized databases used to be the primary way that important records of transaction histories and so forth were held.  Databases validate the identity of those requesting access to the records by asking for and retaining personally identifying information. If that office building were to lose power, was hacked, or was destroyed, it is possible for all of the information to be lost or given over to hands of bad actors. Even with cloud storage backups, the security and financial risk to any one of these storage depositories remain a problem.

The alternative is a Distributed Ledger system, which houses the same data across all nodes in a peer-to-peer network. The ledger is not able to be changed once an item has been added to it, and items cannot be added to it without satisfying the consensus requirements of the blockchain. A consensus level might be that a majority of the nodes agree that an addition is valid. Majority blockchain consensus is often called Nakamoto Consensus, after the founder of bitcoin.The method of asking for additions to the ledger and attaining consensus can vary based on the type of distributed ledger, which can take many forms.

Today, the most prevalent type of distributed ledger is found in blockchains for cryptocurrencies, which validate transactions and obtain consensus through the use of encrypted blocks of transaction information sent throughout a peer-to-peer network.  Personally identifying information can be separated from the ledger using methods such as blind signatures and other ways to validate information without sharing it.

Keywords: Blockchains, Cryptocurrency, blind signatures, database security,