Distributed ledger technology (DLT), also known as a shared or distributed ledger, is amongst the most frequently used buzzwords in business. However, despite the attention it receives and its widely mooted potential, few understand precisely what DLT is, how it works, and what it can be used for. Practical applications of the technology often being crowded out by businesses using the term as a marketing lever without having any real intentions of implementing.
So, what exactly is DLT, and how can it be put to effective use for businesses?
Ledgers have existed for centuries in accounting. Essentially, they are a list of transactions explaining how data has changed over time, used to gain an understanding of the world as it is now, or at any point in the past.
Put simply, DLT is a digital counterpart to this, but with each company maintaining its own copy of the transaction history. All transactions can be verified against the copies held by other members of the network and, once a transaction is verified by the network, the information is written to the ledger and cannot be subsequently altered. Because of the way the data is recorded and verified, it is immutable, incorruptible and therefore, trustworthy.
Bitcoin represented the first notable use-case for DLT, closely mirroring traditional ledgers in many ways. Since then, businesses have discovered a wealth of applications for the underlying technology, that often have nothing to do with cryptocurrency and its controversies.
Even so, many struggle to distinguish between DLT, blockchain and cryptocurrency. Blockchain is just one of the more popular applications of DLT. A blockchain system groups transactions into blocks which are then executed against a shared database. A blockchain system underwritten by DLT can be either public or private and stimulates the results of a proposed transaction in terms of changes to data, and groups those sets of changes into blocks which are then executed against a shared database – the ‘world state’.
Most of the overzealous excitement about blockchain has focussed solely on the public variant. Massive, open systems threatening to overthrow the global economy and bring forth an anarchist utopia according to some; simply an interesting, if technically challenging way to build distributed systems according to others. As interesting as public blockchain may be, the less discussed variant (the private, permissioned blockchain) is becoming more prominent.
What are its use-cases?
Previously, it has been claimed that DLT is set to revolutionise finance, supply chain, asset ownership, digital identity and much more. Many of these projects, though, are still in their infancy and won’t mature into products with full functionality for a little while yet.
One tangible application of DLT already acknowledged as adding increased value, would be to supplement the huge amounts of time and money enterprises are spending on expensive cybersecurity solutions which fail to protect from breaches and hacks, but stifle business agility. A private permissioned DLT platform solves this challenge along with one of the thorniest challenges in the today’s digital economy; how to securely share data.
What is becoming clearer is that blockchain technology is still on track to become a transformative and disruptive force. Yes, market conditions and sentiment are bad, there are many average projects out there, and some critical technological shortcomings still need to be overcome. But there are good projects and initiatives too, building great products and services and actively solving these issues.
If you zoom out a bit, get some perspective and put the current market into context, you will realise that blockchain is on a rather typical journey to maturity and mainstream adoption. Once the key benefits and applications of DLT have been communicated and digested, we will begin to see the difference between the hype surrounding this transformative technology, and its tangible value to enterprise.