Crypto EDU

Distributed Ledger

  • August 2, 2021
  • Intermediate
  • technology
Ledger Delivery (0-00-03-02)

Think of a ledger as a giant collaborative Excel spreadsheet that anyone can add to, except instead of being stored on Microsoft’s servers, it is distributed across every computer that uses the network. This protects the information from manipulation: Since everyone can see what is happening on the ledger at all times, no one can change it without being noticed.

Such a system would quickly break down without a way for all parties to agree on what data should be entered. That’s why distributed ledgers incorporate processes designed to reach consensus. Known as consensus protocols, they ensure that data is entered in a fair, accurate, secure, and orderly way. And they allow it all to be done without the involvement of a central authority. 

Consensus protocols can be designed for private ledgers (open only to select participants) or public ones. They can demand special permission for a node to run the protocol or they can be permission-less. To determine which network participants get to validate new data, protocols can require that candidates solve computational riddles (a mechanism known as “proof of work”), or they can involve other techniques, such as semi-randomized selection.

The primary difference between blockchains and other types of distributed ledgers is their use of blocks—groups of transactions that are validated all at once rather than one by one—and asymmetrical encryption. 

Why should you care about distributed ledgers?

Distributed ledgers—including blockchains—allow information to be shared among all participants of a network in an orderly fashion, securing it against hackers and bypassing the need for moderation by a central authority.

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