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What is Distributed Ledger Technology (DLT)? And how does it work?

If you have some knowledge about blockchain, you have probably come across Distributed Ledger Technology. But what is Distributed Ledger Technology (DLT)? Fortunately, it is not difficult to explain this technology. We have several examples of DLT so that you will understand it quickly and easily.

What is Distributed Ledger Technology (DLT)?

Chances are you know how central systems work. These systems are self-contained and can be accessed by other systems. For example, a web server is a central system. You can reach the web server, after which the web server will answer your question by, for example, sending a website.

Central systems have drawbacks. For example, they have a single point of failure. This means that when a central system no longer works, no one can use the services that the system offers. In the case of the web server, no one would be able to request the website anymore. The Distributed Ledger Technology solves this problem.

Distributed Ledger Technology is a technology in which central systems are connected to each other. Because these systems are connected to each other, the problem of single-point-of-failure disappears. Suppose one system no longer works, the other systems can still exchange information with each other and be of service.

In fact, it is very similar to blockchain . The blockchain network also consists of different systems that are connected to each other. All systems work together, which can lead to many benefits. And it’s right. Because blockchain is a form of Distributed Ledger Technology. There are also other forms of Distributed Ledger Technology. Nevertheless, we can say that blockchain is the best-known form.

Possible applications

Numerous applications are possible with the Distributed Ledger Technology. The most well-known application is the cryptocurrency. Cryptocurrencies run on a blockchain, and as we mentioned, blockchain is a form of Distributed Ledger Technology. The first cryptocurrency to use the Distributed Ledger Technology is Bitcoin . This is also still the best-known and most popular crypto coin.

Cryptocurrencies may be the best-known application of DLT, but there are many more applications. And the following uses are actually much more useful than cryptocurrencies.

For example, schools and universities could use Distributed Ledger Technology. All lesson information can be stored on interconnected systems. Grades, reports and diplomas that are obtained can then be stored on the same systems. It is then much easier to access all your lesson information. But it also makes it much easier for schools to see the results of previous studies, for example.

It could also be beneficial for when you later look for work. Your potential employer can request information about your study from the systems. For example, think of the diploma or grades obtained. Access can be arranged in a secure way in the Distributed Ledger Technology. But access is also much easier to obtain. There is no single system on which the information is stored. The information is stored on different systems, so that every organization can add something to the information.

The benefits of DLT

You have already read that many applications are possible with Distributed Ledger Technology. The possible applications also say something about the advantages that DLT entails. One of the advantages is that with the Distributed Ledger Technology much more is possible than with the current central systems.

Distributed Ledger Technology is also a lot safer. Because information is not stored on one system, it is much more difficult for hackers to shut down the information supply. Normally, a hacker would only have to disable a single system to stop the information supply. Now a whole chain of systems would have to be shut down.

This also brings us to the next advantage. And that is that the information supply can never be stopped. A chain of systems in the Distributed Ledger Technology is accessible anytime and anywhere. So no more malfunctions.

With the Distributed Ledger Technology we no longer need intermediaries. The systems are now the middleman. Just think of cryptocurrencies. When you want to transfer money abroad, you would normally need a bank that does its job as an intermediary. But when you transfer a crypto currency abroad, you do not need a bank. The systems then ensure that the money is transported to the recipient in the correct manner.

Why aren’t we using Distributed Ledger Technology on a large scale yet?

At the moment you will not come across many applications of the Distributed Ledger Technology. Many companies and organizations still use central systems because it costs a lot of time and money to switch. It is often the case that you as a company cannot individually choose to use blockchain, for example. The whole environment will have to adapt to this.

Decentralized Finance (DeFi)

However, it does happen. More and more organizations and companies are using blockchain. For example, Decentralized Finance (DeFi) is getting bigger and bigger. Decentralized Finance is the decentralization of financial systems. Think, for example, of banks, notaries and insurance companies. The systems these organizations use can all be decentralized.

This also means that these types of companies will no longer exist if everything is converted to Distributed Ledger Technology. We already said that intermediaries are no longer necessary. Do you want to sign a contract? Then you no longer have to go to the notary, but you can simply use a smart contract on the blockchain.

Or do you want to report a damage to the insurance company? Then this can all be arranged via the blockchain. The blockchain can then itself check whether the person who caused damage has also taken out the correct policy. The damage amount will then be paid out to the person who is entitled to it without the fault of the employee.

This development ensures that Distributed Ledger Technology is becoming increasingly important. It is therefore only a matter of time before all systems make use of the Distributed Ledger Technology.


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