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What is Distributed Ledger Technology (DLT)?

What is Distributed Ledger Technology (DLT)?

Some people today think that blockchain technology is the same as distributed ledger technology (DLT). They are partly correct: blockchain technology is an example of a DLT. But there are also other types of DLT apart from it.

Multiple websites and institutions use distributed ledger technology (DLT), a decentralized database protocol. In light of this, a large number of people can access it anywhere at all times. In detail, it processes, validates, authenticates, and records digital transactions publicly.

Unlike the traditional method of storing data, DLT strives to leverage a decentralized computerized system that ensures how records and asset information are stored.

Each node on the network holds a record and creates a decentralized system that is nearly-impossible and uneconomical for anyone to hijack.

Moreover, DLT has the potential to maximize transaction speed, reduce transaction costs, and eliminate the involvement of any centralized figures. All transactions and operations on the network are immutable, transparent, and untraceable.

Over time, people have created different use cases for DLT. Today, people use it for tax collection, voting, execution of legal documents, commodities, music, tracking intellectual property rights, and ownership of art.

Blockchain Technology as a DLT

Blockchain is the oldest and most popular type of DLT. It is a peer-to-peer (P2P) network that stores user’s data and transactional records on thousands of servers or nodes.

Most blockchain networks are decentralized. This means that they operate independently without the aid of central authorities. Besides, each entry of anyone is observable by everyone else on the network.

This technology enables the distribution of digital information such as cryptocurrency transactions across many computers, even though the data is not replicated in such a way that there will be confusion regarding the original transaction details.

This concept makes it difficult for anyone to manipulate or gain control over blockchain transactions.

Blockchain technology’s decentralized properties help it become immune to attacks and allow users, companies, healthcare providers, financial institutions, and exchanges to use it for their business.

Other Types of DLT

However, there are other types of DLT that exist aside from blockchain technology. These are the Tangle, which uses the Directed Acyclic Graph (DAG) framework, Radix (Tempo), Holochain, and Hashgraph.

Tangle

Tangle serves as a protocol containing overall details and history of transactions such as sender, recipient, and each transferable payment made on the network. It is arguably the most popular type of DLT after blockchain technology.

Tangle works as a directed graph wherein transactions are stored as vertex in the graph. It uses the so-called Directed Acyclic Graph (DAG), a framework that moves in a single direction without going back in a circle.

Like blockchain, Tangle is decentralized, anonymous, and high privacy-oriented. It works like a string to safeguard transactions and interconnect them to one another and securely store them on a decentralized node of computers for now or future use.

The most notable use of Tangle is the prominent cryptocurrency IOTA. Whenever transactions occur on the network, Tangle chooses either two or three payments made on the platform for approvals wherein, it adds two new edges to the graph.

Tangle is an immutable technology being used as a secondary digital ledger for recording and transferring data. It continues to maximize its capabilities and potential in terms of financial viewpoint through the uses of the latest blockchain technology.

How Tangle works (Source: IOTA)
How Tangle works (Source: IOTA)

As the need for micropayments is rapidly evolving constantly due to the massive adoption of internet-of-things (IoT), Tangle aims to develop a scalable framework that will usher transactions related to IoT technologies anywhere at all times.

Advantages of Tangle

  • The Tangle network offers fee-less transaction times.
  • It provides a high-security data transmission.
  • It has the ability to facilitate both offline and online micropayments to users.
  • Transactions are fast and anonymous due to its decentralization nature.
  • It is virtually immune and more scalable.

Disadvantages of Tangle

  • Tangle is not smart contract-friendly.
  • It is not as popular as blockchain.
  • Hackers only need to have 34% of Tangle’s hashing power to hijack the network.

Radix (Tempo)

Radix functions as a decentralized finance protocol that has a modernized API platform to develop and distribute applications for research purposes. It is specifically designed as a distributed database to aid in driving Internet-of-Things (IoT) into mass adoption.

Its features provide developers a way to create efficient and secure distributed applications for public and private networks. Contrary to its decentralized rivals, Radix virtually owns its open-source ledger on a testnet which focuses on the growth and development of the decentralized finance (DeFi) industry.

The platform is accessible by anyone at all times. Entities such as developers, programmers, communities, and market makers develop and enjoy liquidity pools through its API.

It also claims to have a high throughput protocol to develop decentralized applications (DApps), tokens, and cryptocurrency coins.

Through blockchain technology, Radix intends to be the first layer protocol created to revolutionize the DeFi industry.

As digital currencies are rapidly evolving, Radix technology facilitates the most promising and profitable payment systems that are user-friendly to enable DLT to be used in a broader sense.

With this in mind, Radix is dedicated to developing a decentralized public network that has high-speed anonymity and can be accessible by everyone globally.

Radix paves the way for people to incentivize in its Radvocate program. The program enables individuals to participate and redeem loyalty rewards via the Radix platform with Radix token.

Advantages of Radix

  • Radix provides a privacy-oriented network for peer-to-peer (P2P) payments.
  • Platform participants benefit from loyalty rewards.
  • Developers can create secure smart contracts.
  • It enables near-instant and transparent transactions.
  • It serves as a core platform for decentralized finance (DeFi).

Disadvantages of Radix

  • Radix requires a lot of human effort to work.
  • It requires a lot of computational power to operate.

Holochain

Holochain is a DApp platform and energy-efficient ledger that strives to utilize peer-to-peer (P2P) networks to enable developers to solve downtime problems such as P2P connectivity, network privacy, and anonymity.

Developers created DApps on Holochain that have high anonymity features. Thus, government sectors, social media platforms, community resource management, and more may opt to use these.

Holochain is also immutable and has fintech features that are similar to most payment cryptocurrencies like Bitcoin.

More so, Holochain safekeeps all user transactions on tiny blocks similar to an electronic wallet. Hence, each node or computer connected to the network records the small amount of relevant data or transactions to the interconnected user’s account.

Advantages of Holochain

  • Holochain is an energy-efficient platform.
  • It facilitates high network privacy and anonymity for application developers.
  • It increases transparency in transaction.

Disadvantages of Holochain

  • Holochain is not popular as compared to blockchain.

Hashgraph

Hashgraph, a decentralized and P2P-oriented DLT, operates through what it calls the Gossip Protocol. This protocol, in particular, records and maintains its transaction history.

Whenever someone makes a transaction, Hashgraph would “gossip” the details to two random computers. These two computers would also gossip the details to two random computers each, until the entire network is fully aware of the transaction.

Blockchain leverages high computation power to miners to select the type of transaction and time it should be verified. On the other hand, hashgraph verifies and validates transactions based on how it is received. This drastically reduces the time required for the transaction to ensue.

The nodes validate transactions on the network through voting. After that, using a consensus mechanism, the ledger finally adds the transactions. All of these factors make hashgraph less computation-intensive.

Advantages of Hashgraph

  • Hashgraph verifies and validates transactions faster.
  • It minimizes transactional times.
  • The protocol is scalable and transparent.
  • It is less computation-intensive.

Disadvantages of Hashgraph

  • Hashgraph consumes a lot of electricity.
  • It does not have as much implementation as blockchain technology.

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Collins Adane is a writer who follows the crypto industry closely. He loves fish stew and Real Madrid. He believes in cryptocurrency’s potential to transform the money landscape in his native country Ghana.