What is Distributed Ledger Technology?
Frequently, Distributed Ledger Technology (DLT) and Blockchain are mentioned in the same breath. However, they are related but not synonymous. To put it briefly, DLT is based on the Blockchain concept.
Both DLT and Blockchain are designed as decentralized database with the attributes: immutability of archived data, transparency, storage, direct transactions, consensus and real-time settlement.
The public aspect is the main difference between DLT and Blockchain. While the Blockchain allows everybody to participate in a worldwide, unrestricted, anonymously and fully transparent exchange of data the DLT selects the participants. In fact, the DLT has all the information of the participant for the purpose of selection. But this information is not necessarily publicly available. The reason is that the DLT allows checking on its participants. Its areas of application are primarily everywhere where regulations are in conflict with one of the Blockchains’ underlying principles that everybody can participate.
One might exaggerate that behind the concepts of DLT and Blockchain two different parties of market participants are positioning themselves. The DLT party would like to keep the status quo, but at the same time want to use and benefit from the possibility this new technology offers. The Blockchain party on the other hand would like to see the inherent characteristic of the Blockchain technology whereupon everybody is allowed to participate anonymously to be a self-regulating common property.
The main characteristics of the DLT are:
- optimize the cross-border transactions of goods and (financial-)services
- minimize transaction fees
- eliminate time delays right up to real-time transactions
The DLT is considered to have a high potential to significantly improve current technical implementations.