What’s the Difference Between Blockchain and Distributed Ledger Technology?

Although often used interchangeably, blockchain and distributed ledger technology are actually two different things. This has lead to a lot of confusion, and it’s something that definitely needs to be cleared up. So, what’s the difference between blockchain and distributed ledger technology (DLT)? Let’s take a look.

Distributed ledgers

What’s the difference between blockchain and distributed ledger technology?

A distributed ledger is a database of copied, shared, and synced digital data that is spread geographically across various sites in an ecosystem or network. There is no central administrator like in a standard database (like a bank or government). Rather, the systems have a synchronized database that provides a verifiable and auditable history of information that can be accessed by anyone in the network. Distributed ledgers rely on principles that are similar to consensus on a blockchain, but they’re definitely not the same thing.

Unlike centralized ledgers, a distributed ledger has no single point of failure. All files in a distributed ledger can be accessed by anyone on the network, and they’re all time stamped and given a unique cryptographic signature.

Blockchain

Distributed ledger technology and blockchain might share a similar conceptual origin and purpose, they’re not the same. Blockchain was invented by Satoshi Nakamoto in 2008, when he penned his whitepaper on the cryptocurrency Bitcoin, which functions on a blockchain. Unlike traditional distributed ledgers, blockchains use hash-linked blocks in a sequential chain to store their transactions or data sets.

Blockchains use a consensus algorithm (like Proof-of-Work in Bitcoin), that determines how new blocks get added to the blockchain, unlike distributed ledgers. In short, a blockchain is a decentralized database which records and groups data into blocks. The records cannot be changed unless all of those verifying transactions agree to the changes. This makes blockchains highly secure and vastly less susceptible to attacks than centralized networks.

How can blockchains be used?
In Bitcoin’s case, the Bitcoin blockchain records all transactions made with BTC. However, that’s just the start. Blockchains can be used in more ways than one can really count. The Bitcoin blockchain is really just one type of blockchain, functioning off a Proof-of-Work algorithm which limits scalability in comparison to other consensus algorithms like Proof-of-Stake. Blockchains are currently being used to create dApps (decentralized applications) on networks like Ethereum, and to drive social change through various measures like online voting and better supply chain management.

Blockchain vs Distributed Ledger Technology (DLT)

So, what’s the difference between blockchain and distributed ledger technology? Blockchain is a type of distributed ledger, but a distributed ledger is not a type of blockchain. The two are similar, and will likely be conflated for a very long time, but they’re certainly not the same. Now that we’ve cleared this up, let’s move forward into a world that knows the difference between these two equally fascinating technologies!

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