The Difference Between Blockchain and Distributed Ledger Technology in Simple Words

Developed to operate as a public transaction register of Bitcoin, Blockchain system has changed the method of doing any kind of business. It brings corporations, financial organizations, bank establishments, governmental, and even medical structures to a literally new era.

Whilst the hype is mostly happening around the blockchain, the distributed ledger technology (DLT) keeps staying in the background. Furthermore, people usually get confused facing these two mechanisms and find them interchangeable. So what is blockchain, what is distributed ledger technology and what is the distinction betwixt them?

What is Blockchain and What Principle Stands Behind it?

Blockchain is an allocated system which records the data of transactions or any other operations in blocks. They are then linked to the other units and create a so-called blockchain. All the details are encrypted and stored on various servers or nodes all over the world.

The principal features behind Blockchain are the following:

  1. Decentralization as a key system feature. The data is stored in many copies within numerous computers or nodes. This makes information public yet encoded.
  2. Digital Signatures make all transactions digitally signed by asymmetric cryptography containing two instances of the key: public and private. The first one is used for sent messages, so everyone can see the key. In the meantime, only the recipient has a private key which enables decoding the trading operation.
  3. Blocks of transactions. Blockchain consists of chains of blocks which contain a list of operations. Each block comes with a header → headers consist of the following elements: structured details about the transactions; a date stamp and proof-of-work also information; a link to a recent block which utilizes hashing.

The Benefits Of Blockchain System

Blockchain has greatly changed the common way of running a business. As of now, there are a lot of enterprises that have already benefited using it. Let’s check the most important advantages of using the platform.

  1. Security. All the bargains hold on the platform need an agreement before being recorded. Once approved, they are encoded and attached to the previous operation. Being encrypted and stored on different servers the data is extremely hard to hack.
  2. Transparency. The details stored on the shared ledger system is more precise and lucid than the one stored at a center point. The datum is available for all users with allowing access. What is more, applying changes to any transaction data requires adjustments to the following records. 
  3. Enhanced accountability. This feature will especially be useful for those having a deal with products exchange. It gives an access to an audit log showing the assets migration.
  4. Higher efficiency and speed. Thanks to an automatization of the process, you can exclude mediators and complete the deals faster and more efficiently.
  5. Cost reduction. Eliminating the need for middlemen and a bunch of paperwork across business operations lets you reduce additional costs.

What Is Distributed Ledger Technology (DLT)?

distributed ledger technology

Now, let’s consider a distributed ledger technology beyond blockchain.

Starting with the basics, DLT refers to a technology aimed to distribute the records or the data among nodes or servers. Even though the distributed ledger technology sounds like blockchain, they are still different. While blockchain can be a shared ledger, DLT can’t be a blockchain.

To make you see the distinction, let’s take fruits and the apple. In easy words, DLT stands for fruits, while blockchain is an ‘apple’.

Now, when we have a distributed ledger technology explained in simple term, let’s move on further to the categories and benefits it has.

The Categories In DLT

Digging deeper into DLT we may highlight three types of the technology: public, private, and consortium.

A public DLT refers to a decentralized system of trust. It enables processing the transactions betwixt any two sides, from any computer device, and at any place. It is still secure and does not allow anyone to control it.

A private DLT rather performs as a database. The trading operation depends on the private party. Besides, it is not decentralized and can be controlled by a network user.

Consortium DLT is a hybrid type of a technology. It unites the features of both public and private allocated ledgers. It relies upon the consensus of participants like public DLT does, yet appoints a specific node to be responsible for a transaction approvement like private DLT does.

What Benefits Do You Get Using DLT?

Let’s find out why distributed ledger technology is so important.

  • Higher speed and reduced cost of financial transactions due to excluding middlemen and third parties from the operations.
  • Enhanced security since the information is recorded on various nodes which makes the system challenging to manipulate.
  • Higher transparency due to an opportunity to share the data with all the parties of the operations.
  • A wide range of areas of use including governmental bodies, different businesses, as well as taxation, ownership transfer, distribution of social allowance, voting procedures, etc.
  • Better intellectual property protection.

Distributed Ledger Technology VS Blockchain Technology: The Difference Between

Let’s now compare blockchain and distributed ledger technology along with a Hybrid Blockchain. What’s the distinction?

FeaturesDLTBlockchain Hybrid Blockchain
Decentralization of Network or Management SystemThe management is concentrated in one or several authenticated validation nodes. The other nodes may only have a read access using a permission of a validation node. The management is deconcentrated via the global spread of all servers. The nodal points store the datum of the blockchain. This is a semi-public or public-permissioned Blockchain usually specified by an authenticated validation nodes. Read access is available to everybody and you don’t have to be invited.
Confidence In InstitutionsHigh trusting when the enterprise creates its internal blockchain and include people who trust each other. Censorship resistance is not the main demand. Censorship resistance is high requiring one vote per computer. Trust is lower than in DLT. Censorship resistance is reliant on the geographical and participant allocation of nodes.  
Voting & TokensThe financial operations can be confirmed by invited and authenticated nodal point only. This is the reason DLT does not require tokens unless as an anti-spamming tool. Theoretically, everyone can run a node. A token is a principal unit in public Blockchain. Any node can participate in a Hybrid Blockchain after satisfying specific requirements. Being identified these requirements include some expenses. Someone possess tokens as a stimulating tool and the others don’t.

Wrap Up

It would be impractical to distinguish one of the two systems. There is no winner in the battle distributed ledger technology vs blockchain technology. Both of them provide considerable benefits for different kind of companies. The choice usually depends on the business model, its purposes and needs. With no doubts, the implementation of DLT or Blockchain in your project requires definite resources. Yet, all the advantages you experience are worth the candle.

If you’ve decided to entrust the development to the experts, feel free to apply to Ezetech. Depending on your goals, we’ll advise on the platform best suited for your business. Besides, we’ll assist you with the way it should be implemented. You may rely on our vast experience: we’ll do our best to make the system flawlessly work across your project.  

And don’t forget to click the ❤ below if you liked the article.