Overview
As previously explained, every blockchain is a distributed ledger, but not every distributed ledger is a blockchain – nor does it need to be. Distributed ledger technology (DLT) encompasses similar principles of a consensus blockchain but is only technologically decentralized in that one body has control over the network. The network will not construct a chain of blocks, but the ledger will be stored across many servers which communicate to ensure the most accurate, updated record of transactions is maintained.
A blockchain, however, is a form of a distributed ledger that is specifically designed to create an unchangeable ledger of records maintained by a decentralized network with all records approved by a consensus. The cryptographic signing and linked groups of records form a chain, and all users have input on how it is structured and operates. In other words, the technology, structure, organization, and development is decentralized.
Distinction
It is important to understand that the two – DLT and Blockchain – are not interchangeable, although many often confuse the two and refer to them as being the same. If an organization utilizes DLT to improve corporate operations, it is not a blockchain unless anyone and everyone has access to the software and can participate, having a say in how it is structured and operates. Why would certain institutions or organizations do that? They would not and will not, although they may capitalize on the use of the word “blockchain” albeit incorrectly.
With distinction clarified, there are use cases for both DLT and blockchain technology. Exploring the possibilities and potential for disrupting numerous industries already has captured the attention of many. Â As the technology becomes more mainstream, developers, government agencies, and industry leaders will surely need to develop standards and interaction protocols.
Use Case Examples
Blockchain technology allows for a democratic, decentralized, transparent store of data that requires no middleman or trusted third-party. It removes the need completely to trust organizations, institutions, people, or governments. In the future, it will be used to improve old systems and make processes in a wide variety of industries significantly more secure.
Voting Applications
A blockchain-based voting application would make online voting secure and accessible for everyone with an Internet connection. Hackers gaining access to a terminal would not be able to affect other nodes, and voters could efficiently submit votes without revealing their identity or political preferences. Votes would be counted with absolute certainty because each ID would only be permitted one vote and no fake votes could be created. Tampering with votes would be impossible, and turnout would surely increase dramatically. The cost involved to conduct an election would be significantly reduced. There are so many benefits to blockchain-based voting that it is hard to list them all, and several companies are already working to develop blockchain voting applications.
Banking Applications
Distributed ledger technology is being explored by the financial sector to improve traditional banking processes. The goal is to make transactions tamper-proof, reduce costs, and streamline payments, asset trading, issuance of securities, retail banking, clearing, and settlements. While solutions using DLT will probably not be “decentralized”, significant improvements will be beneficial. The technology most likely to be used is called “interledger” which means the network peers do not have access to a “shared” ledger. Many believe it will be some time before banks shift to decentralized ways of transferring money, given it would mean losing a good deal of income from fees. However, the future may see banks forced to deal with competition that adopts new technologies, and change their traditional strategies.
Sharing and Funding Applications
Companies like Uber and AirBnB are thriving which proves that a sharing economy exists and can be a successful business model. However, relying on Uber corporate to hail a ride-share provider, then payment is made to Uber, which then pays the provider, could end with peer-to-peer, decentralized sharing and payment platforms. Blockchain could also take crowdfunding for product development to a whole new level, and even create crowd-sourced venture capital funding options.
Intellectual Property or Standards
Copyright holders would be able to better protect their intellectual property by utilizing smart contracts that automate sales and end the risk of bootlegged copies being made and sold. A ledger showing ownership of intellectual or creative property, and who holds authorized license for use, by the addition of scannable blockchain-connected tags, seals or imprints could effectively fight counterfeiting or help to quickly certify a product as genuine. For example, a certification mark might ensure a product is 100% cotton or wool. Whatever established criteria or standards are claimed could be instantly identified and proven.