It is basically a database where transactions and details of transactions are stored and distributed on nodes in a network. Therefore, the control of the data recorded in the general ledger and all updates to said general ledger are not handled by a central entity, nor is the data stored in a central cloud or data storage system like traditional storage systems. Instead, many members of the network need consensus to authenticate the updated distributed general ledger and to have a copy of it.
WHAT IS THE HISTORY OF THE BIG BOOKS?
The general ledger concept, which is primarily used to record transactions, has been around for millennia. At one point, transactions and transfers of real estate were recorded on clay, pieces of wood, stones, and papyrus. The process of recording transactions went further when the paper was invented. The normalization of computers in the 1980s and 1990s led to the digitization of ledgers.
However, the new concept discussed here was able to extend the boundaries of the previous general ledger definition. While we continue to live in a paper-based society — which is evident in our reliance on paper invoices, seals, certificates, and written signatures — digital records are becoming more commonplace. Basically, digitized ledgers serve as a medium for the transmission of paper books and are subject to central authorities. The advent of 21st century technologies has introduced optimized ledgers that are distributed and that are almost impossible to crack or manipulate thanks to modern cryptographic protection mechanisms.
HOW DOES DISTRIBUTED GENERAL LEDGER TECHNOLOGY (DLT) WORK?
As mentioned earlier, a distributed general ledger is a database that is updated and maintained by all participants in the network, i.e., a node. Unlike a traditional database, records are processed and stored independently by each network node. As such, each node has input to the transaction validation process because they must vote to conclude on the validity of the transaction. This validation process is called consensus, and the majority of network users must agree on a conclusion before they can reach a consensus.
Once the network has accepted the validity of the transaction, the database is updated and each user retains a copy of the updated general ledger. This architecture makes distributed general ledger technology a more sophisticated form of the database, as there is no need to trust a third party or a central person. As a result, this technology is commonly referred to as an unreliable mechanism.
There are different consensus mechanisms for distributed ledgers, each with its advantages and disadvantages. Nevertheless, they serve the purpose of building consensus within the network, albeit with different methodologies. These consensual processes or mechanisms usually follow these four steps:
Each node creates the data or transactions that you want to add to the general ledger.
The generated data is distributed to all nodes in the network.
The nodes make a decision about the validity of the transactions.
Each node updates the distributed general ledger as soon as a conclusion is reached that reflects the outcome of the consensus.
However, the speed with which each step is completed determines the effectiveness of the consensus mechanism adopted in the General Ledger.
WHAT IS A CONSENSUS PROTOCOL AND ALGORITHM?
Consensus protocols are a set of rules governing the operation of a consensus-based system, while a consensus algorithm is a rule that specifically regulates the process of reaching consensus. In other words, an algorithm controls the order of the steps as well as the conditions required for the successful output of the consensus system, for example in a distributed general ledger. Consensus algorithms are usually scripts or complex programs.
WHAT IS ENCRYPTION?
Cryptography has been around for some time – there is evidence that this method of encryption was used in ancient Egypt and even in Roman times. Encryption is basically the process of encrypting sensitive data.
Thousands of years after the concept was introduced, it plays a major role in updating distributed ledgers. Once the data is captured, it is encrypted with state-of-the-art cryptography that secures the data from potential attackers. Users can only access this data with keys and cryptographic signatures.
WHAT ARE THE POSSIBLE USES OF DISTRIBUTED GENERAL LEDGER TECHNOLOGY?
Distributed general ledger technology has consistently shown its disruptive power in the financial sector as it gradually changes the way transactions are executed and recorded. Yet it is believed that technology has the potential to revolutionize other critical sectors. Therefore, there are plenty of ongoing studies testing the limits of this technology. According to the World Bank, this technology could “transform many other sectors, such as manufacturing, public financial management systems, and clean energy”. Other possible applications of the technology are:
DLT can create transparent and safer fundraising for charities.
You can also optimize existing voting systems to ensure that votes are not susceptible to manipulation.
Its functionality can improve and optimize supply chain trackers.
It can serve as an unreliable and tamper-free land registry database.
Suitable for cloud computing and storage systems.
In addition, this technology can operate a more efficient medical database that improves the healthcare industry.
The legal sector is also looking at how distributed ledgers can act as the main means of storing legal documents.
It can effectively optimize intellectual property systems.
This technology has the potential to be used to store and verify identities.
BENEFITS OF DISTRIBUTED LEDGERS
The above list of possible applications of distributed ledger technology proves that technology can revolutionize our way of life. Currently, technology is transforming the financial sector as well as the global remittance economy. As a result, digital devices or virtual currencies have emerged that can guarantee users ’privacy, irrevocable transactions, decentralization, and inflation-free systems. It can also play a vital role in other sectors such as the food supply chain, intellectual property, logistics, energy and the legal sector. With the help of this technology, we can correct the main faults of traditional systems in these areas.
WHY ARE DISTRIBUTED LEDGERS IMPORTANT?
A distributed general ledger has features that make it unique and effective. One such feature is the distributed nature of the general ledger. Unlike traditional database systems, it provides full control over the operation of the general ledger to network participants. Therefore, it is highly unlikely that general ledger data will be compromised or manipulated, as attackers will have to crack the entire distributed copy of the general ledger at once.
In addition, a distributed database eliminates the need for banks or intermediaries, as users can make transactions directly. Therefore, it is possible for users to make instant and cheap transactions. The distributed nature of the general ledger also means that the system is transparent.
WHAT IS A BLOCKCHAIN LEDGER ?
A blockchain ledger is a distributed ledger where data is entered into blocks that are then linked within a growing chain of newer blocks. The general ledger is distributed on the peer-to-peer network as such, the technology is able to bypass the central authorities. This technology is the main driving force behind cryptocurrencies such as Bitcoin.
TYPES OF DISTRIBUTED LEDGERS
Az elosztott főkönyvek három fő típusa a magán, az állami és a konzorcium által elosztott főkönyvek. A nyilvános elosztott főkönyv lehetővé teszi, hogy bárki részt vehessen az adatok vagy tranzakciók bevitelében és az ellenőrzési folyamatban. Ezzel szemben a privát DLT megbízható csomópontokra korlátozódik; ezért csak a megengedett tagok férhetnek hozzá ezekhez a főkönyvekhez. A konzorcium terjesztett főkönyve a magán és az állami hibrid. Mint ilyen, egy konzorcium vagy egy intézménycsoport a hálózat csomópontjaként szolgál, és a főkönyvi tartalom nyilvánosságra hozható, vagy sem..
DISTRIBUTED LEDGER VS BLOCKCHAIN
There have been a lot of misconceptions about the difference between a distributed ledger and a blockchain. The blockchain is simply an implementation of distributed general ledger technology. The blockchain uses the concept of a distributed database to ensure that the system remains decentralized.
However, you should note that not all distributed general ledger blockchains. This is because not all distributed databases use the block structure on the block chain. To better understand the difference between these two terms, we need to clarify the difference between a distributed ledger and a decentralized ledger.
DISTRIBUTED VS. DECENTRALIZED GENERAL LEDGER
Distributed and decentralized ledgers are somewhat similar, as both systems distribute the database to all participating nodes in the network. However, decentralized ledgers allow all nodes to participate in the operation of the network. Therefore, decentralized ledgers completely eliminate all central entities and the network involves all nodes in the transaction control process. As a result, this type of general ledger is suitable for public and unlicensed blockchains, such as the Bitcoin blockchain.
A shared ledger, on the other hand, does not necessarily support a fully decentralized system. Although each node receives a copy of the general ledger, final decisions about functions and general ledger validity can still be part of a central system. Consequently, most private blockchains, and even consortium DLTs, are ledgers that do not fully comply with the concept of decentralization.
WHAT IS CRYPTO LEDGER ?
Block chain is a well-known basic technique that supports digital currencies or cryptocurrencies. Therefore, blockchain-based encryption networks, also known as cryptographies, are platforms where users can use digital currencies to perform instant transactions. The general ledger uses cryptography to secure transactions and their details. In addition, each ledger has a consensus mechanism that governs the cryptocurrency authentication process for its transactions and mining procedures.
MI A A BITCOIN LEDGER?
A Bitcoin volt az első digitális pénznem, amely a blockchain technológiát használta, és továbbra is a kriptopiac legértékesebb kriptovalutája. Ez a főkönyv rendelkezik egy munkabiztosítási mechanizmussal, amely megköveteli a felhasználóktól, hogy bonyolult számítógépes rejtvényeket oldjanak meg, mielőtt új tranzakciós blokkok hozzáadhatók a blokklánchoz. Amikor a felhasználó ezeket a feladatokat sikeresen teljesíti, a hálózat meghatározott mennyiségű Bitcoin-val jutalmazza őket; ezért a folyamatot Bitcoin bányászatnak hívják.
Because the blockchain is the underlying technology behind Bitcoin’s general ledger, the Bitcoin network is decentralized and the network is a hacking-free and tamper-free general ledger. In addition, the general ledger allows users to make instant payments and transactions at lower costs as the network is free from the input of intermediaries or central persons.
Another feature of the Bitcoin blockchain is the availability of a cryptographic system that requires users to access keys captured on the blockchain using keys.
DISTRIBUTED GENERAL LEDGER AND BUSINESS ENTERPRISES
As for distributed general ledger technology, companies around the world are starting to implement it. The potential of this technology has led to explosive growth and much institutional acceptance. We currently have a number of consortium-distributed databases operated by groups of companies that want to use the technology to solve certain issues. An example is Corda DLT, a product of the R3 consortium. The consortium is made up of more than 200 companies and is specifically designed to facilitate instant, cross-border payments. Some of the companies supporting the project are Barclays Bank, Citibank and UBS.
The applications are pretty much unlimited. We can say that this technology can be used by any online based business. We are seeing the rise of Bitcoin credit unions, Bitcoin crowdfunds, and even the best Bitcoin casinos have started introducing the technology.
Another distributed general ledger initiative that can be called a consortium DLT is B3i. A total of 13 companies have formed the consortium, and the blockchain project focuses on using a distributed general ledger to optimize the insurance industry. In addition, the Hyperledger initiative, hosted by the Linux Foundation, is supported by more than 250 companies. Companies that independently own DLT projects include Goldman Sachs, JP Morgan, IBM, Microsoft, Amazon and Google.
THE FUTURE OF THE DISTRIBUTED GENERAL LEDGER
As this is still a growing concept, the implementation of most distributed general ledger technologies is still in its infancy. As expected, many believe the technology is likely to violate privacy regulations, such as the newly introduced GDPR. However, others have argued that the blockchain is much more privacy-conscious than traditional database systems. In addition, there is the potential to integrate AI into distributed ledgers in order to create fully automated ledgers. We can safely say that we could only give a glimpse into the potential possibilities of systems that take advantage of a distributed general ledger.