What Are Blockchain and Distributed Ledger Technology ("DLT")?



We've all heard of the blockchain technology allegedly 'disrupting' all kinds of industries.  Blockchain had promised to introduce a key 'digital' element in disparate fields, from finance to tech, and even to that conservative beast called 'the Law' - but so far such promises have not borne fruit. The question is, what is blockchain? Essentially, it can be considered as a form of Distributed Ledger Technology ("DLT").

Well, what is  DLT? The UK's Financial Conduct Authority provides the following working definition: it is 'a set of technological solutions that enables a single, sequenced, standardised and cryptographically-secured record of activity to be safely distributed to, and acted upon by, a network of varied participants. This contrasts with a traditional centralised ledger system, owned and operated by a single trusted entity.’ Investopedia explains that 'A distributed ledger can be described as a ledger of any transactions or contracts maintained in decentralized form across different locations and people, eliminating the need of a central authority to keep a check against manipulation. All the information on it is securely and accurately stored using cryptography and can be accessed using keys and cryptographic signatures.'

Well, that's all fine and dandy. In simple English, a distributed ledger is distributed amongst various participants. Those participants can be anyone, even you. So, as regards a cryptocurrency, which has blockchain as its backbone, there is no centralised bank, no centralised repository of cryptocurrency.

The info-graphic above illustrates this nicely. 

The question is, what about security? What's stopping people from simply forging bitcoins or ether or any one of the hundreds of crypto-tokens available?

The answer is that blockchain utilises an immutable database. It's not technological wizardry, but an imposed limitation on the way information is created. Each bitcoin, for example, is just a piece of data, like everything else (more accurately, it is a timestamped record cryptographically linked to previous records). Unlike everything else, however, it cannot be replicated, except by replicating the preceding piece of data with which it is cryptographically linked... and the one before that... and so on. You get why it's difficult to forge it - you'd have to replicate the entire system. The security is enhanced by a 'block time', which is an imposed time period within which the record/data/block is created (for Bitcoin, the block period is 10 minutes, while for Ethereum, 14-15 seconds).

The key feature of blockchain is its security, but while the technology itself seems to work, the interposition of humans at multiple ends of the transaction seems to negate the benefits of adopting the system.


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