What is a distributed ledger

Accounting has been at the core of successful businesses since time immemorial. With the systems for accounting, being acknowledged as far back as the rosetta stone (in part decree giving tax exemption for religious groups). This was the foundation text which allowed for Egyptian hieroglyphics to be translated. At the core of accounting are ledgers. Since the widespread adoption of the computer in the 1980’s records that were once drafted on paper have become digitised.

Early ledgers lived on a single mainframe or CPU. Basically, they were exact duplicates of paper records, digitisation seemed to be adopted primarily to save space more than anything. While paper remains the staple of financial and governmental institutions, there is an increasing trend towards digitisation. Especially considering the widespread infrastructure required to maintain this increasingly burgeoning structure. It seems more and more likely that a technical solution will be required.

Computing power has increased substantially since the 1970s with the transistor count rising from 2,300 in 1971 to around 2,300,000 in 2011. This coupled with developments in algorithms have made the development of distributed ledgers possible.

A distributed network is made up of a series of nodes, which form a database. The ledger is updated independently by each node in the larger network. Distribution across this network is unique, records aren’t communicated by a centralised authority. Instead, the records are built by the nodes and ratified against each other. Every node basically gets a vote on what is the truth. This means that the entire network comes to a consensus before agreeing to a change to the network.

Once the network is in agreement, the distributed ledger is updated. The interesting part is that each node maintains their own identical record of the ledger. Adding to the security of the wider network. This structure transforms it beyond a simple database. The nature of decentralised networks allows for them to go beyond traditional ledgers. With dynamic records and businesses being built upon Blockchains.

What’s the bottom line when it comes to Blockchain though. It removes the need for trust. Notaries, lawyers, banks and governments that used to provide this trust are either improved or removed from the equation due to the inherent qualities of the distributed ledger. It’s one of the simple truths of Blockchain, if you buy Ethereum or Bitcoin then you know you’ve bought the only one. Unlike with regular currency, where large amounts of money in circulation is fake.  

Distributed ledgers have revolutionised ledgers. How it applies to registries and transactional data. One example of this is Visa vs the Lightning Network, which can handle transactions many orders of magnitude higher. This is just a minor example of the ability unlocked by Blockchain technology. The most exciting examples perhaps haven’t even been invented yet.

Mr M