What exactly is distributed ledger technology? Although it’s become popular in recent years, it’s not a new technology by any means. The origins of distributed ledger technology (DLT) are in the 1990s, when computers in different locations were first able to connect and solve a set of problems, and then sending the solutions to a centrally located server. With advancements in computer hardware and software, as well as improvements in internet connectivity and speed, more computers across a wider range of locations now have the ability to connect with each other to solve more complex problems. Each computer connection – also called nodes – has a copy of the ledger, which acts as a data store. The decentralised, private and encrypted nature of distributed ledgers can act as safeguards against cybercrime, making DLT particularly attractive for governments and corporations.
DLT has many uses across different sectors. For example, the Finnish Radiation and Nuclear Safety Authority, the Stimson Centre in Washington DC and the University of New South Wales in Australia partnered in 2019 to create the first DLT for safeguarding nuclear material. It has also been used in logistics and supply chain management, namely in food and health sectors. Walmart has used DLT in their supply chains since 2016. DLT has also paved the way for the creation of emerging sub-technologies and sectors. After all, it’s the technology that makes blockchain possible, and the popularity of blockchain is what has largely driven research, interest and investment in DLT. As a World Bank research note explains, blockchain “uses cryptographic and algorithmic methods to create and verify a continuously growing, append-only data structure that takes the form of a chain of so-called transaction blocks.”
Blockchain itself is applicable across different sectors, but it is particularly popular in fintech. It’s facilitated the emergence of digital currencies such as cryptocurrency and CBDCs. Blockchain’s decentralised system enables people to transact with one another without the need for a central authority to validate transactions, a quality that makes it appealing for digital currencies. Popular crypto coins such as Bitcoin and Ethereum are permissionless systems, where the ledger is public, and anyone can access a copy. The decentralised nature of DLT makes it a crucial part of Web 3.0. Forbes describes Web 3.0 as “a more democratic version of today’s online world,” where users have greater control over the privacy, transparency and ownership of the internet. Another emerging sector that DLT has facilitated is decentralised finance. The desire to replace centralised authorities and institutions with a peer-to-peer system would require the use of the technology for transparency, reduced costs and increased access.
Distributed ledger technology has already impacted supply chains and finance. As the technology finds new uses in new industries and sectors, DLT's multitude of possibilities makes it a current technology shaping the future.
REFERENCES:
Ashmore, D. (2023). A brief history of web 3.0. Retrieved from https://www.forbes.com/advisor/investing/cryptocurrency/what-is-web-3-0/
Cadogan, M. S. (2023). Blockchain and Distributed Ledger Technology: Definition and Scope. In Enforcing Smart Legal Contracts: Prospects and Challenges (pp. 2–2). Centre for International Governance Innovation. http://www.jstor.org/stable/resrep47331.7
Stanford University. (n.d.). Retrieved from https://cs.stanford.edu/people/eroberts/courses/soco/projects/distributed-computing/html/body_history.html
World Bank. (2017). Distributed Ledger Technology and Blockchain. Retrieved from
Photo by Mathieu Stern on Unsplash