Distributed Ledger Technology: The Future of Finance
Distributed Ledger Technology (DLT) is a database that is shared by several participants in different locations. Distributed registries are replicated and synchronised among participants in a decentralised network. A registry is used to record interactions (transactions) between participants – including, for example, payment.
What is Distributed Ledger Technology?
This technology is the opposite of centralised systems that are used by most businesses and financial institutions. In business, registries are often complex, cumbersome, expensive and very easy to tamper with. In addition, different versions of registers are very easy to misalign, resulting in stakeholders acting on incorrect or incomplete information.
In addition, distributed registry technology offers the highest level of security. The use of cryptographic hashes and digital signature technology means that participants can be confident in the authenticity of transactions recorded in the registry and that they come from legitimate senders and not fraudsters.
Distributed ledger technology is best known as the basis for Bitcoin. However, DLT and blockchain have a wide range of potential applications both in the public space (e.g. cryptocurrency) and in private environments, such as business. The technology and protocols on which it is based are designed to allow participants to transact without the need to trust any other party – for example, participants in Bitcoin blockchain do not need to trust that a central bank or clearing organisation will act as expected or as they are told.