What is DLT and how it works?

April 25, 2022

What is DLT and how it works?

April 25, 2022

Distributed Ledger Technology (DLT)

Introduced to the world by Bitcoin, Distributed Ledger Technology (DLT) is also more commonly known as blockchain technology. Although these terms are often intertwined, it should not be forgotten that Bitcoin is a product of this technology.

DLT is a database technology where transactions and details about transactions can be recorded in more than one place at the same time. Unlike traditional databases, distributed ledgers do not have a central repository or management.

The focus of distributed ledger technology is decentralization. It emerged with the idea of ​​creating a ‘decentralized’ network against the traditional ‘centralized’ structure. It aims to disable a ‘supervisory third party’ (intermediary institutions, banks, etc.) factor needed in traditional structures.

DLT Network
DLT is simply a file recording system.

How DLT Works

Distributed ledger technology excludes central authority from the equation in order to prevent possible manipulation or security threat. Instead, it ensures the secure operation of a decentralized digital database.

For this purpose, DLT uses encryption (cryptography) to ensure that all information processed into the database is stored securely and accurately. Only authorized persons with ‘key’ or ‘cryptographic signature’ can access this information. The feature of distributed ledgers that maximizes security is that once stored, information becomes an unchangeable part of the database.

All data is stored within the DLT network.
All data is stored within the DLT network.

Information added to the database is now part of the network and is directly subject to network rules. In addition, who added the added information and who used or updated the ledger can be viewed by all participants. This transparency of DLT builds high trust among the network’s participants. In this way, it also eliminates the possibility of a possible fraudulent activity.

In fact, applications similar to distributed ledger technology existed before but they had some problems in terms of efficiency and security. For example, many institutions, organizations or companies today store their data in a distributed manner in different locations.

However, storing data in different locations does not solve all problems. Because each location is located on a central system in order to stay connected for the updates. This makes the center vulnerable to cybercrime. In addition, it takes time and delays for the center to update every remote data.

The Importance of Distributed Ledger Technology

A decentralized distributed ledger technology is inherently safe from cybercrime. If a malicious actor is to make an attack, he has to attack all copies in the DLT network simultaneously. In this case, it is almost impossible for a cybercriminal to reach and change all the data on the network protected by cryptography at the same time.

In addition, the simultaneous (peer-to-peer) sharing and updating of records realized in the DLT protocol makes the entire transaction process much faster, more efficient and cheaper.

DLT data is stored in copies for all users in the network.
DLT data is stored in copies for all users in the network.

Usage areas

DLT is built on an infrastructure that can change the way companies, institutions, and even governments work. For example, it can assist governments in many matters, such as collecting taxes, distributing social security benefits, voting procedures. In addition, it has or is planned to be used in many industries, including:

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