Difference Between Blockchain and Distributed Ledger

Ledgers have long been the foundation of accounting and they have been around for quite some time. Accounting dates back to more than 7,000 years back and has been used and explored in many parts of the world. But the role and use of ledgers remains the same till now. The early ledgers were mostly paper-based, but digitization and technological innovation have led to the creation of a new system of digitized ledgers called as distributed ledgers, which revolutionized the field of payments and securities clearing and settlement. Distributed ledgers are a dynamic form of media lying at the heart of digital innovation.

There’s been some sort of confusion regarding distributed ledgers and Blockchain being the same technology. This confusion is brought about by the less than ideal analogies often drawn in the scene between certain aspects of digital innovation and other, more familiar, digital phenomena. So it’s important to understand and define these concepts of virtual currencies beforehand and understand the differences between them. Let’s see how the concepts from virtual currencies and distributed systems were combined to create Bitcoin, which now is known as Blockchain. So what is a Blockchain? And what is a distributed ledger? Let’s take a look.

What is Blockchain?

It all started in 2009, when the first practical implementation of a digital currency called Bitcoin appeared. Later the term cryptocurrency emerged. In 2008, a paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” was written on the topic of digital currency under the pseudonym Satoshi Nakamoto. It first introduced the term chain of blocks. Nobody knows the actual identity of Satoshi Nakamoto, the person who developed and released the world’s first cryptocurrency, and created the first database on which the digital currency was deployed. He later handed over Bitcoin development to its core developers and simply disappeared. The term chain of blocks evolved over the years into the word Blockchain. Each block represents a digital record of a batch of validated bitcoin transactions.

What is Distributed Ledger?

Ledgers have been at the heart of commerce since ancient times and they are still used to record many things, most commonly assets such as money and property. But the technological innovation and digitization of records have enabled the collaborative creation of a new system of digital recording system called distributed ledger which goes way beyond the traditional paper-based ledgers. Distributed ledger is more than a system; it represents all those technologies the aim of which is to facilitate the connection of nodes within a network to a shared database designed to provide a transaction validation and consensus record. Unlike the traditional payment schemes, distributed ledgers do not have a centralized database or a central data storage; the ledger is, in fact, distributed among many different nodes in a peer-to-peer network.

Difference between Blockchain and Distributed Ledger

Meaning of  Blockchain vs. Distributed Ledger

Distributed ledger refers to a shared database designed to provide a transaction validation and consensus record of data that allows verifying and certifying who is the final and definitive owner of a certain value, or asset. It is a database of records that isn’t managed by a single central body.

Blockchain is based on the idea of a distributed ledger technology in a purely financial context. Blockchain is an extensive set of records called blocks which are linked using cryptography and each block represents a digital record of a batch of validated bitcoin transactions.

Technology

Blockchain technology refers to the rules and standards for how a ledger is created and maintained. Blockchain technology incorporates a multitude of applications that can be implemented in various economic sectors, particularly in the finance sector. It is a shared record keeping system where each user holds a copy of the records, which can only be updated if all the parties involved in a transaction agree to update.

Distributed ledger technology represents the data-sharing technologies, through which computers (or nodes) participating in a peer-to-peer network can validate and record all sorts of digital data with no central authority over them.

Features in Blockchain vs. Distributed Ledger

Decentralized authority is the most prominent feature of the distributed ledger technology which means there is no central controller in the network and all participants talk to each other directly. This allows for transactions to be exchanged directly among the peers within a network without any third-party involvement, such as a bank.

Blockchain is a dynamic form of distributed ledger technology but not all distributed ledgers employ a chain of blocks. Blockchains are shared and everyone can see what’s on the Blockchain, which makes the system more transparent. Plus all the transactions on a Blockchain are cryptographically secured, which in turn provides network integrity.

Blockchain vs. Distributed Ledger: Comparison Chart

Summary of  Blockchain v. Distributed Ledger

In a nutshell, Blockchain is a dynamic form of distributed ledger technology based on the concept of chain of block, where each block represents a digital record of a batch of validated digital transactions. The structure and technology of a Blockchain technology is decentralized and so does its organization and development. Distributed ledger, on the other hand, refers to all those technologies which aim to facilitate the connection to a shared database designed to provide a transaction validation and consensus record. The technology behind distributed ledger is a gamechanger because it is decentralized and transparent.

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