Decentralized Ledger Technology : What you haven’t heard before ⬇️
Just like we have LST and LRT I’m eager to share with you a term I came across today whilst doing my research, It’s acronym — DLT.
Decentralized finance which we’ll know as Defi is changing the landscape of the traditional financial system focused on providing a decentralized version of mainstream financial opportunities.
In the mainstream world, financial institutions offer customers access to opportunities such as cash storage and loans.
However these offerings are governed by centralized entities with the help of a Distributed Ledger Technology, DLT.
DEFi solutions offer a number of the same opportunities but they are controlled by a large number of participants who abide by rules enforced by smart contracts.
Distributed Ledger Technology is a decentralized system that records transactions across multiple locations in a transparent and immutable manner. It enables participants to securely share and synchronize data without the need for a central authority.
DEFi solutions oftentimes give greater flexibility interms of users ability to store and control their own assets.
Blockchain is a popular example of DLT but there are other variations as well.
These variations of distributed Ledger Technology include:
1/ Blockchain:
A chain of blocks containing transactional data linked together using cryptographic hashes.
Each block is cryptographically linked to the previous one forming a chronological and immutable record of transactions.
2/ Directed Acyclic Graph (DAG)
A structure where transactions are linked in a non-linear fashion allowing for parallel processing and scalability. Examples include IOTA’s tangle and Nano’s block lattice.
3/ Hash Graph
It utilizes a consensus algorithm called gossip and virtual voting to achieve distributed consensus without the need for proof of work
4/ Holochain
A framework for building decentralized applications (dApps) where each participant has their own chain enabling scalability and data integrity without the need for global consensus.
It is important to note that these variations offer different approaches to achieving Decentralization, scalability, security and consensus in distributed systems.
