Blockchain vs DLT – An Explanatory Guide You Can’t Miss On

With a rise in technological applications and new business models, many people get confused about blockchain vs distributed ledger. Although both operate under a similar consensus mechanism, some key factors distinguish them. 

Therefore, to validate transactions and store your information in these decentralized networks, knowing the difference between blockchain vs DLT is crucial. Understanding the terms thoroughly will assist you in making your next digital move and becoming more aware of their use cases.

This article covers a detailed guide about blockchain vs distributed ledger for your convenience so you can understand them clearly. So, without further ado, let’s get into the comparison. 

What is Blockchain?

Before we jump into the comparison of blockchain vs distributed ledger, we must know what these terms stand for. As far as blockchain is concerned, it is a type of shared database that does the important task of recording transactions or storing information. Simply, you can say that it is a decentralized, public digital ledger widely used to track transactions in various business networks. Moreover, blockchain technology runs on three major principles: scalability, efficiency, and transparency. Enlisted below are some of its key characteristics: 

• To validate transactions effectively, blockchain runs on a consensus mechanism of proof of work (PoW) or proof of stake (PoS). This ensures that the sensitive information remains safe from cyber threats or hackers.
  
  
• Immutability is another key characteristic of blockchain technology. This means that once a block is added, you cannot change or modify its content and other information. This, in turn, enhances the reliability of the network.
  
  
• The reason why blockchain is used worldwide relies on its transparency. Making a transparent profile of every participant ensures trust and security for its users. This alternatively means that your every move is being watched or viewed by other participants. 

What is Distributed Ledger Technology (DLT)?

A decentralized record-keeping technology distributed across multiple nodes and locations worldwide is known as Distributed Ledger Technology (DLT). It requires a peer-to-peer computer network so that the validation and record updating can be easily done across a networked database. DLT simply refers to any digital ledger, and the most common form of this technology includes the blockchain. Hence, blockchain is a type of DLT consisting of a block of chains to store the information in a ledger. Some of the key characteristics of distributed ledger technology are as follows: 

• DLT is a flexible technology that can take different forms or structures like blockchain or hashgraphs. It runs on the same consensus mechanism of PoW or PoS. 
  
  
• Compared to traditional database systems, information in DLT cannot be modified or changed once a new block is added to the ledger. 
  
  
• It supports smart contracts, which are programs stored in a blockchain. These smart contracts execute automatically per the terms and conditions of the agreement. 

Blockchain vs Distributed Ledger Technology: A Detailed Comparison

Now, you are familiar with the basic working principle of blockchain and distributed ledger technology. But that’s not all. These two terms are often used interchangeably in technology and finance. However, both are not synonymous. Instead, some key points differentiate these terms. To understand these points, let’s have a look at the DLT vs blockchain difference in detail below:

1. Consensus Mechanism 

Their consensus model is the first and most important factor when discussing blockchain vs distributed ledger. A consensus mechanism is used in both technologies to validate transactions and build trust among traders. Blockchain runs on the specific mechanisms of proof of work or proof of stake. These systems are used to secure the decentralized blockchain network. 

On the other hand, distributed ledger technology has no specific consensus model. It can use any common model depending on the protocol and requirements. This is because DLT has limited nodes and thus does not require any specific program. Hence, the selection of a consensus model is unlimited to blockchain technology. 

2. Use of Tokens 

Another crucial factor you should consider when discussing distributed ledger technology vs blockchain is using tokens. For those who don’t know, a permit is the digital representation of an asset that an owner possesses. In blockchain technology, you need tokens as magical little creatures to validate transactions within the decentralized network. 

These digital tokens represent an investor’s stake and can be used by holders to purchase an asset or for trading purposes. On the contrary, distributed ledger technology does not require these programmable assets. The reason lies in its limited number of participants, making it a more miniature yet complete ecosystem. 

3. Flexibility 

How can you miss flexibility when discussing distributed ledger vs blockchain? Although both technologies operate similarly, DLT is more flexible and efficient than blockchain technology. Distributed ledger technology offers more flexibility because of its unlimited customization options. This way, the organizations or servers can use this decentralized network to tailor their specific technological needs. 

On the other hand, blockchain technology has predefined rules and structures that limit customization options. It primarily uses smart contracts to validate transactions and store information. Due to the less efficient nature of blockchain, distributed ledger technology is preferred. DLT is so efficient that it can complete a bundle of transactions in just a few seconds. This is also why blockchain development companies are stepping into the DLT ecosystem. 

4. Permission Levels 

To see the difference between blockchain vs distributed ledger, closely examining their permission levels is also mandatory. This, in turn, shows the security and trustability of these technologies. In the blockchain ecosystem, the trustability is low due to the more significant number of votes or participants within the network. 

However, distributed ledger technology is highly trustable due to its fewer nodes. The smaller the participants, the higher the trust ratio. Moreover, DLT can be permissioned or permissionless, depending on the use case. In a permissionless or public system of DLT, anyone can participate and validate transactions. Meanwhile, in private DLT, only invited or authorized entities can take part. 

5. Security 

When discussing blockchain vs distributed ledger, what could be more important than the security feature? In DLT technology vs blockchain, DLT features tight security as it is disturbed across multiple servers worldwide. Due to its comprehensive global synchronization, it can be either centralized, decentralized, or hybrid. 

Blockchain technology, on the other hand, emphasizes decentralization, in which no single entity controls the network. Once a block is created, the content or information in the block cannot be changed or modified. This is to ensure complete network security and keep it safe from hackers or malicious users. 

6. Applications 

When discussing blockchain vs distributed ledger, you should also know about their real-life applications or use cases. As far as blockchain is concerned, it is used more commonly in different technological activities and multiple companies. For instance, e-commerce sites like Amazon and Alibaba use blockchain technology for efficient working. Similarly, digital currencies such as Bitcoin and Ethereum are prime examples of public blockchain technology. 

In DLT technology vs. blockchain, the distributed ledger has limited applications as people are not entirely aware of its functionalities yet. Different DLT programs like Hashgraph and Quorum assist companies and investors with specific financial requirements. Hence, blockchain is a vast network, but DLT is a broader technology encompassing various technologies, including blockchain. 

Blockchain vs Distributed Ledger Future Updates

You have seen the comparison of blockchain vs distributed ledger, along with detailed factors and key points. Some proved exceptional for the blockchain industry, and some favored the DLT. Leaving all that behind, the incoming years hold much more for the blockchain vs distributed ledger market. Let’s understand the future of the digital world and how it will impact the masses:

1. Blockchain and Web 3.0

The rise of Web 3.0 technology is a big change in the world of blockchains. In 2022, most web developers, around 65%, jumped into this community. This fast growth shows how much people are getting into this advanced Web 3.0 internet. As Web 3.0 becomes more common and gets lots of attention online, it’s set to be a big part of future technology. It’s clear that Web 3.0 makes things easier for its users. 

In the coming years, it’ll keep improving the tech world by making apps, websites, and browsing smoother and simpler. What’s cool is that thanks to Web 3.0, you can adjust websites and different software to fit your mobile or Android screen. It also helps internet users by making websites and apps work faster and give quick search results.

2. DLT and NFT Marketplace

An NFT project is a particular set of unique tokens saved in technology that tracks things without interchangeability. Unlike regular NFTs, these projects will be made much in the future and will be more critical for investing. Every minute, more and more people are using NFTs. Reports say thousands of NFTs get sold daily, sometimes 15,000 to 50,000 weekly. In the tech world, NFTs will change gaming and tech soon.

Recently, there’s a new idea called wear-to-earn NFTs in digital fashion. More of these projects are coming up in technology. NFT sales increased significantly in the first part of this year, with nearly 7,447,473 sales. The total amount of NFT trading also went up by 13.25% in the first half of 2022. This brought in a lot of big sales in the wear-to-earn NFT world. Some big fashion brands like Nike, Adidas, Burberry, and Gucci are starting to sell virtual clothes using augmented reality.

3. Ethereum Merge

In comparing blockchain and distributed ledgers, the Ethereum merge stands out as a significant change for digital assets. This update launched on 6 September 2022, switches Ethereum’s consensus mechanism from proof-of-stake to proof-of-work, a substantial move in blockchain technology.

The Ethereum Merge aimed to improve traditional transactions and sustainability. Here’s what it does:

• Lowers transaction fees and speeds up payments.
• Changes the proof-of-stake tool to a proof-of-work consensus method.
• It uses less energy, making the system more eco-friendly.

Conclusion 

Understanding the intricacies between blockchain and Distributed Ledger Technology (DLT) is pivotal as these decentralized systems redefine technological paradigms. While sharing similarities, their distinctions underscore diverse potentials for businesses navigating this digital evolution.

At Debut Infotech, we stand at the forefront of this transformative era, specializing in customized smart contracts, Defi, and wallet development. Our team’s expertise empowers businesses to capitalize on emerging technologies, driving innovation and growth.

As the future unfolds with advancements like Web 3.0 and the expanding NFT market, Debut Infotech remains poised to guide businesses through this dynamic landscape. Connect with us to leverage our adept blockchain app developers and tailored solutions, propelling your business toward digital excellence.

Do you want to learn more about the blockchain vs DLT? Well, read our previous blockchain blogs and familiarize yourself with emerging trends.

Blockchain VS Distributed Ledger FAQs 

Q. Is blockchain vs distributed ledger the same thing?

A. Many people get confused when discussing blockchain vs distributed ledger technology. These terms are often used simultaneously but have different functionalities in technology and finance. 

Blockchain is a specific type of DLT that utilizes a chain of blocks to validate transactions and store information. However, distributed ledger technology is a complete ecosystem spread throughout the globe and encompasses different development companies, including blockchain. 

Q. Why is the blockchain not called DLT?

A. Distributed ledger technology can come in many forms and consist of several servers or clients worldwide. Thus, DLT is a broader decentralized network that varies in its use case. However, the blockchain is a type of DLT that is universally encrypted and uses a specific infrastructure. 

Q. Why Should I Use Distributed Ledger Technology?

A. Unlike traditional database systems, distributed ledger technology is highly efficient, transparent, and trustworthy. It improves supply chain management and provides a secure ecosystem to investors so they can validate their transactions with fool-proof security. 

Q. Blockchain vs Distributed Ledger Technology: Which is Better?

A. When discussing blockchain vs distributed ledger technology, you might be baffled in choosing the best one for your transactions. By considering the efficiency, security, use cases, and flexibility of both technologies, you can easily select the one for your financial tasks. 

Q. What is an alternative to blockchain vs distributed ledger? 

A. If you’re stuck between blockchain and distributed ledger, many alternatives exist. These include Hashgraph, Corda, and Directed Acyclic Graphs(DAGs). They all work on the exact consensus mechanism of proof of work or proof of stake and thus are highly efficient.