Components of DLT Framework

This is the continuation of my previous article Distributed Ledger Technologies (and Blockchain). Here I will start to discuss the components of the Distributed Ledger Technology Framework. As I mentioned in my previous article, there are four major components in the DLT framework. Let's start with the first component; Shared Ledger.

Figure 1: Components of DLT Framework

Shared Ledger (Distributed Ledger)

What are the differences between the centralized ledger and distributed ledger?

→ Centralized Ledger

• Resides on a single massive server or node which acts as a central repository for the entire system.
• It is where the ledger’s stored and to where all other nodes or servers in the network send their data to.
• Critically, in a centralized system, there is one and only one copy of the database stored, and that is stored on the central server.

Figure 2: Centralised Ledger

→ Distributed Ledger

• A distributed ledger is a database held and updated independently by each participant or node in a large network that can span geographies, institutions, and even commercial entities.
• All nodes maintain their own identical copy of the ledger and can generally add, amend, or delete records on the collective database.

Figure 3: Distributed Ledger

DLT is a collective term for Blockchain

Figure 4: Overview

1. General Blockchain systems → ex: Bitcoin, Litecoin
2. Permissioned Blockchain systems → ex: Corda, Hyperledger Fabric

• These blockchains provide an additional level of security over general blockchain systems. → Has access control systems

3. Associated Technologies for Blockchain,

• smart contracts
• Peer to Peer networks
• Encryption
• digital signatures

4. A blockchain is just one type of DLT

• Every blockchain is a distributed ledger
• But not every distributed ledger is blockchain → unlike blockchain, the distributed ledger does not necessarily need to have its data stored in blocks.
• Bitcoin is cryptocurrency — an application of blockchain → Blockchain is simply the ledger used to keep track of who owns which Bitcoins.
• Not every blockchain is cryptocurrency.

Public Vs Private Ledgers

• The key difference between them is who can join such a network and who is able to actively participate by adding and/or authorizing data on the ledger.

Figure 5: Comparison between Public and Private Ledgers

Types

1. Public and Permissionless

• Anyone can join, read, write, and commit.
• Ledger is hosted in public servers, and the parties are anonymous.

2. Public and Permissioned

• Anyone can join and read, but only authorized and known participants can write and commit.

→ Ripple — Cryptocurrency platform for transactions

→ EOS — a platform that enables the development and execution of decentralized applications commonly referred to as DAPPs.

3. Private and Permissionless

• Only authorized participants can join, read, write on the ledgers hosted on a private server.

→ Holochain — Platform for decentralized application where participants share information on a need-to-know basis.

4. Private and Permissioned

• Only authorized participants can join and read, and the network administrator operator can write and commit. → Microsoft Quorum, open-source, permissioned implementation of Ethereum supporting transactions and contract privacy.

Figure 6: Examples

Let’s meet again soon with the next article….