Blockchain vs. Distributed Ledger Technology

January 30, 2019

MLG Team

DLT Technology & Blockchain

 

Blockchain vs. Distributed Ledger Technology

A New Frontier

There are many challenges associated with understanding the blockchain space. First of all the space is vast. If you subscribe to the notion that distributed ledger technologies, alongside their derivative cryptocurrencies, will change everything in the world, then it is clear that in order to understand blockchain and cryptocurrencies you have to understand mathematics, monetary policy, world history, cryptography, behavioral economics, computer programming, fiscal policy and more. Much more. This in turn means that the language used to describe this space is also vast and because a lot of the concepts and technologies in the space are brand new so so is the language used to describe the concepts. Much of it is just being developed and is far off from being solidified.

 

Blockchain vs. Distributed Ledger Technology

Take two terms that are often used interchangeably, but should not be: DLT, or distributed ledger technology, and blockchain. Are they the same? No. Blockchains are a subset of the larger DLT so every blockchain is distributed ledger technology, but not every DLT is a blockchain.

Distributed ledger technologies can encompass truly decentralized public blockchains, like Bitcoin. They can include public blockchains like Ethereum or permissioned blockchains like IBM Hyperledger. They can also include non-blockchain distributed ledger systems. These are distributed databases that are decentralized, but do not use cryptography or hashes the same way blockchains do and they organize the information in the databases a bit differently (into chains of blocks).

So in summary, DLTs are databases of records shared among numerous parties who have not built trust among themselves. Blockchains are a subset of that and include those databases that are shared in a distributed fashion like DLTs, but also cryptographically protected, hashed and arranged in chains of blocks.

 

Differences: Blockchain vs Distributed Ledger Technology

There are many differences between a public blockchain, such as Ethereum, and a specific DLT application. For the sake of this comparison we’ll take a look at R3 Corda.

 

Feature Ethereum (Public Blockchain) R3 Corda (Permissioned Blockchain)
Permissions Permissionless and open Permissioned and closed
Consensus Same across all network Yes, at the transaction layer
Mining Yes No, there are no miners
Blocks Yes, all transactions are part of some block No, there are no blocks and transactions are sent only to those participating
Scalability Limited – because consensus participation is unlimited, transaction commit is slower High – Limited consensus participation leading to quick transaction commits
Privacy Less secure as everyone has a copy of transaction Highly secure as the transaction copy is only with relevant stakeholders
Cryptocurrency Ether No cryptocurrency
Tokens Token creation possible No token
Legal Standing No legal standing of any transaction Can be legally bound if contract has a legal prose attached
KYC No KYC All parties have to have KYC to ensure they are who they say they are
Immutability All transactions are permanent Yes, all transactions are permanent
Distributed Yes, across anyone running a node Yes, but not everyone has all records

Distributed Ledger Technologies Big and Small

As time progresses and the blockchain space expands, new technologies will fill out the DLT space alongside public blockchains, permissioned blockchains and non-cryptographically secured distributed databases. As this happens the definitions will also evolve and become increasingly clear and specific.

DLT and blockchain both implement a distributed ledger and have common founding principles. However, each real-world use case is very specific. Blockchains are the smaller subset of the larger concept of distributed ledger technology.

If you are interested in exploring blockchain vs. distributed ledger technology and need some help with making a decisions please contact MLG Blockchain to learn more.