DLT vs Blockchain vs Bitcoin

7 min readMar 22, 2023

Have you been exhausted searching for a complete but simple guide to understanding how a bitcoin transaction takes place? 😰 This is a series of articles that explain bitcoin from its history of evolution to the complete journey of a bitcoin transaction with its underlying mathematics. The series consists of six articles and now you are in the very first one.1️⃣ Happy reading.👨‍💻👩‍💻

Why you are here?

Cryptocurrency is one of the most trending topics nowadays due to its vast adoption in the financial industry. We have tons of native cryptocurrencies and tokens circulating among crypto enthusiasts and traders. The name that comes in a blink of an eye when we spot the phrase cryptocurrency is Bitcoin. Here, I’m not going to talk about how lucky the very first Bitcoin owners were, who bought some for just a few dollars in 2009. Now they have become millionaires and billionaires. Hats off to the few original investors who understood and believed how bitcoin can affect the traditional financial industry. Even though the blockchain industry has evolved a lot, Bitcoin is the application that attracted tech enthusiasts and giants in the financial industry in the first place.

Have you ever read the Bitcoin whitepaper? How many times have you encountered the word “Blockchain” in it? How the term blockchain came then?🤔 Blockchain is not what Satoshi introduced, it was there in people’s minds for a long time. Satoshi, I assume you may already be aware of who is he, applied it to a real-world problem that everyone struggled to solve.

Before moving on, it’s better to take some time to give some credit to the parties who were involved in the evolution of this technology that opened up the doors for many applications and this blog series would give you an insight into what Satoshi did, what is the real world problem he solved and how he did it.

A bit of history

The main concepts behind blockchain appeared in the late 1970s. David Chaum, some referred to him as the “grandfather of blockchain”, introduced an ecash system called DigiCash where users can anonymously transfer money. He called its underlying technology Blind signature technology. The main difference between this and Bitcoin is, in Chaum’s method there was a central authority who participated in the middle as the trusted party.

In 1991, two research scientists called Stuart Haber and W. Scott Stornetta wanted to timestamp digital documents somehow to make them hard or impossible to tamper with data. As a solution, they introduced a concept called a cryptographic hash chain to store the time-stamped documents.

In 1992, a concept called the Merkle tree was incorporated with the above concept to make that chain more efficient which means a collection of document certificates resides on a single block. We will get back to this more technically later in the series. With the introduction of reusable proof of work by Hal Finney in 2004, the new chapter of cryptography and blockchain started to flip.

In 2008, the revolution of the decentralized system started with the introduction of Satoshi Nakamoto’s conceptual idea of blockchain, based on the concepts from previous decades.

Some might argue that this is an aggregated concept from previous inventions. Yeah, that might be. But who thought this before Sathoshi?😒

Here I have touched upon a bit of history before going deep into the technical side of the content. Going forward in this blog series, we will touch upon some exciting and key implementations of blockchain while giving more focus on Bitcoin implementation and its core concepts.

Introduction to blockchain

As the blockchain term refers to, it’s a chain of blocks secured cryptographically. The term cryptography may seem familiar to you. However, we will discuss what is meant by cryptographically secure and why we need to use cryptographically secure concepts like hash functions, and where in a later part in the series. Let’s dive a little bit deep into the term blockchain.

As you may have seen in blockchain articles, it’s a distributed ledger or database that nodes in a peer-to-peer network maintain. Here, it comes under DLTs (Distributed ledger technology). Blockchain is a DLT but all DLTs are not blockchains. It is a bit confusing, right?🙃 Don't worry. Let’s first see some confusing terms and then understand what is actually a DLT and how it differs from Blockchain.

Centralized

I think you may be aware of what centralized is. In simple terms, there is a central authority that can access and control the datastore in a system. The user of the system, let’s say you, should trust the entity that holds control of the entire system before registering or getting a service.

The confusion comes in when distinguishing between decentralized and distributed systems. Aren’t they referring to the same?🙄 What do you think if I say, a decentralized system is a subset of distributed systems? Let’s find out.

Decentralized

In decentralized systems, there is no single entity that makes the final behavior (decision) of the system. The decision-making is decentralized among the participating nodes. (Will see what is actually a node and its types later). Let’s consider a particular scenario. You are trying to get access to the system. Then each and every node(Most of the time) will find out whether you have access to the system. Then, the nodes will come to an agreement on whether you will be given access or not. It depends on the aggregated result of nodes.

Distributed

In a distributed system, the computation or the resources is distributed among the nodes. We can take real-life use cases like AWS, Google, and Facebook as examples of distributed systems. There is no single point of failure. The nodes in the system interact with each other and share the resources to achieve a common goal. Even though the computation is distributed, the final decision-making process would be centralized or decentralized. Facebook or AWS can be taken as a centralized decision-making system while the well-known bitcoin can be taken as a decentralized decision-making system.

Now you can understand the difference between the terms centralized, decentralized, and distributed.

It is not a must for blockchains to be decentralized because decentralization or centralization depends on the application (use case). As an example, bitcoin is an application where it uses a decentralized blockchain.
Based on the above explanation, you will understand why I stated above that all DLTs are not blockchains. The main reason is, there may be some DLTs where the decision-making process is centralized.

Now let’s summarize what we have discussed up to now and highlight what blockchain is. Blockchain is a centralized or decentralized system that stores its digital records as a ledger distributed among all the participants in the network in order to make it difficult to change or add any invalidated data.

Now you may wonder how decentralized blockchain nodes come to an agreement about whether a block is added to a chain. We will come to that later in the series and will describe it through a well-known application of blockchain, Bitcoin.

We can identify three main reasons why we need decentralized blockchain, in other words, the benefits.

We don’t need to maintain a history of records of our own because blockchain maintains them securely by itself. When you want to go back and see what happened in the past since it is impossible to change after adding (immutable), you can refer to the blockchain and confirm.
Since the database is distributed among the nodes, there will not be any single point of failure.
As we discussed earlier, the administration of the system has been decentralized, we don’t need to trust any third party which in turn saves the cost and infrastructure.

Since decentralized blockchain comes in handy with the above benefits, it is being widely used and getting popular in many industries for different use cases like supply chain management, accounting, health care, security, etc. I haven’t thought of going deep into its use cases because it’s not our focus. You can search and find multiple articles on the internet narrated about use cases.

There are four types of blockchains public, private, hybrid, and consortium and each has its own advantages and disadvantages. The type of blockchain used for an application depends on its context, in other words, the level of security, how fast it should be, cost, etc. Here, we are mainly focusing on the public blockchain type.

As we have come to the end of this section, now you definitely have a high-level picture in your mind about how blockchain variants have been architected.

References:

Part 1: DLT vs Blockchain vs Bitcoin. ✅

Part 2: Who controls the blockchain?

Part 3: Initiating a bitcoin transaction.

Part 4: How does a bitcoin transaction occupy a space in a block?

Part 5: Bitcoin block confirmation.

Part 6: Bitcoin address generation and digital signatures.

DLT vs Blockchain vs Bitcoin

Written by Tharaka Wijesundara