What’s the difference between Blockchain and DLT?
Blockchain is starting to change our lives for a better. Every day we see new projects which are being launched or going to be or we hear about new big enterprise businesses, banks or governments which are starting to take interest into what the tech can do for them.
But there is a term that is starting to crop up more frequently in the cryptocurrency space — Distributed Ledger Technology or DLT as most call it. It is often the case that the terms blockchain and DLT are used as synonyms. In reality, there are some differences. Let’s now take a look at the two words and spot the differences between them.
What is Blockchain?
Well, blockchain is actually a type of DLT, a subcategory of a more broad definition, much like how the word “car” falls under the umbrella term “vehicles” or “cat” falls under “animal”. However, over time, it became more popular than the whole concept of distributed ledger technology.
The blockchain is one of the distributed ledger technology where every node gets its very own copy of the ledger. Every time someone adds a new transaction, all the copies of the ledger gets updated. All the transactions are encrypted before getting added to the ledger. What makes the blockchain unique compared to other DLTs is the grouping and organization into blocks. It is the blocks that are connected to each other and protected by encryption.
What is DLT?
We can consider Distributed Ledger Technology as an umbrella term used to describe technologies which store, distribute and facilitate the exchange of value between users, either privately or publicly. A distributed ledger is a database that is decentralized, distributed across several computers or nodes. Every node will maintain the ledger, and if any data changes happen, the ledger will get updated. Every update of the system is recorded individually and then updated by the node, itself.
A DLT can be considered the first step towards a blockchain, but importantly it won’t necessarily construct a chain of blocks. Rather, the ledger in question will be stored across many servers, which then communicate to ensure the most accurate and up to date record of transactions is maintained.
DLT and blockchain are not the same things
The important thing to note here then, is that these terms are not interchangeable, even if they may be used as such. Both technologies sound the same, but there are some differences as well. So all blockchains are distributed ledgers, but remember that not all distributed ledgers are blockchains. Whereas a blockchain represents a type of distributed ledger, it is also merely a subset of them.
The most important difference to remember is that blockchain is just one type of distributed ledger as we said. Although blockchain is a sequence of blocks, distributed ledgers do not require such a chain. Furthermore, distributed ledgers do not need proof of work and offer — theoretically — better scaling options.
Another key difference between the two technologies are the tokens. In a distributed ledger technology, it’s not necessary to have tokens or any kind of currency on the network. In blockchain, anyone can run a node. However, running a full node essentially means a huge network which may become difficult to manage. In most cases, there is some sort of token economy.
Мodern blockchain technology is trying to come out of the cryptocurrency shadow but for now, tokens play a fundamental role in the blockchain technology.
Conclusion
I hope you can now have a clear idea of the differences after reading the article. In short, blockchain is a specific type of distributed ledger. It is designed to record transactions or digital interactions and bring much-needed transparency, efficiency, and added security to businesses.
To wrap up and end this article I would like to say that you can call it, distributed ledger or blockchain, but they are undoubtedly the evolution everyone has been waiting eagerly. As it is said “Blockchain is here to stay” and these days everyone who consider himself as a blockchain expert should know the difference between blockchain and DLT.
