A Beginner’s Guide to the Differences Between DLT and Blockchain

Beginner’s Guide / 30.10.2019

It’s obvious and clear that there are great market confusions about what the distinction between different terminologies that keep floating around is. Most people, some calling themselves seasoned professionals, cannot tell apart Bitcoin and Ethereum or the difference between a Blockchain and a cryptocurrency. Some even go lengths to propose solution for projection that do not even have problems.

Let us hope the distinction between each is soon cleared, so that all the false promises and ill-informed market “experts” can divert their focus towards better understanding the prospects that the ecosystem can promise.

Distributed Ledger Technologies and Blockchain

Distributed technologies have been around way before blockchain or bitcoin was even conceived. In its roots, DLT is a shared database that is synchronized periodically to maintain a copy of records around a distributed network of nodes. DLT mechanisms were readily researched and implemented since the 1990s.

Think of a football field. All players in the same team are individual nodes, acting for the same end-goal, to make the team win. Similarly, DLT is just a broad name for any mechanism that does not have a central mode of communication and transfer, but which relies on the individual contribution of everyone. Distributed Ledger Technology is an umbrella term used to describe technologies which store, distribute and facilitate the exchange of value between users, either privately or publicly.

Source: nakamo.to

What it lacked from the early representations of a DLT mechanisms, was a fool-proof consensus mechanism that proved the legitimacy of nodes on a peer-to-peer network, across a wide geographical area that ensures the disincentive to provide duplicate and false records to the distributed network.

Is Blockchain the same as DLT or is it different?

Well, the answer is that Blockchain is nothing but a sub-set of DLT. All blockchains can be considered as an iteration of Distributed Ledger Technologies, but not vice versa. Both DLT and Blockchain are yet sub-sets of a broader classification of Distributed Databases.

The Bitcoin blockchain became the most famous form of DLT mechanism since it was introduced in 2009. It solved the problem of consensus and paved the way for a whole new range of applications that fall under the DLT sphere.

A Blockchain is a subset of DLT. Blockchains are basically a distributed database that includes consensus and verification mechanisms to provide authenticity across the network, which maintain its difference from a traditional DLT. Since 2009, thousands, if not millions of use cases have been developed with the concept of Blockchain at its center. Several different mechanisms of Blockchains that differ from the original Bitcoin blockchain have also been developed, which best suit the needs of the case at hand. The first consensus mechanism was the Proof-of-work (PoW) that uplifted bitcoin to be the most widely used Blockchain based cryptocurrency, as it provides consensus through staking energy. Since then, mechanisms such as Proof-of-stake (PoS), Delegated Proof-of-Stake (dPoS), Integrated Pow + PoS, Federated Byzantine Fault Tolerance (FBFT) etc., have been developed, tailored according to the needs of the specified blockchain on which they are built upon.

Source: cryptocalibur.com

After the invention of a Blockchain, several organizations and consortium such as R3, Hyperledger, EEA etc., began to explore around the concept of a “Private Blockchain”, a distributed database that doesn’t require data to be propagated to every user, but can be delegated to a set of pre-specified trusted actors that guarantee the authenticity of the data. Some people think that the concept of a “Private Blockchain” is an oxymoron, because privatization strips Blockchain of all the essential features that distinguished it from a traditional distributed database. Thus, Corda, Hyperledger and other similar to these come under the wide scope of Distributed Ledger Technology and not Blockchain.

Let us now list down the various “difference” that are characteristic to both the broad terms:

S. No Digital Ledger Technology Blockchain
1 Distributed Ledger Technologies are a sub-set of Distributed Databases Blockchains are a sub-set of DLTs
2 Distributed Ledger Technologies have been proposed since back in the 1990s The Bitcoin P2P paper was the first to set a classification of ‘blockchain’
3 DLTs are characteristic to the mechanism. They can be both Public and Private in nature. They can be tweaked to suit the preferences of its creator. Blockchains, by definition, are public and open. They are programmed to include anyone and everyone wishing to join the network.
4 The structure of a DLT mechanism dictates its mode of communication and transfer protocols. Although not likely, DLTs can be Centralized too, other than being decentralized and distributed. Decentralization is an inherently future of blockchain. Each blockchain is looked upon by the degree of its decentralization. But a lot of standards, the bitcoin blockchain stands to be the most decentralized yet.
5 Broadly, DLT refers to the communication, collection, transfer and accumulation of data over a distributed network. The mechanism by which the data is stored, transferred and in some cases, can act as digital value, is what a blockchain is good at.

 

Hope this brief explanation was clear enough for the reader to understand the nuances of DLT and blockchain.

To Dive deeper and explore projects under the Blockchain Ecosystem, readers are encouraged to check the following reviews:

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Sudarshan M is a long time crypto-enthusiast. Pulled in by bitcoin early on, it did not take long for Sudarshan to divert all of his academic attention from business studies to blockchain by doing his Masters and eventually pursuing his PhD in the subject.