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Blockchain is same as Distributed Ledger – A Myth

block chain ledger

In my previous blog on blockchain, I wrote about distributed ledger. Now, there is a general misconception that blockchain and distributed ledger is the same thing. It is not. In this blog I am going to draw a fat line between distributed ledger and blockchain.

In a distributed ledger system, the data (transaction entries) are written in a file (ledger) and every stakeholders of the system/network are in the possession of the same. As a result any transaction that happens in the network is known to all the stakeholders. This is so unlike of a legacy centralized ledger system where a single controlling authority is in the possession of the ledger. As a result the record of any transaction is available to 3 stakeholders of the system only – the sender, the receiver and the controlling authority. This controlling authority is also known as an intermediary in all transactions (e.g. Reserve Bank of India in Indian perspective). The advantage of Distributed over Centralized ledger is that the responsibility of maintaining the sanctity of the ledger lies with all the stakeholders of the network. It also removes the interference of the intermediary and this makes distributed ledger system so appealing.

blockchain transaction

In a distributed ledger system, the data necessarily need not to be stored in block, per say unlike blockchain. A distributed ledger is a multi-node, multi-location, multi-site mutable database. Blockchain leverages distributed ledger system with data stored in immutable blocks. Hence it is true that all blockchain use-cases are built on distributed ledger system but the reverse is not. The advantage of distributed ledger is that it promotes transparency and trust among the stakeholders. Similarly, blockchain that executes distributed ledger system ensures that any done transaction can’t be tampered.

To summarize, blockchain is a type of distributed ledger system. It is developed to record digital transactions that are written in an immutable ledger. As it is built on distributed ledger system, it brings transparency to the entire transaction system.

Conclude your reading by leaving a comment here and also your thoughts on the topic. I would appreciate your input on the topics which you would like to hear from me in my subsequent blogs.

Prof . Kaushik Ghosh
IS School of Excellence
Globsyn Business School

Image Source: https://www.freepik.com/free-vector/security-concept-illustration-people-holding-chain_3226083.htm

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