Ledgers which form the foundation of accounting are as ancient as writing and money. Initially, their medium consisted of clay, stone, and paper. When computers came in, the ledgers were digitized. The digital ledger was a reflection of the paper accounting.
Computing power, technological breakthrough, in addition to the discovery of some new and additional algorithms have led to the development of distributed ledger.
A distributed ledger is simply a database that is held and updated independently by each participant across the network. The distribution is unique; the records are not communicated by a central authority to the various nodes, however, they are independently constructed and held by each participant node.
Every single node on the network processes the transaction that comes to its own conclusion. Also, the nodes vote for the transaction so that the majority of the nodes in the network might agree to it.
Once the different nodes agree, the distributed ledger is updated and the individual accounts get a copy of the ledger. The consensus architecture allows for the dexterity of the system that goes beyond the simple mechanism of operating a database.
Distributed ledgers as a dynamic form of media have distribution characteristics that normally go beyond the normal static media. There are many kinds of records systems since the blockchain allows for the recording of both static and dynamic data. Data can be held in basically three methods; unencrypted data, encrypted data and hashed data.
Unencrypted data means that every participant in the blockchain can read the data. Encrypted data means that only participants with a decryption key can read the data. Hashed data is presented alongside the function that created it to indicate that the data was unaltered. A shared system of record can change the ways in which organizations work.
New relationships are developed in the digital world. These relationships change mean the trust that banks guarantee is changed through the quality and architecture of the distributed ledger.
Three technologies from blockchain technology. They eliminate the need for a third party in facilitating online transactions. The blockchain is not a new invention; rather, it’s a combination of the internet, private key cryptography and a protocol governing incentivisation. The architecture of the tree combined technologies offers security for all the transactions.
The invention of the distributed ledgers ensures that there is no private storage required for data management. The peer to peer technology facilitates the consensus of algorithms and the replication of the transaction data among the various nodes. One thing worth noting, not all block chains have a distributed ledger that is taken for security reasons. However, each blockchain is a distributed ledger.
Distributed ledgers provide a revolution in the manner in which information is communicated and gathered. It provides both static data (registry) and dynamic data (transactions). The owners are more than just custodians of data. The system enables them to accumulate energy from the manner of using, manipulating and extracting value from a database.