Before businesses relied on computers, they had to record monetary transactions, business news, and the prices of goods, commodities, and services on paper. Depending on the organization, these paper records may or may not have been available for public viewing (for verification purposes). Regardless, these business records were kept within what is known as a ledger. Below is an illustration of a paper-based ledger belonging to F. Scott Fitzgerald, author of The Great Gatsby.
From a finance and accounting perspective, Investopedia defines the term ‘general ledger’ as follows:
A general ledger represents the formal ledger for a company’s financial statements (with debit and credit account records validated by a trial balance). The ledger provides a complete record of financial transactions over the life of the company. The ledger holds account information that is needed to prepare financial statements and includes accounts for assets, liabilities, owners’ equity, revenues, and expenses.
Over time, cryptocurrency-based distributed systems using similar record-keeping mechanisms became popular. Eventually, the terms public ledger and distributed ledger became almost synonymous. To distance themselves from the hype and volatility associated with cryptocurrencies, larger companies like Google, Amazon, and Volkswagen began using the phrase distributed ledger technology. This article delineates distributed ledger technology.
Distributed Ledger Technologies
Simply put, distributed ledger technologies are designed to disseminate business information to company stakeholders (either publicly or privately). Conceptually, they’re similar to a database distributed over several computing devices or nodes. Each node maintains an identical copy of the entire ledger while working independently from other nodes. As no central authority manages data in a distributed ledger, independent nodes are responsible for updating the ledger and recording transactions. Before doing so, however, all nodes must first vote on these updates to ensure agreement. Once these nodes reach an agreement (or consensus), each node on the distributed ledger updates itself to the latest agreed-upon version.
The various consensus methods used to facilitate blockchain transactions (like Proof of Work, Proof-of-Stake, Delegated Proof of Stake) continues to grow. However, while blockchain technology is the first fully functional implementation of distributed ledger technology, Directed Acyclic Graphs [DAGs] and other hybrid technologies are also being used to implement distributed ledger systems.
Distributed ledger technologies remove the financial burdens associated with ‘trust’. Being ‘trustless”, they have little or no need for banks, notaries, and regulatory compliance officials. Consequently, they’re begetting various financial innovations, from loyalty and rewards to smart contracts to payments to trading and raising capital (ICOs). Not incidentally, they’re also providing greater transparency and accountability within the financial world. In short, they’re revolutionizing the way people related to money and technology.
XTRABYTES™ intends to play a significant part in this revolution. For instance, its DICOM-API makes it easier for the corporate world to incorporate distributed ledger technology within their everyday work processes. Expect to hear more about this path-breaking technology shortly.