What is a Distributed Ledger?
A distributed ledger is a type of database that exists across several nodes or computers in a network rather than being centralized in a single location. This design enhances security, transparency, and resilience since the information is replicated and validated by each node. Changes or updates to the ledger are agreed upon through consensus mechanisms, meaning all participating nodes must verify and approve the information before it is added.
In the context of cryptocurrency, distributed ledgers are the backbone technology enabling secure and transparent transactions. Bitcoin and other cryptocurrencies use a specific type of distributed ledger known as blockchain, where data is organized into blocks that are chronologically linked. Every transaction on a blockchain is visible to all network participants, making it nearly impossible to alter without detection, a feature critical for the security of digital currencies.
Distributed ledgers have applications beyond cryptocurrency as well, from supply chain management to secure voting systems, due to their ability to provide a verifiable and tamper-resistant record of transactions. By decentralizing data storage and management, distributed ledgers reduce the reliance on a single point of control, lowering the risk of data tampering or loss due to system failures.
