Blockchain glossary: Lesson No.1 – Blockchain ≠ distributed ledger technology

We’ve been talking about blockchain for quite some time; we discussed its facets, uses, future, shortcomings, and growth, to name a few. We got down to the heart of the matter and answered questions such as: Is the blockchain over-hyped? Can it transform the world? How can we measure its performance? Should we list it as a skill? What’s in it for us?

What we haven’t done so far is focus on what this technology can and can’t do, what it is and what it isn’t. Therefore, we have to go back to basics and explore the fundamentals in order to eliminate all misconceptions about blockchain. This series is meant to clear the air by answering the most fundamental questions.

In the first part of this interview series, we invited seven blockchain experts and Blockchain Technology Conference speakers to weigh in on the difference between blockchain and distributed ledger technology. 

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Meet the experts

Ingo Rammer (@ingorammer) is co-founder and managing director of Thinktecture AG.

Peter Lawrey (@PeterLawrey) is a Java Champion with the most Java & JVM answers on Stackoverflow.

Arnaud Le Hors (@lehors) is Senior Technical Staff Member of Web & Blockchain Open Technologies at IBM.

Vinita Rathi (@VinitaKRathi) is the CEO and Founder of Systango.

Svetlin Nakov (@svetlinnakov) is a passionate blockchain engineer, trainer and experienced developer in a broad range of technologies.

Jana Petkanic (@JeanneDeBit) is a blockchain consultant and founder of Blockchain Talks.

Christian Junger (@ChristianJunger) is CEO and co-founder of the German blockchain start-up MADANA.

What is the difference between blockchain and distributed ledger technology?

Ingo Rammer: A blockchain is essentially just one kind of implementation of a distributed ledger. I am personally guilty, however, of sometimes using ‘blockchain’ in a conversation as the initial moniker to refer to DLTs as a whole – simply because this is the term most non-technical people are familiar with when referring to decentralized technology.

Blockchain is the term most non-technical people are familiar with when referring to decentralized technology.

I then try to steer the conversations to ‘DLT’ over time as it is the more correct term for the phenomenon I care most about: decentralization, not the particular implementation.

Peter Lawrey: A distributed ledger is a highly redundant, decentralised ledger of transactions. The purpose is to achieve high availability.  Such a ledger can perform at high throughputs, as the nodes trust each other and don’t need to validate each other’s work. This works well within a single organisational unit, which is a very common use case.

A blockchain is a distributed ledger where the nodes don’t trust each other. By trusting a protocol, instead of the nodes running a service, they can be Byzantine Fault Tolerant, where up to one-third of nodes are actively trying to defraud the system.  However, if more than one half the nodes are compromised the whole chain is. This works best when you have many individuals or organisations running a service, where there is an advantage in not having to trust each other e.g. a collection of services providers adding liquidity to a market with equal access to that service.

Arnaud Le Hors: This is a question on which not everybody agrees today but generally blockchain is considered to be one type of distributed ledger technology in which the ledger is stored as a chain of blocks. This is not the only possible form of storage though and there are distributed ledger technologies that have similar characteristics while using a different form of storage.

Vinita Rathi: A distributed ledger is a database that is spread across several nodes or computing devices. Each node replicates and saves an identical copy of the ledger. Each participant node of the network updates itself independently. The most unique feature of distributed ledger technology is that the ledger is not maintained by a central authority. Updates to the ledger are independently constructed and recorded by each node. The nodes then vote on these updates to ensure that the majority agrees with the conclusion reached. This voting and agreement on one copy of the ledger is called consensus and is conducted automatically by a consensus algorithm.

The structure of the blockchain makes it distinct from other kinds of distributed ledgers.

Blockchain, on the other hand, is one form of distributed ledger technology. Not all distributed ledgers employ a chain of blocks to provide a secure and valid distributed consensus. A blockchain is distributed across and managed by peer-to-peer networks.

Since it is a distributed ledger, it can exist without a centralized authority or server managing it, and its data quality can be maintained by database replication and computational trust. However, the structure of the blockchain makes it distinct from other kinds of distributed ledgers. Data on a blockchain is grouped together and organized in blocks. The blocks are then linked to one another and secured using cryptography.

SEE ALSO: Blockchain: Learning and unlearning the misconceptions

Svetlin Nakov: Distributed ledger technologies (DLT) are decentralized systems, which hold a sequence of transactions (ledger). The ledger is maintained by a peer-to-peer network (the DLT network) of nodes, which use a consensus algorithm to synchronize the data between the nodes in a reliable and attack-resistant manner. DLT systems can be implemented as public (permissionless) or private (permissioned) or hybrid systems. The underlying structure of the DLP can be blockchain, DAG (directed acyclic graph), hash-graph or other structure and the consensus algorithm can be proof-of-work, proof-of-stake, practical byzantine fault tolerance, asynchronous byzantine agreement or other. The DLT technologies include a large class of distributed systems and the blockchain is just a subset of them.

Blockchain technologies use a “chain of blocks” (sequence of blocks). It is a linear structure (linked list). Each block cryptographically refers to the previous and holds a set of transactions (signed documents). Transactions may hold asset transfers (in the financial sector), plain documents (in a document management systems) or results from a smart contract execution. Most blockchains use a public-key cryptosystem, typically an elliptic curve cryptography (ECC) to sign transactions. Transactions are signed by the blockchain users who control their blockchain addresses through a private key. The blockchain is maintained by a peer-to-peer network, which synchronizes the chain and constantly adds the new transactions from the users through a consensus algorithm.

In short, blockchains are a technical design and implementation of DLT, but not the only implementation.

Jana Petkanic: Distributed ledger technology could be considered as a broader term than blockchain. Not every DLT is organized in a “chain of blocks” encrypted by means of the latest cryptography tools. DLT is basically a database that is spread across several nodes. Blockchain is capable of creating digital assets in an environment where stakeholders do not trust each other.

Christian Junger: In essence, Blockchain and DLT are very similar, though there are some glaring differences between the two.

In a way, blockchain is an evolution stemming out of the DLT technology.

From a technical perspective blockchain is a specific implementation of a DLT, so in a way, blockchain is an evolution stemming out of the DLT technology. Each of these concepts requires decentralization and consensus among nodes. However, the blockchain organizes data in blocks. As far as cryptocurrencies are concerned, most of the known ones (Bitcoin, ETH, Litecoin etc.) are blockchain implementations – meaning all of them are DLTs.

However, not all cryptos are blockchain implementations, such as IOTA. So IOTA is a good example of a DLT that is not a blockchain.

We don’t want to keep you waiting so the next parts of the series will be published in the coming days.

All the blockchain experts who participated in this series are also speakers at the Blockchain Technology Conference, which starts TODAY.

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