When did you find out blockchain and distributed ledger technology (DLT) are not the same thing? Are you finding that out just now? That’s fine. We are going to explain some basics in this blog.
Blockchain and DLT are unique in many ways, but the purpose of both is to offer an immutable and decentralized history of transactions. There’s a lot of back and forth in the industry about which is best but really they both offer certain advantages.
What is a Distributed Ledger?
A distributed ledger is a decentralized database. It is shared between an extensive network of nodes. Every node maintains the ledger and it gets updated if the data changes. Updates take place at each node individually and all these nodes have the same level of authority, which means no central authority to manage the database and that is why we can call that this technology decentralized and in case it’s made public, also transparent. Every node can update the info on the ledger while others need to validate and accept said change.
Nodes communicate changes and apply changes via consensus. A majority of nodes need to come to agreement on the changes and if one node misses out on the most recent changes, it must update its state to start participating again. Once consensus is reached with the help of cryptography, transactions are applied and the state of the ledger is changed.
An obvious advantage of DLT is that its latest state is always visible just by looking at the latest ledger. If all history is lost, the state of the last preserved ledger will still reflect that history. This history, however, will be lost. The downside is that it takes up a lot of storage space to store the whole history of a distributed ledger.
announcementStoring full XRPL history Storing full history is expensive. As of 2020-11-10, the full history of the XRP Ledger occupies approximately 14 terabytes of disk space, which must be entirely stored on fast solid state disk drives for proper server performance. Such a large amount of solid state storage is not cheap, and the total amount of history you must store increases by approximately 12 GB per day. Source
How about Blockchain?
As the name suggests a blockchain is a chain of blocks in a sequence. This setup serves the same transparency and decentralization purposes as DLT but is achieved in a slightly different way. Consensus is reached through cryptography but rather than keeping the full state of the database in each block, only transactions are applied. Cryptography is used to 1) continue the sequence of blocks and 2) to reach consensus on the content of the new block. This means that in order to see the state of the network at any given time, all the blocks up to that point must be known.
Compared to DLT this has an obvious advantage and disadvantage. The advantage is that an individual block can be smaller in size and the storage requirements to keep a full history node are smaller. The disadvantage is that all blocks must always be available to know the current state of the blockchain’s ledger of accounts. This ledger of accounts is obviously the result of all past blocks. Some services keep the full history handy so you are able to look up your address and see all its transactions in an instant.
announcementStoring the full Bitcoin history The size of all of Bitcoin’s history is slowly growing towards 400GB. Source
What should you use?
There are proponents of both and some argue that both follow the crypto ethos. There are also those that criticize one, the other or both. In principle, you should make your own conclusion of what you want to achieve. Most top coins utilize blockchain technology so you will need to figure out what you actually need. We’ll just list a few.
Bitcoin network and BTC allow a transfer of value and offers a traditionally sound system and investment.
Ethereum and ETH offer a variety of tokens and smart contracts which enable DeFi. You are able to utilize some advanced features like swaps. It can be costly to transact in times of high traffic.
Solana (SOL) and Cardano (ADA) have a lot of similarities with Ethereum and offer staking for holders of their respective native tokens. Ethereum is also on track to replace its proof-of-work system to proof-of-stake.
All of the above are blockchains and offer a variety of utility. The most prominent DLT has to be the XRP Ledger. It offers cheap and fast transactions as well as some OG DeFi functionality via its native DEX, escrows, payment channels and more. It also lets you secure your account with multisignature.
In conclusion, the market offers a huge variety of options for everyone and once you decide to use one technology, there is nothing stopping you from changing your mind. The best approach is to keep an open mind and use whatever best suits you in a given moment. Blockchains often offer a reward in exchange for something like mining or staking. A DLT like XRP can offer fast finality and other perks like an order based DEX.
Our position is that a multitude of technologies will continue to coexist at least for a while for the benefit of all participants. Once a tech becomes obsolete it will simply become redundant.