# Distributed ledger technology (DLT): What it is & how it works

Distributed Ledger Technology (DLT) is a decentralized system for recording, sharing, and synchronizing data across multiple locations or participants. Unlike traditional centralized databases, DLT ensures that no single entity controls the data, making it more secure, transparent, and resistant to fraud.

The most well-known form of DLT is blockchain, but other types exist, including Directed Acyclic Graphs (DAGs) and Hashgraph.

### How Distributed Ledger Technology (DLT) works

- **Decentralized network** – Instead of a single database, multiple nodes (computers) maintain copies of the ledger.
- **Consensus mechanisms** – Nodes agree on updates through methods like Proof of Work (PoW), Proof of Stake (PoS), or Byzantine Fault Tolerance (BFT).
- **Immutable record-keeping** – Once data is recorded, it cannot be altered or deleted.
- **Real-time synchronization** – Changes are updated simultaneously across all nodes, ensuring data integrity.

DLT removes the need for central authorities, reducing reliance on banks, governments, or corporations.

### Types of Distributed Ledger Technology (DLT)

### 1. Blockchain (most common DLT)

- Organizes data in a chain of blocks.
- Uses cryptographic hashing for security.
- Examples: Bitcoin, Ethereum, Hyperledger Fabric.

### 2. Directed Acyclic Graph (DAG)

- Uses a network of transactions, rather than blocks.
- More scalable than blockchain, with faster transaction speeds.
- Examples: IOTA (Tangle), Hedera Hashgraph.

### 3. Hashgraph

- Uses gossip protocol for consensus.
- More energy-efficient than traditional blockchains.
- Example: Hedera Hashgraph (HBAR).

### DLT vs. Traditional databases

| Feature | Distributed Ledger Technology (DLT) | Centralized database |
| --- | --- | --- |
| Control | Decentralized (shared across nodes) | Centralized (one entity controls it) |
| Security | Highly secure, harder to hack | More vulnerable to data breaches |
| Data Integrity | Immutable (can't be changed) | Can be modified or deleted |
| Consensus | Uses PoW, PoS, or BFT for validation | Admin approval or central control |
| Speed | Slower (depends on consensus mechanism) | Faster (single authority) |

DLT is ideal for applications needing security and transparency, while traditional databases excel in speed and efficiency.

### Uses of Distributed Ledger Technology (DLT)

- **Cryptocurrencies & DeFi** – Bitcoin, Ethereum, and other decentralized finance applications.
- **Supply chain management** – Companies like Walmart and IBM use DLT to track goods.
- **Healthcare records** – Secure storage of patient data with permissioned access.
- **Voting systems** – Secure, tamper-proof digital voting solutions.
- **Identity management** – Blockchain-based IDs to prevent fraud.

### Benefits of Distributed Ledger Technology

- **Decentralization** – Eliminates single points of failure.
- **Security & Transparency** – Immutable records prevent fraud and unauthorized changes.
- **Faster Transactions** – Reduces the need for intermediaries.
- **Cost Efficiency** – Saves money by removing middlemen in finance, supply chains, and contracts.

### Challenges

- **Scalability Issues** – Some DLTs (like Bitcoin) have slow transaction speeds.
- **Energy Consumption** – PoW-based blockchains require high computing power.
- **Regulatory Uncertainty** – Governments are still defining policies around DLT-based systems.

## Other Glossary Terms

[**DeFi** 
DeFi, or decentralized finance, refers to blockchain-based apps that offer financial services without banks. It runs on smart contracts, giving users full control over their assets.](/content/learn/defi/index.html)

[**Blockchain trilemma** 
The blockchain trilemma is the challenge of achieving scalability, security, and decentralization at the same time. Learn why it matters — and how projects try to balance the trade-offs.](/content/learn/blockchain-trilemma/index.html)

[**Crypto Address** 
A crypto address is a unique identifier used for sending and receiving cryptocurrency on blockchain networks. Linked to a wallet](/content/learn/crypto-address/index.html)

[**Public Blockchain** 
A public blockchain is an open, decentralized network where anyone can participate, validate transactions, and view the ledger. Learn how it works, its benefits, and the challenges it faces in scalability and security.](/content/learn/public-blockchain/index.html)

[**Circulating Supply** 
Circulating supply is the number of crypto tokens actively available in the market. It impacts price, market cap, and scarcity, making it a key metric for investors. Bitcoin has ~19.5M BTC circulating, while Ethereum's supply fluctuates.](/content/learn/circulating-supply/index.html)

[**Block in a blockchain** 
A block in a blockchain is a digital record that contains a batch of verified transactions, along with metadata such as a timestamp, cryptographic hash, and a reference to the previous block.](/content/learn/block-in-a-blockchain/index.html)