Distributed Ledger Technology
At the heart of any financial system is the ledger. This is used fundamentally in bookkeeping.
A ledger is maintained usually by an authority. In a private company that is the accounts department led by the Financial Director (FD) or a Chief Financial Officer (CFO).
For banking, ledgers are still used but the context is different. Banks will use ledgers to create assets (loans) and that is how new money enters the economy – one way.
What created the excitement in Fintech was the concept that the ledgers could be distributed. This involves data being repeated in ledgers held in different computer systems.
This distributed structure allowed multiple parties to access and control their own ledgers. When these ledgers are compared this then creates a consensus.
Examples of DLTs are –
The Hedera Hashgraph uses DAG technology; as does Conflux and IOTA.
DLTs remove the need for a a single authority (trusted party) and hence this enables a far cheaper and high grow network of ledgers.
The famous blockchain technology is an example of a DLT which has some additional features.