Enterprises are quietly ditching centralized information systems managed by single entities or external IT providers and gravitating towards distributed ledger technology (DLT) solutions that bring speed, accuracy, and quality to the decision-making process.
Most people still confuse blockchain with distributed ledgers because they are related, though the two are disparate. Let’s dive into this article to discover the difference and how enterprises are using DLT to transform their internal enterprise business functions.
Distributed ledger technology refers to a decentralized, distributed record of data or transactions stored in a digital system that all parties can trust in the network. However, the exact mechanisms used to guarantee trust differs from one platform to another. DLT enables users to record, share and synchronizes data and transactions across a network of participants simultaneously.
The database recorded through DLT doesn’t include central data storage or an administrator facility; instead, it’s shared among many participants or across numerous geographical locations. The records added to distributed ledgers are linked one to another, tamper resistant, and time stamped. DLT enables easy traceability and provides a robust and secure environment where stakeholders can interact directly without intermediaries.
Distributed ledger technology is categorized as public or private based on whether the ledgers are accessible by anyone or other devices and can be classified as permissioned or permissionless depending on whether users need permission from a particular entity to edit the ledgers. DLT creates a decentralized system to obtain consensus from all the participants.
Blockchains are examples of distributed ledgers as they are blocked with records updated similarly. DLT is the umbrella term describing all systems that rely on shared databases to record, process, and verify data or transaction records in an open network. You want to compare a distributed ledger to a method of keeping records where different parties can add records to a database. Like in Google Docs, every participant’s copy is kept in sync.
On the other hand, blockchain refers to a specific kind of distributed ledger where cryptography plays a crucial role in controlling new units. This system requires a trusted third party acting as an administrator to keep track of the transactions within the network to avoid duplicate transactions. Blockchain is, therefore, a database where users employ pseudonyms. While distributed ledger technologies still use cryptographic validation, they don’t necessarily use chains of blocks; DLT is a distributed database that can track anything of value.
DLT enables businesses to carry out fast and secure transactions without relying on intermediaries. By distributing control of the database and creating a tamper-proof network, distributed ledger technology offers a more accessible, efficient, and reliable platform compared to centralized ledger systems via the following:
Smart contracts are now a prominent use case of DLT among enterprises. The code defines relationships and interactions and sets clear parameters for performing predefined actions. Smart contracts act as a safeguard against fraud with some benefits, including:
The leading use cases of DLT include the following:
Banking and insurance firms are required by law to implement KYC processes to gauge the suitability of potential customers to do business with them and whether they pose any fraud risk. The meticulous process involves obtaining and authenticating personal details and checking them against public databases and consumer reporting agencies.
A firm like Tradle now uses DLT on their platform to bridge internal and external networks to help them achieve user-controlled KYC data via different devices allowing customers to share information with insurers and bankers. Due to the decentralized nature of DLT, data stored within the platform’s database is protected from hacking, and data is shared automatically whenever a customer moves to another company without it having to be checked.
Lost or inaccurate bookings are a common cause of stress and anxiety for regular travelers making customers incur fees across several supply chains as providers extract value. Australian-based Webjet has leveraged the distributed ledger’s immutability to create a platform that eliminates these irritating booking experiences.
The system records all customer entries on the firm’s immutable ledger, eliminating the likelihood of lost or mistaken bookings while reducing the layers between consumers and sellers. The ledger locates and addresses real-time data problems that could occur between travelers, hotels, and agents and sends messages to all parties involved. Besides building a secure, cheap, and efficient supply chain, the result is lower costs for hotels and travelers.
Whereas most healthcare record service providers no longer use paper-based records, most online platforms they use are prone to data breaches. Firms like BurstIQ, and MedicalChain, etc., are leveraging DLT to provide a safe and comprehensive mechanism to provide health data that’s accessible for use by doctors and clinicians while still maintaining its integrity. These firms store health data on permission-based distributed ledgers where users retain control over who uses their data and when it’s shared.
Cybersecurity has become an emerging threat to enterprises and governments. Omnia leads as an essential provider of DLT-based solutions to protect privacy and data against unauthorized access. By leveraging decentralized ledger technology, all data is securely encrypted using different cryptographic algorithms, providing a secure and transparent environment where no person or entity can tamper with data unless authorized.
Many modern-day businesses are harnessing distributed ledger technology and moving away from the risks associated with centralized systems where only one party takes responsibility, accountability, and the dangers of business data. In the face of increasing business-related expenses, fraud, unpredictability, and even worse, nothing is more critical for enterprises than having a stable ecosystem where security, trust, stability, and resilience are the norm rather than the exception. DLT offers a new business imperative that maintains data trust for business decision-making processes.