Distributed Ledger Technology and Blockchains
Crypto market in India has been going through a lot of speculation and un-forseen events. The recent RBI ban on crypto transaction by banks and the follow up judicial proceedings left the common trader helplessly waiting for a positive outcome, which is yet to be seen. Meanwhile the Department of Economic Affairs has made it clear that it does not intend to legalise or provide legal tender to cryptocurrency for the reason of volatility, and cryptocurrency still remains to be a regarded as a financial asset in India.
However, the DEA secretary Subhash Chandra Garg, in his recent statement announced that India will surely implement and participate in this DLT revolution, and crypto technologies using them for remittances and supplying crypto tokens in exchange for fiats and storing them with a key on mobile wallets, but these tokens cannot be in anyway used as a substitute of fiats or a method of payments.
The statement by the DEA secretary has raised many concerns and questions as to what does DLT mean, are DLT and Blockchain the same and what are the benefits of using such technology. Two days back a well known crypto channel CryptoKanoon conducted a twitter survey which revealed that people are confused if DLT and Blockchain are the same or different, 44% voting for both being the same and 41% voting them to be different while the rest said they has no idea. This article is intended to shed some light upon this confusion and try and educate the mass on what to expect from the DEA statement.
Difference between DLT and Blockchains
The DLT or Distributed Ledger Technology is the term coined for services that are not centralised or centrally controlled by a single party. The introduction of bitcoins in 2009 by Satoshi Nakamoto brought with it the underlying technology of Blockchains which gathered pace as a distributed record keeping mechanism and became widely adopted. The wide acceptance and popularity of Blockchains was the reason why people starting confusing DLT and Blockchain just as the implementation of certain technology become the brand name of the technology itself if it surpasses the brands popularity. DLT is like an “umbrella” under which Blockchains is just a use case or an implementation.
The key feature of blockchains is the use of Consensus Mechanism. Consensus is used in Blockchains to agree upon the addition of new block to the chain, by the nodes. In blockchains every new block is connected to the previous block through a hash key and thus the order of the blocks cannot be tangled with. Since order of the blocks cannot be changed once added to the chain and neither can the hash key be changed it is quite impossible for a hacker to go back in the chain and make changes to corrupt the chain. This makes the blockchain technology virtually impossible to hack.
The major reason for the worldwide popularity of blockchain technology was that it solved the double spend issue (double spending is where someone can spend a token or a currency that they do not own). With further advancement came the Ethereum blockchain which offered the service of developing different applications popularly known as Dapps, which could be automatically executed.
Public and Private Blockchains
So we understand that blockchain was a revolutionary use case or implementation of the DLT. Private blockchains and public blockchains are different types of DLT.
Public Blockchains/ Open Blockchains are the ones which can be used by anybody who wishes to. The blockchains is maintained by the nodes that participate in it. Since there is a huge number of people who can see the blockchain as well as regulate it, there is less chance of failure as well as corruption by any single party. This also brings transparency to the chain as everybody in the network is aware of the developments in the chains. All this is the reason why open blockchains are more widely adopted that private blockchains. Bitcoin, Ethereum and several other applications and tokens are built upon the public blockchains.
Private blockchains are the ones that can only be accessed within an institution and its members. The member must be a part of the institution to be able to participate in the chain, Hyperledger, is such a blockchain, it has its applications like Indy, Fabric, Burrow. (Refer to https://www.hyperledger.org/ for further reading).
HashGraph and Blockchains
Bitcoins introduced blockchains as the technology behind them, and since then it has been widely accepted in developing different applications. Being the first of its own kind, blockchain has its own shortcomings and problems, which is now said to be solved by the introduction of Hedera Hashgraph. Developed by Leemon Baird, the co-founder and CTO of Swirlds, in 2016, Hashgraph is believed to be a solution to the shortcomings of blockchains, as it addresses the challenges of :
1. Speed of processing
2. Challenge of fairness
3. Challenge of requiring multiple industry regulators to come together
Hashgraph has the capacity to process 250000+ tx/sec while blockchains can only process 7 tx/sec. In addition to this the security provided by Hashgraph is also said to be better than blockchains as it is proven to be completely asynchronous Byzantine. The better processing speed comes due to the use of Gossip Protocol. Also the delay and forking problem is solved by consensus and time-stamping. The Virtual Algorithm of Hashgraph invented by Leemon Baird himself, makes it easier to know how a node would vote and thus this data can be used as input to the voting mechanism.
With this article I have tried to explain the difference between DLT and Blockchains. The DEA and the India Govt have made it clear to be using crypto tech in the near future as is the demand of the market. A study by Accenture asserts that investment banks can reduce compliance cost by 30% and 50% by 2025 using DLT. Banks manage a huge amount of data and thus distributed database can help in managing the data efficiently and with lower cost. Consortiums like Hyperledger, R3 and Ethereum have taken the initiative of exploring and exploiting potential of DLT as well as Blockchains.
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