A Breakdown of Distributed Ledgers

Accounting ledger
Accounting ledger

Ledgers are used in accounting for purposes of record keeping. They are the bedrock of financial accounting. Whenever transactions occur, records are kept for a variety of reasons. In the past this was done with written language and has progressed into the digital age. With digital technology, the advancement of cryptography, and algorithms, distributed ledgers have now become a most useful tool in record keeping.

A distributed ledger is basically a shared database that is synchronized at various locations. Its distributed framework allows participants on the network, or nodes, to record transactions which aides in providing verification and security. So every node can access records, record data, and maintain their own copies of the data or transactions. This in essence is the basis for blockchain technology which helps drive many cryptocurrencies today.

With so many nodes on the network and with each maintaining records of each and every transaction on the network, attacking and hacking the records is extremely difficult. Not only does cryptography protect many of the underlying data on the network, but the nodes on the network must agree on a change in records or the processing of a new transaction. Thus, for an attack to be successful on the network, attackers must alter every node on the network almost simultaneously.

The benefit of having distributed ledgers in that as the network grows, the security becomes stronger. There are more and more nodes to attack which requires a lot of computing power and therefore eliminates the possibility of many attacks. This decentralization of data ensures that no single party can alter records and adversely affect participants within the network. No one can destroy records, alter them in their favor, or deny or approve them arbitrarily.

Author: Sidney Lisojo

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