What Is a Distributed Ledger?

Distributed ledger

Everyone does the book, whether at work checking invoices or balancing the checkbook at home. If you are old enough to remember the paper books and the transition to using a computer, then you know the convenience of punching in data in one place and having it pop up everywhere else you access the books. Distributed ledgers take that one step further; everyone in a network has the ledger and uses it to keep everyone honest.

The big difference between the ledgers used for business and the distributed ledgers of bitcoin and altcoins is that there is no central “book” held by one controlling authority. Instead, whenever a transaction takes place, such as selling a coin from one wallet to another, that transaction is copied to everyone’s ledger in the network at once. Furthermore, these ledgers serve as an accountability method; in order to engage with the network in any sort of transaction, you need a copy of the ledger and it needs to match everyone else’s. If the copies do not match, the transaction does not go through.

This is what is meant when altcoins are referred to as “trustless.” Instead of a bank or a government as a central authority, everyone keeps everyone else honest. It is not a flawless system, of course, as there are always going to be a handful of people who act in bad faith. But when investing in altcoins, the distributed ledger is a useful check against unethical actors, and it helps keep your investments open and transparent. To learn more about distributed ledgers, subscribe to the Bitcoin Market Journal newsletter today!

Comments are closed.