What is a distributed ledger?

A ledger is an accounting tool that records every transaction that is carried out. A distributed ledger is held digitally within a peer to peer network whereby members of the network can add new records of transactions from anywhere anytime without the need for a third party to authorize the transactions.

Why is the ledger distributed?

It is decentralized because unlike traditional banking systems where the ledger was held in a central location, the ledger is availed to anyone in the network. If one member of the network makes a new transaction, all members of the network will be able to see. Each node in the network maintains an identical copy of the ledger.

The ledger is organized such that one record of a transaction is linked to the previous record and the subsequent record. Any change made on a record will cause changes in other records and the change will be reflected in all nodes. To limit access to the ledger to only the verified members of the network, members are required to use their digital signature to access information on the network. Distributed ledgers offer high security to the data against cyber attacks since for the attack to be successful the hacker must attack all nodes simultaneously.

In cryptocurrency and bitcoin trading, a distributed ledger is a crucial part of the system. The distributed ledger in cryptocurrency trading is implemented through a blockchain technology. The blockchain technology incorporates the use of cryptography to secure the records. This is because of the public, decentralized and permissionless networks such as this, require that measures must be taken to verify traders, authenticate transactions and keep off fraudsters. Distributed ledgers enable faster processing of transactions and offer a high level of transparency in record keeping.

Distributed ledgers have revolutionized record keeping. The technology is propelling the world to move from paper-based ledgers and centralized digital ledgers to decentralized ledgers. This kind of record keeping will play a crucial role in revolutionizing how information is gathered and communicated beyond the world of cryptocurrencies. It has the potential to transform record keeping and information sharing in government institutions and corporate institutions.

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