EXPLAIN DLT AND HOW IT DIFFERS FROM BLOCKCHAIN IN PRACTICE

Core Concepts of DLT and Blockchain

Distributed Ledger Technology (DLT) is a decentralised database protocol that enables multiple participants to maintain a synchronised record of transactions without the need for a central authority. Each participant, or node, typically maintains an identical copy of the ledger, promoting transparency, resilience, and security through consensus algorithms.

Blockchain is a subset of DLT and represents one specific structural implementation of this concept. A blockchain organises data into discrete blocks that are cryptographically linked in a sequential chain using hashing mechanisms. Once a block is confirmed through consensus (e.g., proof-of-work or proof-of-stake), it is immutable and appended to the chain permanently.

The distinction is subtle yet significant. All blockchains are distributed ledgers, but not all distributed ledgers are blockchains.

Understanding Distributed Ledger Technology (DLT)

DLT refers broadly to any protocol that distributes data across multiple nodes, ensuring each has access to the exact same information at all times. Here are its core properties:

• Decentralisation: No central entity governs the data; instead, duties are spread across participants.
• Consensus Mechanisms: Transactions are validated through pre-agreed rules rather than a central controlling node.
• Immutability: Once a transaction is agreed upon and added to the ledger, it cannot be altered easily.
• Transparency: All participating nodes can access the same data at the same moment, enabling auditability.

Various DLT systems can vary widely in architecture and data structure. Some alternatives to blockchain include Directed Acyclic Graphs (DAGs), such as those used in IOTA or Hedera Hashgraph, which aim to optimise transaction speed and scalability without relying on chained blocks.

Blockchain's Unique Structure

Blockchain's most distinct feature is its data organisation. Instead of recording individual transactions directly on the ledger, the technology compiles them into blocks. Each block contains a timestamp, a reference to the preceding block (via hash), and a collection of transaction data.

This method ensures a fully auditable trail of data and enhances security through cryptographic linking. Because blockchains rely on consensus protocols like PoW or PoS, they tend to be more resource-intensive than other DLT variants. However, this trade-off enhances security and immutability significantly.

Thus, while blockchain is a structured and secure form of DLT, it is not the only approach available under the distributed ledger umbrella, and in some cases, it may not be the most efficient.

Key Differences in Architecture and Design

Though both DLT and blockchain share the same foundational goal—to offer decentralised and secure data management—there are several significant differences in how they achieve it. These distinctions become visible in their structural, operational, and governance frameworks.

Structural Differences: Block-Based vs Other Models

The most evident architectural divergence is how data is recorded. Blockchain uses blocks that form a chain, where each block is cryptographically connected to the previous one. This structure ensures data integrity, traceability, and security but ties the system to sequential processing.

By contrast, other DLT systems may bypass the use of blocks altogether. For instance:

• Directed Acyclic Graphs (DAGs): Instead of linking blocks, each user transaction confirms one or more previous transactions, forming a web-like ledger.
• Consensus Timestamping: Used in some DLTs like Hashgraph, which orders transactions by consensus time rather than order of addition.

These alternative architectures provide greater flexibility and can achieve higher throughput and lower latency, particularly in environments that require real-time data processing.

Consensus Mechanisms

In blockchain, consensus algorithms like Proof of Work (PoW), Proof of Stake (PoS), or their hybrids are essential to validate blocks before they can be added to the chain. These consensus methods are foundational to blockchain’s security but can consume significant computational power and time.

In other DLT architectures, consensus may be achieved more efficiently. Examples include:

• Virtual Voting: As in Hashgraph, where consensus is reached through gossip protocols and virtual voting.
• Witnessing: Seen in systems like Corda, where only parties involved in a transaction validate it, reducing the need for network-wide consensus.

Such methods can lead to faster transaction confirmation times and reduced energy consumption.

Governance and Permission Models

DLT systems may be public, private, or consortium-based, depending on their intended use and governance model:

• Public Blockchain (e.g., Bitcoin, Ethereum): Open to anyone, with fully transparent data and decentralised validation.
• Permissioned DLT (e.g., Hyperledger, Corda): Participants are selected by a central authority or consensus among peers. Access to information can be restricted.

Many DLT systems that do not employ blockchain are designed as enterprise solutions, focusing on operational efficiency, privacy, and governance flexibility. This makes them more appealing for industries like banking, insurance, and supply chain management, where privacy and compliance are paramount.

In summary, the architectural and design choices of a DLT system deeply influence its use cases, performance, and compliance posture. Blockchain represents one form that prioritises transparency and decentralisation, while other DLT forms offer diverse benefits for different business needs.

Practical Applications and Industry Impact

While the theoretical structures of blockchain and DLT are important, understanding how they function in real-world use cases sheds light on their utility. Both technologies are increasingly integral to industries ranging from finance and logistics to healthcare and governance.

Finance and Banking

Blockchains, especially public ones like Bitcoin and Ethereum, are well-known for powering cryptocurrencies. However, private DLT systems—often non-blockchain—are rapidly transforming traditional banking infrastructure:

• RippleNet: Utilises a form of DLT to facilitate cross-border payments between banks without reliance on blockchain blocks, allowing faster settlements.
• JPM Coin: Developed on Quorum, it combines elements of blockchain and permissioned DLT for internal transfers within JPMorgan Chase’s network.

These implementations aim not just to transfer money, but to improve auditability, reduce settlement times, and lower transaction fees.

Supply Chain and Logistics

DLTs offer an immutable record of goods as they move through a supply chain, improving traceability and accountability. IBM’s Food Trust, for example, leverages blockchain to document the origin and handling of food products, increasing consumer trust and recall efficiency.

However, several supply chain systems, particularly those developed by private consortia, use ledger systems that are not chained block structures. These often rely on authenticated APIs and permissioned access protocols that offer agility and better data privacy controls.

Healthcare Applications

Maintaining data integrity and privacy is vital in healthcare. DLTs allow patient records to be securely shared among authorised entities without compromising integrity. Blockchain-based systems like Medicalchain or non-blockchain DLTs like Guardtime’s KSI blockchain are being applied for patient data management, clinical research, and pharmaceutical supply tracking.

DLTs can be adapted for compliance with regulations such as GDPR or HIPAA by offering mechanisms for permissioned access and audit trails, something traditional blockchains have struggled with due to immutability and public access issues.

Public Services and Identity Verification

Government agencies worldwide are piloting DLTs for public records management, voting systems, and digital identity verification:

• Estonia’s e-Governance: Employs KSI DLT (not blockchain) for securing public records and providing timestamps and integrity validation.
• Brazil’s Judiciary: Uses blockchain to timestamp legal proceedings to enhance transparency.

Each system adopts key features suited to public accountability or citizen privacy, dictating which DLT model is chosen over another.

Which Technology Fits Best?

Ultimately, the choice between blockchain and other DLT forms depends on use case requirements. Key considerations include:

• Scalability: DAGs and non-blockchain DLTs may handle higher volumes.
• Privacy: Permissioned DLTs offer more robust controls.
• Governance: Enterprise systems require flexible and compliant frameworks.

In conclusion, while blockchain popularised the idea of decentralised ledgers, alternative DLT architectures are proving equally transformative. The practical divergence lies in adaptability—blockchains offer unparalleled transparency, while other DLTs offer tailored performance, regulatory alignment, and scalability for enterprise environments.