distributed ledger

Contributor(s): Sue Troy

A distributed ledger is a digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time. Everyone who has access to the ledger receives a copy and a distributed consensus protocol, such as proof of work (PoW), ensures that all copies are always in sync and contain the exact same information.  

Distributed ledgers can be thought of as a type of database, but unlike traditional databases, distributed ledgers have no central data store or administration functionality. Changes to the ledger are recorded across the participating systems in a matter of minutes or seconds and records are protected through cryptographyAn important benefit of a distributed ledger is that assets can be tracked and traded without the need for a centralized point of control. Another key benefit is that the consensus mechanism used in distributed ledgers lowers the risk of fraud, because any attempt to tamper with the information in one ledger will have to be carried out in every other copy of the ledger at the exact same time. 

Distributed ledgers are based on the concept of the double-entry bookkeeping system used in accounting. In a double entry system, each transaction is documented in at least two of an accounting system's accounts to prevent bookkeeping errors; for every credit that is recorded as equity, an equal debit is recorded as an asset. In a digital context, distributed ledgers build upon double-entry bookkeeping by recording a transaction's credit and corresponding debit simultaneously across multiple computer systems. 

In the enterprise, the most popular type of distributed ledger is a blockchain system, which originally gained popularity for supporting cryptocurrencies such as Bitcoin and Ether but has since been used for a number of innovative use cases wide across wide a range of industries.

This was last updated in October 2016

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