Today’s world is manifesting a revolution in technology that is proving beneficial in many ways. Take the case of legacy systems that have long dominated control over centralized power supplies. Bitcoin’s introduction of Distributed Ledger Technology (DLT) in 2008 finally broke the clutches of centralization to enable effective networks to operate on a global scale. A DLT subgroup called Blockchain demonstrated how decentralized finance and financial technology companies disrupted, or rather upgraded, the entire financial landscape.
A closer look at DLT
Distributed ledger technology is a decentralized digital system that enables direct transactions between parties without the need for intermediaries or a central authority to do things. Smart contract transactions are simultaneously recorded in real time in a transparent ledger, with all anonymously participating nodes or computers having a copy of it. DLT applies cryptographic validation and an automated consensus algorithm that each node follows to qualify and validate transactions before they are invariably recorded in the general ledger.
DLT can also be used for centralized ledgers that require data protection. As in a company, users are known to each other and validation of transactions is limited and transactions do not need to be verified by all participating general ledger users.
How important DLT is
When using distributed ledger technology, outdated financial processes can inevitably be disrupted in order to improve the efficiency, effectiveness, resilience and reliability of the services. Transactions can eliminate costly intermediaries through third parties such as lawyers, accountants, financial institutions and cross-border payments for good. The non-banks can now access funds via DLT. While previously the underserved population of the countries was outside the financial world.
Industry will benefit immensely from the use of distributed ledger technology, including government financial systems, manufacturing, trading, clean energy, art, music and entertainment, valuable items like diamonds, etc. The traditional record of supply chains can be disrupted for faster and faster efficient transactions, lower fees and faster money transfers.
In addition, DLT has several sources of error, which makes handling data records safer and free from manipulation. Unlike centralized databases, which are secret and prone to transplants and corruption, it has a single point of failure that can crash the system at any point in time.
Government services will greatly improve when DLT is used. Faster transactions are seen in the distribution of benefits, the transfer of title deeds, the collection of taxes and the voting system. DLT can also be an important tool in the processing and execution of legal documents. In addition, a person’s personal data can be saved and selected information exchanged in a transaction if necessary.
Distributed ledger technology is a revolutionary invention and is redefining the collection and communication of information so that it can be used for static data such as in a registry or for dynamic data such as transactions. It is more about managing a record keeping system than managing a database like simple custody. Startups and giant tech companies like Microsoft and IBM are studying the far-reaching implications of DLT. Some of the most popular DLT protocols besides Bitcoin are Ethereum, Hyperledger Fabric, Quorum, and R3 Corda.
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