Distributed ledgers

To finish our journey into distributed systems, let's talk about a particular type of distributed system that could potentially form the basis of a large number of exciting cutting-edge technologies in the future. Distributed ledgers are a special class within distributed databases made famous recently by the prevalence of blockchain and subsequent cryptocurrencies such as Bitcoin.

Traditionally, when you make a purchase using your credit or debit card, the issuing bank acts as the centralized authority. As part of the transaction, a request is made to the bank to ascertain whether you have sufficient funds to complete the transaction. If you do, the bank keeps a record of the new transaction and deducts the amount from your balance, allowing you to complete the purchase. The bank keeps a record of this and all transactions on your account. If you ever wish to view your historic transactions and your current overall balance, you can access your account records online or via paper statements, all of which are managed by the trusted and central source—your bank.

Distributed ledgers, on the other hand, have no single trusted central authority. Instead, records are independently created and stored on separate nodes forming a distributed network, in other words, a distributed database, but data is never created nor passed through a central authority or master node. Every node in the distributed network processes every transaction. If you make a purchase using a cryptocurrency such as Bitcoin based on Blockchain technology, which is one form of distributed ledger, the nodes vote on the update. Once a majority consensus is reached, the distributed ledger is updated and the latest version of the ledger is saved on each node separately.

As described, Blockchain is one form of a distributed ledger. As well as sharing the fundamental features of distributed ledgers, in blockchain, data is grouped into blocks that are secured using cryptography. Records in blockchain cannot be altered or deleted once persisted, but can only be appended to, making blockchain particularly well suited to use cases where maintaining a secure historical view is important, such as financial transactions and cryptocurrencies including Bitcoin.