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Distributed Ledger Technology (DLT) is a type of digital system that records and synchronises data across multiple locations without the need for a central authority, enabling secure and transparent record-keeping.
DLT has already established itself as a crucial component of digital infrastructure, revolutionising how information is recorded, shared, and secured across industries. But what exactly is DLT, how is it being implemented, and why has it garnered the attention of governments, financial institutions, and technology innovators worldwide?
Often overshadowed by its more famous counterpart, blockchain, DLT represents a broader family of technologies that offer decentralised, tamper-resistant ways of managing data and transactions.
The fundamentals of DLT, how it works, its various forms, and its growing relevance across sectors ranging from finance and supply chains to sustainability and digital identity are key to understanding its transformative potential.
Defining Distributed Ledger Technology
Distributed Ledger Technology refers to a category of systems that allow multiple participants, known as nodes, to maintain and share a synchronised copy of a ledger, a database which records transactions or other data entries. Unlike traditional databases controlled by a single entity, DLT removes the need for central authorities, enabling direct, peer-to-peer data sharing in a secure and verifiable manner.
What makes DLT revolutionary is its ability to create a single, unchangeable record of truth without relying on intermediaries. Each transaction or data entry is cryptographically signed, timestamped, and agreed upon by the network through a process known as consensus. This not only enhances transparency but also builds trust into digital systems by design.
As the World Economic Forum puts it, DLT can ‘facilitate secure peer-to-peer data and value exchange, without needing intermediaries or central parties.’
How Does DLT Work?
At the heart of DLT is the principle of decentralisation. Decentralisation means no single party controls the data. In a DLT system, all participants store a copy of the ledger. When a new transaction occurs, it is broadcast to the network, where participants use predefined rules (consensus protocols) to verify its authenticity.
Once consensus is reached, the transaction is added to the ledger and synchronised across all nodes. Importantly, past transactions cannot be altered without the network’s permission, making the ledger tamper-resistant and auditable.
Different DLT systems use various methods to achieve consensus. These range from energy-intensive approaches like Proof of Work (PoW), made famous by Bitcoin, to more efficient models such as Proof of Stake (PoS) or alternative approaches like Byzantine Fault Tolerance (BFT) and Gossip Protocols, as used by Hedera Hashgraph.
This diversity of architectures is one reason why DLT extends far beyond blockchain alone.
Why is DLT needed?
To understand why DLT is so crucial, consider the example of traditional banking systems. In a centralised bank, all transaction records are stored and managed by the bank itself. If a bank employee or a hacker gains unauthorised access, they could potentially alter transaction records, divert funds, or even erase transaction history.
While banks have security measures in place, the centralisation of control leaves room for human error, fraud, or cyberattacks. Before DLT, there was no foolproof way to ensure that these records couldn’t be tampered with or falsified. For instance, in a cross-border payment, an intermediary might have the ability to adjust fees or transaction amounts, creating opportunities for fraud or inaccuracies.
DLT provides a solution by decentralising data storage, ensuring that each participant in the network holds a copy of the same records, and transactions are validated by consensus. This creates an immutable and transparent ledger, where tampering with any record would be immediately visible to all participants, making fraud and manipulation nearly impossible.
It’s a system that builds trust where traditional centralised models failed, offering a robust way to securely record and verify transactions in various industries.
What is an example of a DLT?
An example of a distributed ledger is blockchain technology, which is the foundation behind digital currencies like Bitcoin (BTC) and Ethereum (ETH). Blockchain records transactions in blocks that are sequentially linked to form a chain, ensuring a transparent and immutable ledger.
Each transaction on the blockchain is validated by the network, and once confirmed, the record cannot be altered, making the system highly secure. The decentralised nature of blockchain means no single authority controls the data, offering protection against fraud and manipulation.
Outside of cryptocurrencies, blockchain is widely used in industries like supply chain management —such as SUKU’s platform leveraging Hedera to track product authenticity— digital identity verification through Safe Health Systems’ Hedera-based health ID infrastructure, and voting systems like the Attica project, which uses Hedera’s Consensus Service to ensure transparent and verifiable elections.
How is DLT different from blockchain?
The terms DLT and blockchain are often confused, but they are not the same. While all blockchains are DLTs, not all DLTs are blockchains. Blockchain is a specific type of DLT where data is organised into blocks linked in a chain, which is highly secure but can be slower and less scalable.
In contrast, other types of DLTs, such as Hashgraph (developed by Hedera) and other Layer 1 networks, employ different data structures. Each variation aim to enhance scalability, speed, and energy efficiency while maintaining decentralisation and security, making them suitable for various applications beyond cryptocurrencies.
Real-World Applications of DLT
DLT’s appeal lies not only in its technical elegance but also in its real-world applicability. Across industries, the technology is enabling new forms of data management, transaction processing, and trustless collaboration.
Financial Services and Payments
In finance, DLT is driving a rethinking of how money, assets, and information move between parties. Banks and payment providers are increasingly piloting DLT to streamline cross-border payments, settlement processes, and digital securities.
Central banks, too, are exploring DLT’s potential through Central Bank Digital Currencies (CBDCs). The Bank of England is currently assessing how DLT could enhance the UK’s Real-Time Gross Settlement (RTGS) system, aiming to increase resilience and open access to new players.
Supply Chain Transparency
DLT is also making waves in supply chains, where transparency and traceability are critical. One example is AVC’s Track and Trace, a platform that uses the Hyperledger and the Hedera Consensus Service (HCS) to create tamper-proof, real-time records in pharmaceutical supply chains—helping to combat counterfeiting, improve compliance, and ensure the authenticity of medicines from production to delivery.
Another example is IBM Food Trust which utilises DLT to create immutable records of goods’ journey, reducing fraud, counterfeiting, and inefficiencies.
These applications have been particularly impactful in sectors such as food safety, pharmaceuticals, and luxury goods, where the origin and history are important.
Sustainability and Climate Action
Perhaps one of the most exciting frontiers for DLT is sustainability. From tracking carbon credits to verifying renewable energy certificates, DLT is enabling greater accountability and integrity in climate markets.
The United Nations Climate Change (UNFCCC) highlights DLT as a tool that could support climate action by improving data collection, enhancing trust, and reducing greenwashing risks in carbon offset markets. Projects such as DLT Earth and tools like Hedera Guardian are advancing this vision by offering open, auditable infrastructure for emissions tracking and environmental asset tokenisation.
Meanwhile, organisations like Toucan Protocol and Flowcarbon are leveraging blockchain-based systems to bring transparency and liquidity to voluntary carbon markets, although concerns about market manipulation and regulatory gaps remain.
What Are the Advantages of DLT?
The growing adoption of Distributed Ledger Technology is fuelled by several distinct advantages that make it a revolutionary force in digital systems and industries. At its core, DLT enables decentralised data storage, removing the need for central authorities, which fundamentally alters the way data is managed, verified, and shared.
- Transparency and Trust: All participants have a shared, immutable view of transactions.
- Security: Advanced cryptographic methods protect against fraud and unauthorised changes.
- Efficiency: By removing intermediaries, DLT can streamline processes and reduce costs.
- Resilience: Decentralised networks are less vulnerable to single points of failure.
These attributes make DLT especially valuable in sectors where data integrity, auditability, and collaboration across untrusted parties are essential.
Challenges and Barriers to Adoption
Despite its promise, DLT faces hurdles that are being addressed before widespread adoption of the emerging technology can take place by the traditional sectors and regulators.
Scalability remains a significant challenge for many DLT systems. Public blockchains, in particular, have faced criticism for their low transaction speeds and high energy consumption. Bitcoin’s annual energy consumption, for example, has been estimated at over 170 terawatt-hours (TWh), comparable to the electricity usage of Poland, according to data from Digiconomist.
However, more recent research by the MiCA Crypto Alliance suggests that Bitcoin’s energy use may not be as unsustainable as often portrayed. The analysis found that Bitcoin mining has steadily increased its reliance on renewable energy sources, growing from 20% in 2011 to 41% in 2024, and is on track to reach at least 70% by 2030.
Newer consensus models, such as Proof of Stake, used by Ethereum since its transition in 2022, and alternative DLTs like Hashgraph, aim to reduce energy usage by up to 99% while increasing transaction throughput.
Another major hurdle is the lack of interoperability between different DLT networks, which limits ecosystem growth and user adoption. Several initiatives aim to bridge these gaps, but universal standards are still lacking.
Regulatory uncertainty also presents a barrier, especially in financial services, where questions around data privacy, legal enforceability, and liability are yet to be fully resolved. The Bank for International Settlements (BIS) has emphasised the need for clear governance models and regulatory clarity to support safe DLT innovation.
What is the future of DLT?
As technical challenges are addressed and regulatory frameworks mature, distributed ledger technology is expected to support a wide range of digital innovations. Its versatility enables use cases across emerging technologies such as Web3, the Metaverse, and decentralised finance (DeFi), where transparent and secure data sharing is critical.
DLT represents an evolution in how societies manage and verify information. While it gained prominence through cryptocurrencies, its applications now extend far beyond digital currencies, offering infrastructure for more secure, efficient, and transparent digital systems.
Its use in areas such as sustainable finance, transparent supply chains, and decentralised identity solutions highlights its expanding relevance in supporting systems that demand trust and accountability by design.
For businesses, governments, and individuals, understanding DLT is becoming increasingly important, not only to keep pace with technological change but also to contribute to shaping a more transparent, resilient, and sustainable digital economy.
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