Distributed ledger technology (DLT) refers to a digital system which records the transaction of assets wherein these transactions and their details are recorded in multiple places at the same time. It is basically a decentralized ledger of transactions across different locations and people. It eliminates manipulation and facilitates the secure and accurate storage of information via cryptography. The activities of trading in DLT system is called DLT trading.
This is possible because unlike traditional databases, distributed ledgers have no central data store or administration functionality. This is because with distributed ledgers, each node processes and verifies every item. This produces a record of each item and generates a consensus on each item’s veracity. Distributed ledgers represent a paradigm shift in record-keeping as it changes how information is gathered and communicated while allowing the recording of static data, such as a registry, and dynamic data.
How does a distributed ledger work?
Distributed ledger database are held, controlled and updated by individuals (also known as nodes). Each of them autonomously constructs the database by processing every transaction that occurs on the network and generating their supposition on the progression of the database.
Based on the transaction, all the nodes then vote on the changes to the database based with the majority agreeing on the new transaction that is accepted onto the database. They then update their versions of the database until there is a harmony. The new transaction is then written into a new block on the blockchain. For there to be a majority, over 51% of the nodes have to be in agreement. There is also no central entity with the power to overrule input into the database.
DLT is best known as the trading ground of cryptocurrencies. This is because it eliminates the business risks that arise from irrational decisions, lots of paperwork, longer processing times, manipulation of figures and provides a secure wallet source where digital assets can be stored without risks
By virtue of its operation, distributed ledger technology is foolproof. When applied to trading, DLT streamlines the process at lower costs and faster speeds.
With DLT traders get a platform that facilitates real-time, secure cryptocurrency swaps while allowing traders to trade and invest in cryptocurrencies. With DLT trading, traders can also eliminate third-parties and automate payments.DLT trading facilitates the speed of trade transactions since there are no need third-parties ( central authorities or middlemen), and makes trading cheaper since the costs of transactions are reduced. This is in addition to the ability to settle simultaneous trades instantly. Then there is the issue of improved security since manipulation of records is eliminated to a minimum. Moreover, the immutability of distributed ledgers and the transparency that this creates allows all trade transactions (documents inclusive) to be viewed by all. This allows for easy audit, reduces the risks of fraud and allows for corrective reviews in the event of trade mishaps.
