Distributed Ledger Technologies

In recent years, different distributed ledger technologies have emerged, called DLT (Distributed Ledger Technology). While many people refer to these technologies as DLTs or Blockchain interchangeably, it should be noted that Blockchain technologies are a form of DLT, but not the only one.

A DLT is a technology that allows recording, sharing and synchronizing transactions and data between multiple users in multiple locations, creating a decentralized environment.  This database is replicated to users’ computers and is updated using consensus protocols. 

Among the DLT solutions, the one that is having the greatest journey is Blockchain, a technological innovation introduced by the creator (or creators) of Bitcoin, but which is currently being used as an infrastructure that facilitates solutions far beyond its initial origin.

What is Blockchain?

Blockchain is a particular type of DLT technology that stores and transmits data in packets called “blocks” that are connected to each other in a digital “chain.”  Blockchain technologies employ cryptographic and algorithmic methods to record and synchronize data, over a distributed network, immutably.

In addition to being the underlying technology of Bitcoin, Blockchain technology is being applied to fields as diverse as cross-border payments, international transfers, registration of movable guarantees, issuance of bonds or, outside the financial field, property registries, tracking in supply chains or solutions related to digital identity, such as its application in the Civil Registry.

The advantages of this technology over centralized solutions can be summarized as:

– Decentralization,
– disintermediation,
– greater transparency and easier auditability,
– gains in speed and efficiency,
– cost reductions and
– automation and programmability.

Since it is an incipient technology, it also faces challenges that have not yet been solved and on which diverse solutions are being proposed, not yet mature. The challenges to be solved are of a technological, legal and regulatory nature such as scalability, interoperability, security, identity verification, data privacy, dispute resolution and, in general, the challenges in the development of a legal and regulatory framework for Blockchain solutions, which can bring fundamental changes in the roles and responsibilities of the participants.

From being the underlying technology to Bitcoin , there are currently many Blockchain platforms, which apply different cryptographic methods and different consensus mechanisms and can form private networks or public networks, allowed (to access they have to give you permission) or not allowed (anyone can access).

We can distinguish two types of solutions:

1. Business solutions that seek greater efficiency, lower costs and less need for intermediation. They are normally built on permissioned and in some cases private Blockchain platforms, and can be vertical (Banking, Insurance, Energy, Transportation, etc.) or horizontal (for example, the platform that Alastria builds).
2. Universal solutions that above all seek disintermediation and anonymity. According to our expert at the Future Trends Forum, Jerry Brito, this is where the greatest degree of innovation and the greatest capacity for profound social changes to take place lies.

The most advanced platforms incorporate the ability to embed programming within the transactions that are recorded in the blocks, allowing certain actions to be executed when certain conditions are met. This is what is called “Smart contracts”.

The most popular Blockchain platforms are: Bitcoin, Ethereum, EOSIO, Hedera Hashgraph, Hyperledger, NEO, OpenChain, Quorum, R3 Corda or Stellar.

For our expert, Jerry Brito, the biggest innovation that has occurred in recent years in relation to public and non-permitted Blockchain platforms, in addition to the appearance and consolidation of Ethereum, is “Lightning Network”   It is a layer of software on Bitcoin that seems to solve the problems that have been attributed to Bitcoin so far: Lack of scalability, price of transactions, speed of execution. Lightning Network promises the possibility of making instant payments thanks to “smart contracts” that will not require the creation of a transaction for each payment and the possibility of making micro payments at practically zero prices per transaction.

On the other hand, Jerry predicts that of the multiple existing Blockchain platforms, a handful of them will end up being imposed (no more than 2 or 3), with Bitcoin and Ethereum being two of the candidates practically safe for him.