Distributed Ledger

A ledger is a record of transactions or account balances.

A distributed ledger is a ledger that is shared across many computers or participants, rather than stored and controlled by a single organization.

What “distributed” means

In a distributed ledger system, many independent participants keep copies of the same record.

When updates occur, the network uses predefined rules to agree on which updates are valid and should be added to the shared record.

Distributed vs centralized ledgers

In a centralized ledger, one organization controls the record and decides what gets added or changed.

In a distributed ledger, the record is maintained across multiple participants, which can reduce reliance on a single point of control or failure.

How blockchain relates to distributed ledgers

A blockchain is one type of distributed ledger.

In a blockchain, transactions are grouped into blocks that are linked together in a sequence. Other distributed ledgers may store records differently depending on their design.

Why distributed ledgers matter in crypto

Cryptocurrency systems use shared ledgers to track ownership and transactions without requiring a central authority to maintain the record.

This is one reason crypto networks can operate across many independent participants and still keep a consistent history of transactions.

Common misunderstandings

A distributed ledger does not automatically mean a system is fully open or decentralized.

Some distributed ledgers are public and open to anyone, while others are controlled by a limited group of participants. The level of openness depends on the system’s rules and governance.

Key takeaway

A distributed ledger is a shared record maintained across multiple participants instead of a single organization.

Blockchains are one type of distributed ledger, and crypto systems use these ledgers to track transactions and ownership.

Next lesson

Distributed ledgers still need a way to agree on valid updates.

The next lesson explains how consensus mechanisms like proof of work and proof of stake function.

Read: Proof of Work vs Proof of Stake →