A distributed ledger is a distributed, cryptographically-secure database structure that allows network participants to establish a trusted and immutable record of transactional data without the need for intermediaries. A distributed ledger can execute a variety of functions beyond transaction settlement, such as smart contracts. Smart contracts are digital agreements that are embedded in code and that can have limitless formats and conditions. Distributed ledgers have proven themselves as superior solutions for securely coordinating data, but they are capable of much more, including tokenization, incentive design, attack-resistance, and reducing counterparty risk. The very first distributed ledger was the Bitcoin distributed ledger, which itself was a culmination of over a century of advancements in cryptography and database technology.

Historically, databases have incorporated a centralized client-server architecture, in which a sole authority controls the central server. This design means that data security, alteration, and deletion rests with a single point of failure. The decentralized architecture of distributed ledger databases emerged as a solution for many of the weaknesses of centralized database architecture. A distributed ledger network consists of a large number of distributed nodes––voluntary participants who must reach consensus and maintain a single transactional record together.

When a digital transaction occurs in a distributed ledger network, it is grouped together in a cryptographically-secure “block” with other transactions that have occurred in the same time frame. The block is then broadcast to the network. A distributed ledger network is comprised of nodes or participants who validate and relay transaction information.

Distributed ledger technology has a wide variety of benefits, for both global enterprises and local communities. The most commonly cited benefits of a distributed ledger are trusted data coordination, attack-resistance, shared IT infrastructure, tokenization, and built-in incentivization.