What is Distributed Ledger in Blockchain & Cryptocurrency?

By: Prof. Dr. Fazal Rehman | Last updated: May 28, 2025

A Distributed Ledger in the context of cryptocurrency is a decentralized database that is shared, replicated, and synchronized across multiple nodes (computers or devices) in a network. It records transactions and stores data in a secure and immutable way, with no central authority.

Key Features of Distributed Ledgers

1. Decentralization

   • No single entity controls the ledger.

   • Every participant (node) maintains a copy of the ledger.

2. Immutability

   • Once data is recorded, it cannot be altered or deleted without consensus.

   • Example:

     When a transaction (e.g., Alice sends 1 BTC to Bob) is added to the ledger, it is permanently recorded in a block.

     • Each block contains:

       • A list of transactions

       • A timestamp

       • A cryptographic hash of the previous block (this links them together like a chain)

     Once this block is added, it becomes part of the blockchain’s immutable history.

3. Transparency

   • Transactions are visible to all participants, promoting trust.

4. Consensus Mechanism

   • Nodes must agree on the state of the ledger before new transactions are added.

   • Common mechanisms:

     • Proof of Work (PoW) – e.g., Bitcoin

     • Proof of Stake (PoS) – e.g., Ethereum 2.0

     • Byzantine Fault Tolerance (BFT) – e.g., Hyperledger Fabric

5. Security through Cryptography

   • Uses public-key cryptography to sign transactions and hash functions to secure data.

🔁 How It Works (Simplified)

1. A transaction is created (e.g., Alice sends 1 BTC to Bob).

2. Transaction is broadcast to the peer-to-peer network.

3. Nodes validate the transaction using the consensus protocol.

4. Valid transactions are grouped into a block.

5. Block is added to the distributed ledger (blockchain).

6. All nodes update their copies of the ledger.