In the old days of the Wild West, posters of wanted criminals were sent out to all sheriffs’ offices across the U.S., so lawmen knew who to watch out for. If a criminal gets caught, the updated information is resent to all sheriffs so they would no longer look for someone who is no longer on the list. Well, that’s pretty much how distributed ledgers work.
A distributed ledger is a network of autonomous computers spread around the world that record, share, and synchronize a database of transactions. Each user of the distributed ledger becomes a witness to, for example, a bitcoin transaction made over the blockchain, making it impossible for people with malicious intentions to make any alterations to the data.
Read More about a “Distributed Ledger”
The immutability or resilience to alteration of a distributed ledger is one of the main reasons why it is useful for creating smart contracts. This feature allows it to serve many practical applications.
4 Real-World Applications of Distributed Ledgers
1. Charitable Institutions
The World Food Programme (WFP) uses a distributed ledger as a means to track and secure its cash transfers related to funding its food aid for Syrian refugees. The blockchain-based system allows the institution to streamline transactions while reducing the possibility of fraud and mishandling of data. Since the organization does not have to rely on banks, it was able to reduce transaction costs by as much as 98%.
2. Utility Providers
Distributed ledgers are also used in the energy sector, particularly by environmentally conscious consumers. As more and more people turn to renewable energy sources such as solar panels and wind farms, many are considering distributed ledgers for marketplaces where they can trade excess energy with others. With the help of smart contracts, the energy marketplace allows proactive consumers or prosumers to settle transactions and trade energy seamlessly.
3. Trade Finance Sector
Distributed ledger technology has also found a place in the trade finance industry. One notable example of this is a trade transaction between Japan and Australia, wherein they used IBM’s Hyperledger Fabric platform to carry out faster delivery of trade documents. Since the materials were digitized, data creation and transmission can proceed in much less time. Both parties also benefited from the transparency of the transaction. Companies in the sector can apply the same technology to execute trade faster and more securely.
Smart contracts are also useful in some aspects of the legal industry. Distributed ledgers’ immutability will play a significant role in this sector. For example, both parties’ lawyers can’t make changes to contracts drawn without letting the other know. When signed, both parties can’t deny nor tamper with smart contracts.
These are just four of the potential applications of distributed ledgers. As shown, stakeholders can gain much from using distributed ledgers such as speedier transactions because there’s no need for intermediaries or central authorities. Distributed ledgers also reduce transaction costs. And since they are immutable, users also enjoy enhanced security and transparency.
A distributed ledger is an application of blockchain technology that users can further perfect to become a vital means of facilitating transactions across industries.