Understanding DLTs, Bitcoin and Ethereum

In this video, we will explore Distributed Ledger Technologies (DLTs), compare them with traditional databases, and understand how blockchain utilizes DLTs. We'll also examine Bitcoin and BNB Smart Chain as real-world examples of DLT platforms.

What is Distributed Ledger Technology (DLT)?

A Distributed Ledger is a type of database that is shared across a network of computers. This setup allows all participants to access the same information, enabling secure and transparent updates to the data.

DLTs store and track transactions or other forms of data without relying on a central authority. Blockchain is a well-known example of a DLT, particularly used in cryptocurrency systems.

Because of their decentralized and transparent nature, DLTs are ideal for applications where security, trust, and auditability are crucial. Here are some common use cases:

• Legal documents: DLTs provide a tamper-proof way to store contracts and deeds.
• Supply chains: They enable tracking of goods from raw materials to finished products, increasing efficiency and transparency.
• Healthcare: Medical records stored on DLTs become more secure and easily shareable among providers.

DLTs vs. Traditional Databases

1. Centralization

• Traditional databases are usually controlled by a single authority.
• DLTs are decentralized, spread across many computers, with no single point of control.

2. Transparency

• All data on a DLT is visible to network participants.
• Traditional databases often restrict access and lack this level of transparency.

3. Immutability

• Once data is written to a DLT, it cannot be altered or deleted.
• This is critical for applications requiring accurate, permanent records.

4. Consensus Mechanisms

• Traditional systems use central authority for validation.
• DLTs use consensus mechanisms like:
• Proof of Work (used in Bitcoin)
• Proof of Stake (used in Ethereum)

How Blockchain Uses DLTs

Blockchain organizes data into blocks, which are added in a linear, chronological order. Each block contains a hash of the previous block, forming an unbreakable chain.

Since blockchain networks are distributed and not centrally controlled, altering data without consensus from the majority of participants is extremely difficult. This makes them resistant to tampering and censorship.

Blockchains are used in various areas including finance, logistics, and even voting systems. Common platforms include:

• Bitcoin
• Ethereum
• BNB Smart Chain

Bitcoin: The First Decentralized Cryptocurrency

Bitcoin is a peer-to-peer digital currency that uses blockchain technology to verify and record transactions. It was the first cryptocurrency and remains the most well-known.

Advantages:

• Decentralization: No central authority.
• Censorship resistance: Difficult to manipulate or restrict.

Challenges:

• Scalability: Limited number of transactions per second.
• Energy consumption: Mining uses significant computational power.
• Volatility: Price fluctuations make it unreliable as a stable currency.
• Regulation: Lack of oversight increases risk of fraud.

BNB Smart Chain (BSC)

Launched in September 2020, BNB Smart Chain is a high-performance blockchain designed for decentralized applications (dApps). It offers fast transaction speeds and low fees, making it attractive for developers.

Key Features:

• High Performance: Handles up to 100 transactions per second.
• Low Fees: Transactions typically cost less than one cent.
• Cross-Chain Compatibility: Can interact with other blockchains like Ethereum.
• EVM Compatibility: Supports smart contracts written in Solidity via the Ethereum Virtual Machine.
• Staking Mechanism: Users can stake BNB tokens to help secure the network and earn rewards.

We’ll dive deeper into Solidity and the technical details of BNB Smart Chain in later parts of the course.

Conclusion

In this video, we introduced the concept of Distributed Ledger Technologies, explored how blockchain systems like Bitcoin and BNB Smart Chain use them, and reviewed the benefits and limitations of each. These technologies are shaping the future of decentralized digital systems across industries.