Glossary of Terms
DLT - Distributed Ledger Technology is like a spreadsheet, which develops through time. However, instead of resting with a single provider, it is shared across a network. Every change is replicated, recorded and agreed by everyone. Physically, the ledger is duplicated across many computers, so it is more difficult to subvert or destroy. Distributed Ledgers use cryptography to make them resilient to attack or unauthorised change.
Blockchain - The word “blockchain” is used to describe both the foundation technologies and applications of distributed ledger technologies. This is confusing; there is no clear definition of what a blockchain is, or its capabilities, and the term blockchain infers certain specific qualities present in Bitcoin but not all DLTs. It is also a shared dataset – a log of records – but in this case shared by means of blocks that, as the name indicates, form a chain via the encryption that links them.
What’s the difference between blockchain and DLT?
There is often some confusion in distinguishing the difference between the distributed ledger technologies (DLT) and blockchain. One of the most common mistakes is to think that they are the same. As a matter of fact, DLT is an umbrella term used to describe technologies which store, distribute and facilitate the exchange of value between users, either privately or publicly, and blockchain is only one of them. Since it was the first fully functional DLT, blockchain is more well-known than block directed acyclic graphs (blockDAG), and transaction-based directed acyclic graphs (TDAG). Therefore, in the same way that the category “vehicle” covers the passenger car, the freight ship, and the space shuttle, the term DLT spans a broad set of technologies.
Cryptography - Cryptography is the science of protecting information by transforming it into a secure format. This method involves taking unencrypted data, such as a piece of text, and encrypting it using a mathematical algorithm, known as a cipher. This produces a ciphertext, a piece of information that is completely useless and nonsensical until it is decrypted. In blockchain, it is mainly used to secure the identity of the sender of information and ensuring the past records cannot be tampered with.
Encryption - Encryption is the process of converting data to an unrecognisable or "encrypted" form. It is commonly used to protect sensitive information so that only authorized parties can view it.
Hashing - Hashing is a function that converts one value to another. It is one of the fundamental pieces of blockchain technology with the goal to make the data immutable. Therefore in blockchain, the data is taken as an input and run through a hashing algorithm which gives an output of a fixed length.
Node - Any system or a device connected to a network.
Consensus protocol - A process, encoded in software, by which computers in a network reach an agreement about a set of data.
Permissioned blockchain - A shared dataset with a blockchain structure that requires participants to obtain permission before reading or writing to the chain. Contrast this with permissionless blockchains, which anyone can join, read and write.