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What is Ledger?
Ledgers have been used since the dawn of accountancy. Traditionally, ledgers were books, containing financial transaction records. They were large, heavy and prone to manipulation or destruction.
Once the digital age began in the 1980s and 1990s, the majority of ledgers made the transition to being created and managed through applications on computers. These records were normally entered into applications manually and then stored on a centralized network. It is fair to state that these systems merely digitized the management of ledgers, rather than their creation, due to technological limitations.
Rapid developments in the power of computers and cryptography, along with the creation of new, sophisticated mathematical algorithms have dawned in the era of distributed ledgers.
Put into simple terms, a distributed ledger is a database that is held by every node on a network and it is updated individually by each of the participants. The method of distribution is the key difference in this case. The data from these ledgers are not divvied out by central powers on the network, rather, they are created by the users of the network and then stored by each node on the network. This means that every single node on the distributed ledger network will process each individual transaction, which will then formulate their own conclusion and carrying out a vote to ensure consensus on the conclusion is reached by the network.
Once this consensus has been reached, the ledger will then be updated. Each node will then keep its own copy of the updated data. This allows the network to extend to functions beyond that of traditional databases.