2021: the year Distributed Ledger Technology took off, big time
Public interest in Distributed Ledger Technology—or DLT—rose dramatically in 2017 as a result of the cryptocurrency boom. Although at the time some wrote this off as a brief trend, the last year in particular has seen the promises of this technology become impossible to dismiss.
So, what is the current state of the DLT world in 2021?
DLT is an umbrella term that encompasses various platforms and technologies. The basis of DLT is a shared ledger—a form of decentralised database that does not require a central authority in order to function (although administrators can be chosen to program and monitor access rules). DLT networks store data using cryptography, which makes them more secure than traditional databases or ledgers.
Although the concept of a distributed database goes back at least decades, most examples that exist are still reliant on a central system, which is not only less efficient than a decentralised ledger but can be a tempting target for cybercriminals.
The most well-known form of DLT is blockchain, which is most often recognised as the technology behind cryptocurrencies such as Bitcoin and Ethereum. Although the terms are often used interchangeably, blockchain is merely one type of DLT, as is DAG (or Directed Acrylic Graphs).
Although DLT is most familiar to the public for its cryptocurrency applications, it has numerous other uses.
The impact of DLT on the financial sector in 2021 alone has been immense, with new cryptocurrency trading platforms making it easier than ever before for consumers to trade in crypto. In response to widespread consumer desire for cryptocurrency options, many banks are also now considering using blockchain and cryptocurrencies.
Blockchain technology itself is also developing rapidly, with the “proof-of-stake” algorithm becoming the standard in certain protocols. Compared to the original consensus protocol “proof-of-work” (which powers Bitcoin), proof-of-stake is more economical and energy-efficient, and believed to be less vulnerable to hackers. Ethereum, one of the largest cryptocurrencies, is currently transitioning from a proof-of-work to a proof-of-stake algorithm. If proof-of-stake becomes the standard, many of blockchain’s issues around energy usage could shrink dramatically, further increasing public trust in the technology.
The innate security of decentralised ledgers makes them promising investments for many companies. In May 2021, tech giant Microsoft announced that it would be shutting down its Azure Blockchain service. Speculations that this marked a step back for DLT were corrected only weeks later, when the company announced that the service was in fact being replaced by a new, more secure Confidential Ledger still based on blockchain.
Microsoft also launched its decentralised digital identity system ION in 2021, an implementation of which had been successfully tested with the UK National Health Service. With the COVID-19 pandemic highlighting the need for reliable, secure identity information (e.g., vaccination status records), the uses of DLT in the public sector have become increasingly apparent.
DLT has also made strides in the security and accuracy of data sharing in 2021. For example, DLT platform SICCAR was used to develop an Open Referral platform that enables charity organisations to self-publish details which are instantly accessible to local authorities. Projects such as this not only reinforced DLT’s strengths in data security, but also showed its potential uses in the increasingly important arena of social value.
The blockchain distributed ledger market is expected to reach almost $140 billion USD by 2027. Aside from financial effects, promising technologies usually come with boundless speculations about their potential effects on society. DLT is no exception, with predictions ranging from making supply chains more efficient all the way to saving the planet and replacing the state.
Aside from the utopian (or, in some cases, dystopian) visions of blockchain-based societies, we can expect to see DLT play a steadily increasing role in our everyday lives in the short-to-medium-term. The COVID-19 pandemic only sped up the DLT trend as more and more financial, social, and logistical processes took place digitally. Widespread adoption of DLT could potentially change everything from the way we use banks to the way votes are counted and laws enforced.
However we choose to use it, Distributed Ledger Technology is here to stay.
