What’s the difference between a distributed ledger and a blockchain?

A blockchain is a type of distributed ledger.  But new distributed ledgers are emerging. These are databases where control over the data’s evolution is shared between entities. Here’s a handy cheatsheet.

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Yes, but what’s new with distributed ledgers?

This short post is inspired by a conversation I had recently with a couple of finance professors from top business schools who had some questions about blockchains.

Prof A explained that he had heard all the fuss about blockchains but was unsure whether it was revolutionary or evolutionary (I think the word disruptive was also used). I have written about disruption in Fintech and the Evolutionary vs Revolutionary aspects of distributed ledgers before (hint: it depends, it’s both, and yes, perhaps).

Then he asked, “Yes, but is there anything new?”

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No, “Blockchain” is not a solution looking for a problem

I have heard this comment many times:

“Blockchain” is a solution looking for a problem.

 

That is incorrect – here’s the problem statement, originally articulated in 2008:
Bitcoin whitepaper

The problem statement, to paraphrase, is

“How do people pay each other electronically without being at the behest of Financial Institutions?”

The proposed solution is:

“Bitcoin”

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In a nutshell: DTCC whitepaper on distributed ledgers – Jan 2016

In a nutshell: DTCC whitepaper on distributed ledgers – Jan 2016

On 25 Jan 2016 the DTCC released a white paper entitled “Embracing Disruption – Tapping the potential of distributed ledgers to improve the post-trade landscape”.  It is a very good read: high quality, succinct, and cuts through the hype.

I attempt to summarise for those with less time to read the full paper.

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