A distributed ledger is a database that is shared and synchronised over multiple sites. The ledger contains records of contracts and transactions that have each been agreed by consensus. The consensus mechanism is based on a mutually agreed approach using defined algorithms that ensure that all data is validated and accepted at the time of transaction.

This means that transactions are simultaneously written to the ledger of each party to the transaction. The transaction details in each ledger are identical and provide a trusted record of the transaction. Each party to the contract can be certain that the records and balances they are looking at are always in agreement with the records of their counterparties. This eliminates the need for reconciliation between parties to a transaction.

When using a traditional ledger, each party maintains its own records of a transaction in their own ledger. While each ledger system may be internally consistent, they are completely independent and no party can assume that a counterparty has the same view of the same transaction. This means that statements issued by one party to another must be checked and reconciled before it can be agreed.

Category: Definitions