DLT or Distributed Ledger Technology refers to a technology that has a database to record transactions to make them foolproof observed Bahaa Abdul Hussein. The best and most popular use of DLT has been in cryptocurrency. Cryptocurrency is virtual currency that makes use of DLT. Beyond cryptocurrency, DLT has an important role in digital currency.

DLT and Digital Currencies

  • Before getting into digital currencies, it is important to know the essentials of DLT.
  • DLT offers an immutable ledger where transactions once recorded cannot be deleted or modified. This ensures the highest level of transparency.
  • It is a decentralized system using a network of computers with no central authority. It is another measure ensuring transparency.
  • Smart contracts can be used where contracts are executed upon certain trigger conditions being met.
  • Cryptocurrencies use DLT to do away with intermediaries and ensure faster & cheaper transactions.

DLT has been used in cryptocurrencies for all the reasons mentioned above. Going beyond cryptocurrencies, DLT’s role in digital currencies must be discussed.

The following explains why DLT should be considered for use in digital currencies:

  • When DLT is used in digital currencies, it ensures greater security. There is no possibility of manipulation ensuring highest levels of security. In the digital world, security is paramount.
  • Using DLT ensures there are no intermediaries in the system. As a result, transaction costs are lesser. People who hesitated to use digital currencies because of the costs can now access it.
  • DLT is a very transparent system. There is greater trust in the digital currency because of the use of immutable ledgers.
  • DLT can be a very important tool to increase financial inclusion. Since DLT is more secure and also cheaper, it allows access to financial services for people who could not access them earlier.

Having discussed the benefits of DLT, it is also important to know the risks and challenges involved:

  • Regulation is a key issue with regulatory agencies needing to balance innovation with protection for consumers.
  • Digital currencies can be complex. Not everyone understands how it works.
  • These currencies are not accepted as commonly as conventional currency. This creates a major obstacle for its effective adoption.

Conclusion

Distributed Ledger Technology is popular thanks to its enhanced security, transparency, and other benefits. DLT can be used in digital currencies making its use safer and also increasing its reach. The risks and challenges need to be overcome to increase the reach of digital currencies. Thank you for your interest in Bahaa Abdul Hussein blogs. For more information, please visit www.bahaaabdulhussein.com.