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My Road to Crypto – 03 – How does DLT work?

For the matter of simplicity I will use blockchain to explain how DLT works. First it is a term you certainly have heard of and second it is from a technological perspective the easiest to explain the core principles. 

To be able to understand a ledger you have to be aware of transactions. Going back to your bank account a transaction is when your salary is debited to your account. The result is a higher balance. DLT follows the same core principle. Transactions change the state of the ledger, ie. individual accounts.

Very much simplified a blockchain chains blocks to each other, hence the name blockchain. Each block lists verified and agreed upon transactions. The result is a complete overview over all accounts and their states.

Each DLT works different but this basic principle of keeping track of transactions and account states is more or less the same for all of them.

A transaction does not necessarily need to be money related.

Example transactions:

I sold 100 eggs to a pasta producers.

Pasta producer created 10 lots of pasta with my 100 eggs

Now if i figure my chicken were infected I can let the pasta producer know and he will be able to immediately take that lot off the shelves from grocery stores in order to prevent people getting sick.

In the next chapter we take a look at how transactions are verified in bitcoin.

Now we know how to reach those destinations. Stay tuned.

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