How distributed ledger technology works
Each node holds a full or partial copy of the ledger. A participant signs a transaction with a private key and broadcasts it, and the nodes check the signature and the balance behind it. The consensus mechanism then decides which transactions are added, and in what order.
Once enough nodes have accepted an entry, changing it would mean redoing that agreement across the network, which is what makes the record hard to alter. Ledgers differ in who may run a node: anyone on a public, permissionless ledger such as Bitcoin or Ethereum, or only approved parties on a permissioned one.
How EU law defines DLT
MiCA, Regulation (EU) 2023/1114, defines a distributed ledger in Article 3 as an information repository that keeps records of transactions and is shared across, and synchronised between, a set of DLT network nodes using a consensus mechanism. A crypto-asset is a digital representation of a value or of a right that can be transferred and stored electronically using DLT or similar technology.
Why DLT matters to a payments or crypto product
A product that holds or moves crypto-assets reads from and writes to a distributed ledger: it watches for deposits, waits for confirmations, pays network fees and signs withdrawals. The ledger settles the transfer itself, with no card scheme or correspondent bank in between, and a final transfer cannot be reversed.
The provider still keeps its own internal ledger of customer balances, reconciled against what the distributed ledger shows.
DLT or blockchain?
- Blockchain
- A distributed ledger that groups transactions into blocks, each linked to the one before by a cryptographic hash. Every blockchain is a distributed ledger, but not every distributed ledger uses blocks.
- Database
- A conventional database, even a replicated one, has one operator who can change any record. A distributed ledger spreads that control across nodes that have to agree.
Where Distributed ledger technology shows up in a platform
Modules that do the work
- Custody & walletsWallets on every major chain, with MPC custody from leading providers or your own keys.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
Platforms that need it
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.