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The Surprising History of Distributed Ledger Technology
The Surprising History of Distributed Ledger Technology

September 14, 2021

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Did you know that Distributed Ledger Technology predates Bitcoin? Many people associate Blockchain with Bitcoin, and rightly so. However, the famously anonymous innovator known by Satoshi Nakomoto got his (or her) ideas from technologies that were established long before the Bitcoin whitepaper.

Both are methods of organizing transaction records in a shared, distributed database, but DLT is a broader term that includes all sorts of structures, including blockchain.

Distributed Ledger Technology

The concept of a distributed ledger can be traced back as far as the times of the Roman Empire. As is now, the problem was how to achieve consensus on the data in a decentralized, distributed, and trustless manner.

This problem is described as the Byzantine Generals’ Problem.

The Byzantine Generals’ problem describes a scenario where a general plans to launch an attack. However, since the army is very dispersed, he or she does not have centralized control. The only way to succeed is if the Byzantine army launches a planned and synchronized attack, where any miscommunication can cause the offence to fail.

The only way that the generals can synchronize a strike is by sending messages via messengers, which leads to several failure scenarios where different actors in the system behave dishonestly.

Bitcoin solved the Byzantine Generals’ Problem by providing a unified protocol, called proof of work. The Generals problem described the main obstacle to massive, distributed processing and is the foundation for distributed ledger technology, where everyone must work individually to maintain a synchronized and distributed ledger.

Where did Satoshi get his/her inspiration from?

Long before Bitcoin, in 1991, Stuart Haber and Scott Stornetta wrote “How to Time-Stamp a Digital Document.” Their paper focused on tamper-proofing digital timestamps in a distributed system using signatures.

In 1997, Tim May proposed a type of digital money based on a ‘remailers’ system that forwarded messages while preserving anonymity. This is very similar to Bitcoin that forwards transactions instead of money.

Later, in 2002 David Mazierers and Dennis Shaha proposed a way to build a trusted file system on an untrusted server.

In 2008, Satoshi Nakomoto wrote the Bitcoin whitepaper. It brought together these concepts by creating a system of direct online transactions using a peer-to-peer trustless network. Its core innovation was its proof-of-work (POW) consensus model that solved the Byzantine Generals’ Problem.

In fact, one of the currencies Satoshi makes reference to is e-cash, a system for untraceable payments that was first proposed back in 1983.

The Growth of Distributed Ledger Technologies

Since Bitcoin’s innovation, many other blockchain-based DLT networks have been created, such as Ethereum, Hyperledger, and IOTA. IOTA, for instance, is described as a cryptocurrency for the Internet of Things industry. Instead of using the chain of blocks construction, IOTA uses a ‘tangle’, a particular kind of directed graph that holds transactions. There are many examples of open-source distributed ledger platforms for decentralized app development.

Since the first Bitcoin was mined, many new technologies have emerged that build on blockchain concepts. However, as we can observe, the history of Distributed Ledger Technology predates Bitcoin because of a few reasons:

  • Distributed Ledgers date back to the Romans
  • Various parties had worked on the concept of arriving at a consensus in a distributed manner before Bitcoin.
  • Not all DLTs are blockchains, and understanding their differences may help determine which solution is best for each application area.
  • Satoshi Nakomoto, whoever he or she is, studied those early innovators and built upon them

Now the next time someone says Bitcoin came before DLT, you know what to tell them!

Author — Maria Gonzalez, DLT Labs

About the Author: Maria is a part of the Business Analysis team at DLT Labs, with experience in the Finance, Service and Production sectors. Being PMP certified, she currently works on requirements documentation for various projects. In her free time, she enjoys learning new things, reading, and swimming.


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