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Session 2.2 - Types & Features of DLT

Classifying DLT types and analyzing their key features and characteristics

Module 2 45 minutes Foundation Level

Learning Objectives

By the end of this session, you will be able to:

  • Classify DLT types and analyze key features
  • Distinguish between different DLT architectures and their use cases
  • Understand the trade-offs between different DLT implementations
  • Evaluate which DLT type is appropriate for specific scenarios
  • Analyze the key features that define distributed ledger systems

DLT Classification Overview

Classification Dimensions

Distributed Ledger Technologies can be classified along multiple dimensions, each affecting their functionality, security, and use cases.

Access Control

Who can participate in the network?

  • Public (Permissionless)
  • Private (Permissioned)
  • Consortium (Hybrid)
Data Structure

How is data organized and linked?

  • Blockchain (Linear chain)
  • DAG (Directed Acyclic Graph)
  • Hashgraph
Consensus Mechanism

How do nodes agree on validity?

  • Proof of Work
  • Proof of Stake
  • PBFT, Raft, etc.

Classification by Access Control

Public DLT
Permissionless
Characteristics
  • Open to everyone
  • No central authority
  • Fully decentralized
  • Transparent and auditable
Use Cases
  • Cryptocurrencies
  • Public records
  • Global payments
  • Decentralized applications
Examples

Bitcoin, Ethereum, Litecoin

Private DLT
Permissioned
Characteristics
  • Restricted access
  • Controlled by organization
  • Higher privacy
  • Faster consensus
Use Cases
  • Enterprise systems
  • Supply chain tracking
  • Internal auditing
  • Regulatory compliance
Examples

Hyperledger Fabric, R3 Corda

Consortium DLT
Semi-decentralized
Characteristics
  • Controlled by group
  • Semi-decentralized
  • Shared governance
  • Balanced transparency
Use Cases
  • Industry consortiums
  • Banking networks
  • Trade finance
  • Cross-organization data
Examples

Energy Web Chain, IBM Food Trust

Choosing the Right Access Model

The choice depends on your requirements:

  • Public: Maximum decentralization and transparency
  • Private: Maximum control and privacy
  • Consortium: Balance between decentralization and control

Classification by Data Structure

Blockchain

Linear chain of blocks linked by cryptographic hashes

Advantages
  • Simple and proven structure
  • Strong immutability
  • Easy to verify
  • Well-understood security
Disadvantages
  • Sequential processing
  • Scalability limitations
  • Energy intensive (PoW)
DAG (Directed Acyclic Graph)

Network structure where transactions reference multiple previous transactions

Advantages
  • Parallel processing
  • Higher throughput
  • Lower fees
  • Energy efficient
Disadvantages
  • Complex structure
  • Newer technology
  • Different security model
Hashgraph

Gossip protocol with virtual voting for consensus

Advantages
  • Fast consensus
  • Fair ordering
  • Byzantine fault tolerant
  • Low energy consumption
Disadvantages
  • Patented technology
  • Limited implementations
  • Centralized governance
Data Structure Examples
  • Blockchain: Bitcoin, Ethereum, Hyperledger Fabric
  • DAG: IOTA, Nano, Hedera Hashgraph
  • Hybrid: Some systems combine multiple structures

Key Features of DLT Systems

Distributed Storage

Data is replicated across multiple nodes

  • Redundancy: Multiple copies prevent data loss
  • Availability: System remains operational if nodes fail
  • Consistency: All nodes maintain the same data
  • Partition Tolerance: Network splits don't break the system
Cryptographic Security

Mathematical algorithms ensure data integrity

  • Hash Functions: Create unique data fingerprints
  • Digital Signatures: Verify transaction authenticity
  • Merkle Trees: Efficient data verification
  • Encryption: Protect sensitive information
Consensus Mechanisms

Protocols for reaching agreement among nodes

  • Agreement: All honest nodes reach the same decision
  • Validity: Only valid transactions are accepted
  • Termination: Consensus is reached in finite time
  • Fault Tolerance: System works despite node failures
Immutability

Historical data cannot be easily changed

  • Cryptographic Linking: Changes break the chain
  • Distributed Verification: Multiple nodes must agree
  • Computational Cost: Expensive to alter history
  • Audit Trail: All changes are recorded

Performance Characteristics

DLT Type Throughput (TPS) Latency Energy Consumption Scalability
Bitcoin (PoW) 7 10-60 minutes Very High Limited
Ethereum (PoS) 15 12 seconds Low Moderate (with sharding)
Hyperledger Fabric 3,500+ < 1 second Very Low High
IOTA (DAG) 1,000+ < 10 seconds Very Low High
Hedera Hashgraph 10,000+ 3-5 seconds Low Very High
Performance Trade-offs

Different DLT types optimize for different aspects:

  • Public blockchains: Prioritize decentralization and security over speed
  • Private networks: Optimize for speed and efficiency
  • DAG systems: Focus on scalability and low fees
  • Hybrid approaches: Balance multiple requirements

DLT Type Selection Guide

Choose Public DLT When:
  • Maximum decentralization is required
  • Global accessibility is important
  • Transparency is a key requirement
  • No single entity should control the system
  • Censorship resistance is needed

Examples: Cryptocurrencies, public records, voting systems

Choose Private DLT When:
  • High performance is required
  • Data privacy is critical
  • Regulatory compliance is needed
  • Known participants only
  • Central control is acceptable

Examples: Enterprise systems, supply chains, internal auditing

Choose Consortium DLT When:
  • Multiple organizations need to collaborate
  • Shared governance is desired
  • Semi-public transparency is needed
  • Industry standards are being developed
  • Trust exists among known parties

Examples: Banking networks, trade finance, industry consortiums

Choose DAG/Alternative When:
  • High throughput is critical
  • Low transaction fees are important
  • IoT or microtransactions are involved
  • Energy efficiency is a priority
  • Parallel processing is beneficial

Examples: IoT networks, micropayments, high-frequency trading

Session Summary

Key Takeaways
  • DLT systems can be classified by access control (public/private/consortium), data structure (blockchain/DAG/hashgraph), and consensus mechanism
  • Each DLT type offers different trade-offs between decentralization, performance, and control
  • Key features include distributed storage, cryptographic security, consensus mechanisms, and immutability
  • Performance characteristics vary significantly between different DLT implementations
  • The choice of DLT type should align with specific use case requirements and constraints
  • Understanding these classifications helps in selecting the appropriate technology for different applications

What's Next?

In the next session, we'll explore Consensus in DLT, diving deeper into how different distributed ledger systems achieve agreement among participants and the specific consensus mechanisms used in various DLT implementations.

Next: Consensus in DLT Previous: Origin of Ledgers Back to Course Home