It’s a revolution which begins unnoticed. Distributed Ledger Technologies (DLT) such as Blockchain are a concept known to many people as the technology behind the cryptocurrency Bitcoin. But their potential to redefine how we do business and also redesign our business structures remains unclear to many. The “Chain reaction” series looks behind the hype and provides answers to the most important questions.
What precisely are DLT?
DLT are decentralized, digitally managed ledgers. By the capacity to distribute information with a high level of transparency and security, DLT have really refined the internet.
Distributed Ledgers are basically a collaboration model which is based on an old idea: the cooperative system. DLT transfer this system into the digital world. A platform does not belong to a company which can exploit monopoly structures, but preferably belongs to the users of the system. So the area of application of distributed ledgers goes far beyond digital currencies.
How do DLT work?
The video explains the technology behind Distributed Ledger technologies such as Blockchain and the steps towards an Economy of Things.
Where are the areas of application of DLT?
Potential areas of application are generally those which are built on confidence and consensus, because information such as, for example, contract details, transactions or data, are secured decentrally in a distributed ledger. Every node of the network contains data records.
This creates a system which is difficult to attack or manipulate. At the same time, all information is shared and hence is visible in the network. This transparency makes cyber-attacks even more difficult.
What does it mean?
The most important terms from the world of distributed ledger technologies explained.
Proof of Work (PoW)
Proof of Stake (PoS)
Proof of Authority (PoA)
How do DLT promote the Economy of Things?
Thanks to their decentralized, secure, transparent, and automated transaction potential, DLT allow so-called “Smart Contracts”. These are algorithmic contracts for transactions concluded between machines — without any human intervention. The resulting transactions are autonomously executed by algorithms. In such an Economy of Things, DLT create confidence, ensure fairness and consensus, and hence enable cross-industry value added networks.
4 steps towards an Economy of Things
Where is the Economy of Things already applied?
One example of an application is a project which Bosch has set up together with german energy supplier EnBW.
In this case, an electric vehicle negotiates prices or concludes a contract directly with a charging station. The user merely enters in the on-board computer how much money he is prepared to pay and how far the battery level may be run down. The rest is done by a digital agent in the vehicle which negotiates the transaction with the charging stations.
The system is open to any player worldwide and belongs to all users of the system. This infrastructure, implemented for the benefit of society, is an example of how distributed ledger technologies enable the old cooperative concept to be applied in the digital age.