Definition
An immutable ledger is a digital record-keeping system in which data cannot be changed, tampered with, or deleted once it has been recorded.
This ensures the integrity and transparency of the data in the ledger. Immutable ledgers are standard in supply chain management, digital currencies, and finance. Blockchain is one of the most notable examples of an immutable ledger.
How Immutable Ledger Works
- Participants start transactions (e.g., digital asset trading or financial).
- Transactions or entries are transmitted to network nodes, where they are verified using cryptographic methods and established rules.
- After verification, transactions are organized into blocks before being recorded into the ledger.
- Multiple network consensus mechanisms (e.g., proof of stake, proof of work, or delegated proof of stake) agree on binding transactions and their order.
- Validated blocks create distinct cryptographic hashes, connecting them in an unalterable chain.
- Modifying one block requires changing all subsequent blocks because of the hash functions and consensus.
- The decentralized nature of the network (without central control) enhances security and resilience.
- The ledger is duplicated across all nodes, ensuring consistent data availability and preserving the ledger integrity.
- The ledger’s transparency enables anyone to audit and verify transactions, increasing accountability.
Benefits of Immutable Ledger
- The data cannot be altered or deleted once entered into the ledger.
- The ledger is open source, minimizing the chances of data manipulation.
- The verification process through cryptographic methods enhances security.
- The decentralized nature makes the system more resilient to failures or attacks.
- Automated verification eliminates the need for intermediaries.
- The transparency of the ledger reduces fraud.