https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/492972/gs-16-1-distributed-ledger-technology.pdf"Algorithms that enable the creation of distributed ledgers are powerful, disruptive
innovations that could transform the delivery of public and private services and
enhance productivity through a wide range of applications.
Ledgers have been at the heart of commerce since ancient times and are used to
record many things, most commonly assets such as money and property. They
have moved from being recorded on clay tablets to papyrus, vellum and paper.
However, in all this time the only notable innovation has been computerisation,
which initially was simply a transfer from paper to bytes. Now, for the first time
algorithms enable the collaborative creation of digital distributed ledgers with
properties and capabilities that go far beyond traditional paper-based ledgers.
A distributed ledger is essentially an asset database that can be shared across
a network of multiple sites, geographies or institutions. All participants within
a network can have their own identical copy of the ledger. Any changes to the
ledger are reflected in all copies in minutes, or in some cases, seconds. The
assets can be financial, legal, physical or electronic. The security and accuracy
of the assets stored in the ledger are maintained cryptographically through the
use of ‘keys’ and signatures to control who can do what within the shared ledger.
Entries can also be updated by one, some or all of the participants, according to
rules agreed by the network.
Underlying this technology is the ‘block chain’, which was invented to create
the peer-to-peer digital cash Bitcoin in 2008. Block chain algorithms enable
Bitcoin transactions to be aggregated in ‘blocks’ and these are added to a
‘chain’ of existing blocks using a cryptographic signature. The Bitcoin ledger is
constructed in a distributed and ‘permissionless’ fashion, so that anyone can
add a block of transactions if they can solve a new cryptographic puzzle to add
each new block. The incentive for doing this is that there is currently a reward
in the form of twenty five Bitcoins awarded to the solver of the puzzle for each
‘block’. Anyone with access to the internet and the computing power to solve
the cryptographic puzzles can add to the ledger and they are known as ‘Bitcoin
miners’. The mining analogy is apt because the process of mining Bitcoin is
energy intensive as it requires very large computing power. It has been estimated
that the energy requirements to run Bitcoin are in excess of 1GW and may be
comparable to the electricity usage of Ireland."
