Distributed ledger

A shared record maintained and checked by many independent computers, in which a settled transfer cannot be reversed by any of them.

Example

A mistyped bank transfer is reversed by a person on a telephone; a mistyped ledger transfer has moved the entry, and nobody involved has the authority to move it back.

Important

Finality is the feature and the hazard at once. Every safeguard other financial systems provide by being able to undo a mistake has to be provided here before the transfer instead of after it.

Related terms

• Digital asset — An entry on a shared ledger, transferable by whoever holds the private key controlling it. Unlike every other instrument in this curriculum it is not a claim on an issuer, a company or a borrower.
• Private key — The secret number that authorises a change to a ledger entry. Whoever holds it controls the asset, nobody else can move it, and nobody can restore it.
• Self-custody — Holding the private key to your own digital assets, rather than leaving them with a trading venue or a custodian that holds the key for you.

Lessons that explain it

• A secret number, and one line in a shared record — What you own is not a coin and not a claim on anybody. It is the ability to authorise a change to one entry on a ledger - and who holds that ability is the whole of the risk. (10 min)

All 578 terms in the Investing glossary