In 2018 I wrote a blog post about blockchain and X-Road. The aim of the post was to explain that there's no blockchain technology in X-Road, unlike multiple writings had been claiming. Despite the facts provided in the post, still today, X-Road is often called a blockchain or distributed ledger technology (DLT) based solution. X-Road has experienced several major changes since 2018, but its relationship to blockchain hasn’t changed – there’s still no blockchain technology in X-Road.
My earlier blog post already explained the difference between X-Road and blockchain. But what is DLT, and how does it differ from blockchain? And most importantly, what’s the relationship between DLT and X-Road? Let’s find out!
Distributed ledgers
Essentially, DLT or a distributed ledger is a distributed database spread across multiple nodes that all hold an identical copy of the data stored in the ledger. The data is replicated, shared, and synchronized across all the nodes, and the nodes update themselves independently. When the ledger is updated, the nodes use a consensus algorithm to agree on which copy is correct. Once the nodes reach a consensus, they all update themselves with the new copy. In other words, the consensus algorithm enables the nodes to agree on the state of the ledger.
Typically, distributed ledgers are decentralized since they are based on a distributed architecture and don't have centralized governance. However, there are distributed ledgers that have some level of central administration. Therefore, it can be argued not all the distributed ledgers are entirely decentralized.
A distributed ledger may be permissionless, permissioned, or hybrid. Permissionless ledgers are public, and everyone can participate in the network and access the data stored in the ledger. Instead, permissioned ledgers are private, and they only allow trusted nodes to join the network. In private ledgers, the information is available to a specific group of permitted participants, and a network operator decides who is allowed to join the network. In addition, there are also hybrid ledgers that are a combination of permissionless and permissioned networks, e.g., anyone can read data from the ledger, but only authorized nodes are allowed to write data to the ledger.
Distributed ledgers typically have several properties, including but not limited to immutability, transparency, and trust. All the transactions in the ledger are immutable since once a transaction exists in the ledger, nobody can change it. Distributed ledgers are transparent because all the nodes have the same copy of the data. Also, distributed ledgers enable direct trust between parties that don't necessarily trust each other. Immutability and trust are accomplished through cryptography and digital signatures.
There are various types of distributed ledgers that implement the properties differently and have their characteristics. Different kinds of ledgers include blockchain, Directed Acyclic Graph (DAG), Hashgraph, and Holochain.
Sometimes distributed ledger or DLT and blockchain are used as synonyms. However, as we have just seen, there are different types of distributed ledgers, and blockchain is just one type of distributed ledger. Blockchain is a data structure of blocks linked to one another via cryptographic hashes, but distributed ledgers don’t require such a structure or chain.
In general, blockchains are distributed ledgers, but not all distributed ledgers are blockchains. Therefore, distributed ledger and blockchain shouldn’t be used as synonyms.
Is X-Road a distributed ledger?
X-Road and distributed ledgers are both based on decentralized architecture. Distributed ledgers don't typically have central administration, which means that they're entirely decentralized. Instead, X-Road is technically decentralized, but an X-Road ecosystem is always built around a centralized governance model managed by the X-Road operator.
A fundamental difference between X-Road and distributed ledgers is that distributed ledgers are decentralized databases for storing data, while X-Road is a decentralized solution to exchange data. All the distributed ledger nodes hold the same copy of the data, and they agree on the latest version using a consensus algorithm. Instead, in X-Road, data is exchanged between two data exchange parties, and other parties do not have access to it. Also, X-Road nodes do not permanently store data - they only act as secure proxies. All the nodes of an X-Road network have their own sequence of transactions that are not shared with any other nodes – not even in a Security Server cluster. Therefore, there’s no need for a consensus algorithm in X-Road.
Based on the above reasoning, it's evident that X-Road is not a distributed ledger. Comparing X-Road and distributed ledgers is like comparing apples to oranges. However, under the hood, both distributed ledgers and X-Road use the same mechanisms, cryptography and digital signatures, to secure their operations – they’re just applied differently.
Is distributed ledger technology used in X-Road?
Distributed ledger technology is not currently used in any areas of X-Road. The data exchange always happens between two parties, and the data is not shared with other parties of the X-Road ecosystem. Even in a Security Server cluster with an external load balancer where all the nodes share the same identity, the exchanged messages are Security Server specific. Only configuration is shared between the nodes. Consequently, the logs produced by different nodes of the cluster are unique since each message is processed by one node in the cluster only. Also, the logs are stored on the nodes only temporarily - once they’ve been archived, they are removed. Therefore, there aren't currently features that would directly benefit from distributed ledgers when it comes to data exchange. Although, that doesn't mean that some additional features that aren't directly related to data exchange couldn't be implemented using distributed ledgers.
However, some other aspects of X-Road could potentially benefit from distributed ledger technology in the future. For example, how configuration details are managed on the Central Server and distributed to the X-Road ecosystem through global configuration is a potential topic to study further. Also, when thinking about X-Road’s trust model and how organizational identities of X-Road members are managed, self-sovereign identity (SSI) together with decentralized identifiers (DIDs) and verifiable credentials could provide some exciting alternatives in the future. But that’s a topic for another blog post.
All in all, X-Road’s isn’t currently based on distributed ledger technology nor blockchain. When it comes to using distributed ledger technology in X-Road, even if something can be done using distributed ledger technology, it doesn't automatically mean that it should be used. A common principle in the X-Road development is to choose the technology that’s the best fit for the job instead of selecting the most popular alternative.