A microledger is a series of cryptographically generated blocks containing provable data updates. Like a blockchain, a microledger provides trustworthy, tamper-resistant data. Unlike a standard public blockchain, a block in a microledger can exist anywhere, independent of a chain. 

Imagine it is the near future. A bouncer at a club is using a microledger to check your date of birth. When you show the bouncer your driver’s license, which is now a QR code on your phone, the bouncer’s scanner picks up metadata describing the object (this is John Doe’s driver’s license), your birth year, and cryptographic proof the data belongs to you and hasn’t been tampered with. A record of the entry is created in the form of a new block that lives both on the scanner’s system and in your iPhone. 

There’s no need to put the microledger in the form of data on a singular public chain. Each block exists independently of the other. Microledgers are thus decentralized data containers and update only on demand, not in a single long chain or ledger. 

How microledgers are different from blockchains and NFTs

For all their positive qualities, blockchains are also inefficient for some use cases. They can’t store much data and what storage there is costs a lot of money. You’re often forced to use a corresponding cryptocurrency to take advantage of a blockchain, like ETH or BTC. If you lose your wallet, you lose access. Depending on the consensus mechanism used, some blockchains are also carbon-intensive, requiring a lot of energy to run.

Microledgers retain the positive qualities of blockchains—trust, immutability and tamper resistance—without the inefficiency. They are small and decentralized, only coming together in a chain on demand. As the name implies, they really are ‘micro,’ or miniature, ledgers. 

The smallness of microledgers makes them sound similar to NFTs. Unlike NFTs, microledgers make ongoing changes possible. While you can verify who owns an NFT, transfer ownership, and even code in royalties, you cannot update or change an NFT over time. This static quality of NFTs makes them great for exchanging artwork, but not for dynamic applications where data is frequently updated. 

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The many uses of microledgers

Just as Web3 is only beginning to permeate our daily lives, most microledger applications are still in development. Currently, verifiable credentials are the biggest emerging use case. A verifiable credential is cryptographic proof of a sensitive credential, such as a driver’s license, W-2 or college transcript. The IATA Travel Pass and Apple’s ID patents are examples of verifiable credentials. 

Other applications are being built as well. A research paper by the Boston Fed and MIT described the use of microledgers to build a digital dollar. Microledgers are also being developed to track insurance and miles driven for shared cars. In the world of e-commerce, they will enable people to buy, add value and sell digital items online. 

For example, a gamer who purchases a sword could add power to the weapon by winning battles with it, then resell it at a higher price. Musicians could use microledgers to track and monetize songs. When Steve contributes a guitar riff, Sydney a bass riff, and Sasha vocals, each contribution is provable and trackable. The musicians can sell rights to both the song and their individual contributions. 

The gist becomes clear: Microledgers enable people to trust, verify and track changes to data in a decentralized way. They are a new development in the evolution toward Web3, in which smallness and decentralization already occur in the form of edge computing, containerization and microservices. When it comes to data, our future is small. 

Brian Platz is the CEO and co-founder of Fluree.

This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration, and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.

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