Blockchain vs Database

As more and more enterprises are incorporating this blockchain technology in their businesses, are databases still relevant? Let’s find out.

Structural Difference Between Blockchain and Database

A database often uses a client-server network architecture. There are database administrators who may make changes to any part of the data and its structure at any given point in time. Administrators are the central authority that maintains control of the database and they’re the ones who decide who else gets access and permissions. The updated version of the database is the one that is accessible.

Blockchain itself is a database in the form of digital ledger. It combines the Internet and cryptography to cater information registration and distribution, thus, eliminating the need for a trusted party such as a bank in case of monetary transactions. Records are arranged in ‘blocks’ of data and each block is connected to the previous one by a hashing function. It forms a chain of blocks that cannot be changed.

Immutability of Blockchain

In a database, data can be easily modified or deleted. However, in the case of blockchain, modifying or deleting data is almost impossible. In fact, unalterable data entries is one of the defining features of the blockchain.

Blockchain has a write-only data structure. Every new block gets appended to the blockchain by linking to the previous block’s ‘hash’. There are no administrator permissions within a Blockchain that allow editing or deleting of data. This hash includes the Merkle root hash of all the transactions in the previous block.

If a single transaction were to change, not only would the Merkle root hash change but so too would the hash contained in the changed block. In addition, each subsequent block would need to be updated to reflect this change. This means that each user maintains, calculates and updates new entries into the database. All nodes work together to ensure they are all coming to the same conclusions.

This feature makes blockchain immutable and provides in-built security.

The Decentralization Aspect

A distributed database is suitable for an organization where all the users trust each other and do not want to keep a duplicate record of the same data. Blockchain, however, comes into play when the entities cannot trust each other.

In blockchain transactions are verified by consensus from other nodes on the blockchain.

Each one has a record of all the transactions, even those that happened in the past. Furthermore, certain rules can be built into each transaction to create automatic responses to particular outcomes.

This makes blockchain more reliable and secure.

Databases and Confidentiality

In a database, an intermediary maintains a private database of records. However, blockchain technology makes all records public. Effectively killing the need for a middleman. Since a complete copy of the chain with every transaction is held by the entire network, everyone can access that information.

While this means that if someone attempts to cheat the system or steal, they can be easily identified, blockchain may not be suitable for those who prioritise confidentiality.

In a competitive marketplace, businesses will prefer the privacy of a centralized database, rather than reveal their activities to each other. Particularly, if a trusted central party already exists and can provide the neutral territory in which that database can reside. It all comes down to what the priorities for your business are.

The Cost Aspect

Blockchain removes a lot of the complexity of setting up your own distributed database. This, in turn, helps cut down costs drastically since you will not be the only one paying for electricity and compute, everyone that is connected to the network would be too. If you’re on a budget, then blockchain might be your preferred digital ledger.

Blockchain vs Database – Which One is Right For You?

The right choice out of the two would depend on your business’ use case and preferences. If you want to do something within your network with your data and with computers that you control then databases are more suitable. On the other hand, if you need a setup where the data is highly available but you are not the only one paying for it, would not need to modify past data, need it to be immutable, and publicly accessible then blockchain is a better choice. It will also provide more transparency and reliability.