Do you really need a Blockchain?


The Blockchain is a technology which is in particular attributable to its properties of allowing mutually mistrusting entities to exchange financial value and interact without relying on a trusted third party. A blockchain moreover provides an integrity protected data storage and allows to provide process transparency.

This was a brief of the abstract from a whitepaper on, “Do you need a Blockchain?” by Karl Wüst and Arthur Gervais, while Blockchain is a distributed ledger or also quoted as a distributed database it has a lot of fundamental factors which makes Blockchain different from a traditional database.

What does the Blockchain offer?

Trustlessness, privacy, redundancy, transparency are some of the factors that make the Blockchain a worthy decentralized network to shift to. Distributed cloud storage, smart property, Internet of Things, Supply Chain Management, healthcare, ownership, and royalty distribution are some of the industries Blockchain has ventured into.

But before that some keywords related to Blockchain, we denote as a ‘writer’ as any entity which writes state to the database. In a Blockchain, this would correspond to a participant that is involved in the consensus protocol and helps to grow the Blockchain.

As such, a writer is able to accumulate transactions within a block and append this block to the blockchain. Related work might also denominate a writer as a validator. We denote a ‘reader’ as any entity which is not extending the Blockchain but participating in either the transaction creation process, simply reading and analyzing or auditing the blockchain.

Do you need to shift to a decentralized database?

Before shifting to a blockchain you need to verify whether using an open or permissioned Blockchain where multiple mutually mistrusting entities would want to interact and change the state of a system and are not willing to agree on an online trusted third party, would benefit you as compared to the centralized database which is governed by a central authority.

If no data needs to be stored, no database is required at all, i.e. a blockchain, as a form of a database, is of no use. Similarly, if only one writer exists, a blockchain does not provide additional guarantees and a regular database is better suited because it provides better performance in terms of throughput and latency.

A table showing different parameters of permissionless, permissioned and a centralized database, where these parameters judge the efficiency, effectiveness and also gives the general idea of the use case of different platforms.
Image Source: Do you really need a blockchain? by Karl Wüst and Arthur Gervais

 Furthermore, some of the properties of Blockchain will be described and compared between distributed ledgers and centralized systems provide:

Public Verifiability/Trustlessness

In a distributed ledger,each transaction is confirmed by verifiers/block validators (e.g. miners in Bitcoin), which can be a restricted set of participants. Any observer, however, can verify that the state of the ledger was changed according to the protocol and all observers will eventually have the same view of the ledger, at least up to a certain
length. In a centralized system, different observers may have entirely different views of the state. As such, they might not be able to verify that all state transitions were executed correctly. Instead, observers need to trust the central entity to provide them with the correct state.

Transparency

The transparency of the data and the process of updating the state is a requirement for public verifiability. The amount of information that is transparent to an observer, however, can differ, and not every participant needs to have access to every piece of information. Only the miners who are verifying the transactions need to validate each transaction in order to ensure they have added the correct transactions in the block.

Privacy

Privacy is an important property of any system. There exists an inherent tension between privacy and transparency. Privacy is certainly easier to achieve in a centralized system because transparency and public verifiability are not required for the functioning of the system.

Integrity

The integrity of information ensures that information is protected from unauthorized modifications, i.e. that retrieved data is correct. The integrity of information is closely linked to public verifiability. If a system provides public verifiability, anyone can verify the integrity of the data; integrity can otherwise only be ensured if the centralized system is not compromised. In a decentralized network the integrity relies upon the consensus algorithm the platform is using in order to arrive at a consensus, any node in the network who doesn’t follow the rules, would get penalized, in worst case scenario he/she might not be able to validate any transaction or even possibly kicked out of the network.

Redundancy

Redundancy of data is important for many use cases. In blockchain systems, redundancy is inherently provided
through replication across the writers. In centralized systems, redundancy is generally achieved through replication on different physical servers and through backups.

This flowchart gives a better understanding of where you would need a Blockchain and you would not require one.
Image Source: Do you really need a blockchain? by Karl Wüst and Arthur Gervais

 

If you are starting a business or your existing business is planning to shift to a Blockchain based one, hope this article would have helped you to know where you need a Blockchain and where you don’t.

For more details on this article click on the link.

Image Courtesy for featured image: principalhomebuyers.com


Disclaimer: The opinions presented here are of the Authors. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. CoinScenario.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.

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