As stated in our guide “What is Blockchain Technology?”, the difference between a traditional database and a blockchain begins with architecture, or how the technologies are orchestrated.
A database running on the World Wide Web is most often using a client-server network architecture.
A user (client) with permissions associated with their account can change entries that are stored on a centralized server. By changing the ‘master copy’, whenever a user accesses a database using their computer, they will get the updated version of the database entry. Control of the database remains with administrators, allowing for access and permissions to be maintained be a central authority.
This is not at all the same as with a blockchain.
For a blockchain database, each participant maintains, calculates and updates new entries into the database. All nodes work together to ensure they are all coming to the same conclusions, providing in-built security for the network.
The consequences of this difference is that blockchains are well-suited as a system of record for certain functions, while a centralized database is entirely appropriate for other functions.
Blockchains allow different parties that do not trust each other to share information without requiring a central administrator. Transactions are processed by a network of users acting as a consensus mechanism so that everyone is creating the same shared system of record simultaneously.
The value of decentralized control is that it eliminates the risks of centralized control. With a centralized database, anybody with sufficient access to that system can destroy or corrupt the data within. This makes users dependent on the administrators.
Some administrators have earned the trust put in them, for the most part. People’s money is not stolen by banks that record the money they hold in private databases, for example. And, there is a logical reason why you would want centralized control. Centralized control can be a speciality, a reason for being.
But, that also means those with control, such as a bank, need to spend billions of dollars keeping these centrally held databases from being altered by hackers or anyone else who might wish to profit from another’s loss. If the central administrators we’re trusting to keep our information secret fail in this regard, then we lose.
History of itself
Most centralized databases keep information that is up-to-date at a particular moment. They more or less are a snapshot of a moment in time.
Blockchain databases are able to keep information that is relevant now, but also all the information that has come before. Blockchain technology can create databases that have histories of themselves. They grow like ever-expanding archives of their own history while also providing a real-time portrait.
It is the expense required to compromise or change these databases that has led people to call a blockchain database immutable. It is also where we can start to see of the evolution of the database into a system of record.
While blockchains can be used systems of record and are ideal as transaction platforms, they are considered slow as databases when compared to what is possible for digital transaction technology that we see today with Visa and PayPal.
While there will certainly be improvements to this performance, the nature of blockchain technology requires that some speed be sacrificed. The way distributed networks are employed in blockchain technology means they do not share and compound processing power, they each independently service the network, then compare the results of their work with the rest of the network until there is a consensus that something happened.
Centralized databases, on the other hand, have been around for decades, and have seen their performance increase in lock-step with a formula that has come to define innovation in the digital era: Moore’s Law.
Bitcoin is a write-uncontrolled, read-uncontrolled database. That means anyone can write a new block into the chain, and anyone can read a block in the chain.
A permissioned blockchain, like a centralized database, can be write-controlled and read-controlled. That means the network or the protocol can be set up so only permissioned participants can write into the database or read the database.
But, if confidentiality is the only goal, and trust is not an issue, blockchain databases pose no advantage over a centralized database.
Hiding information on a blockchain requires lots of cryptography and a related computational burden for the nodes in the network. There is no way to do this that is more effective than simply hiding the data completely in a private database that does not even require network connectivity.
Think of all the databases Ethan Hunt has broken into in the “Mission: Impossible” series and you can get a sense of the type of confidentiality possible in the private databases.