Blockchain is a digital, decentralized, public record book or ledger while a conventional database is a centralized digital record.
But what do these descriptions mean in plain English? How is blockchain different than a conventional database? More importantly, what benefits it provides?
Read on to learn about the two key differences between blockchain and conventional databases, as well as the answers to the other two questions. You will also find out why is blockchain technology disrupting all major industries, as the BitFortune’s infographic suggests.
Blockchain Is Decentralized; Conventional Database Is Centralized
Blockchain and conventional databases are digital records. That is, information in both is stored in computer language. Both of them also run on the world wide web.
But this is where the similarities between the two end.
A conventional database typically uses a client-server network architecture, meaning the database is stored on a server manned by a group of persons referred to as administrators and connected with several computers known as clients.
The administrators have complete authority over the database. They also decide which clients have what sorts of permission. For instance, some computers in the network might have only viewing rights while some others might have editing rights.
Because the data is stored in a central location with only administrators having the full ownership of it, a conventional database is a centralized, digital record.
On the other hand, in blockchain, the data is stored on all the computers in the network at the same time. Whenever new information is added, it reflects in all connected computers simultaneously. All users of the network have equal rights. That’s why blockchain is a decentralized, digital, and public record.
Key Benefit – Blockchain Is More Secure
Data is stored in a centralized server in a conventional database. While hacking a server is extremely difficult, it is nevertheless possible. Even prestigious companies and most powerful governments in the world have had their servers breached in the past. The threat of data being compromised is real and ever-present in a client-server network design.
Since in blockchain environment information resides in all connected computers and any changes made at one address immediately reflects in all other computers, a hacker would have to not only hack all the computers but also hack them at the same time. This is almost next to impossible.
In conventional databases, a central figure verifies a transaction. For instance, let’s say you owe your friend Lucie $1,000. You want to transfer money from your account to hers. When you make the transaction from your account, your bank checks and approves the transaction and then the money reaches Lucie’s account.
In blockchain, all users verify a transaction. Suppose you make the same transaction in a blockchain where eight other people are present besides you and Lucie.
When you initiate a transaction to transfer money to Lucie’s account, all users on the network will receive a broadcast. The network will check the validity of the transaction, and if it finds nothing is amiss, the money will be transferred to Lucie.
Key Benefit – Blockchain Does Away With The Need To Trust A Central Authority
Continuing with the above example, when you transfer money conventionally you need to trust your bank to verify the transaction honestly. But what if you don’t have complete trust in this central authority? What if you suspect that the bank might transfer only part of the money to Lucie?
Blockchain application solves this problem because there’s no one principal authority here and trust is transferred from one key figure to many decentralized anonymous users.
Therefore, there’s no risk of central authority failing in blockchain, while this risk is always present in the conventional technology.
Precisely for this reason, blockchain is likely to have a huge impact on the banking sector in the near future. Still, we expect it will prove no less important for many other industries as well.