Traditionally Stored Data Versus Blockchain-based Databases
Decentralized systems can now be trusted thanks to Distributed Ledger Technology. Several computer devices or nodes are involved in its structure. A node may be located in more than one place.
The term blockchain does not refer to the first distributed ledger or distributed file system (e.g. BitTorrent) from which Bitcoin emerged. It was built using peer-to-peer networks, cryptography, and consensus mechanisms to build a blockchain using existing technologies.
The three components of a DLT are Standards or models for data, Languages that are common, and Consensus protocol for peer groups
All nodes in the network will be able to talk the same language and communicate seamlessly using these three elements, data standards, a common language, and a common protocol.
All 3 components are not shared among traditional ledgers and centralized systems. The data standards and protocols used by traditional ledgers may differ.
Systems may also speak different languages and require many integrations. There is no transparency between the parties involved, and they are not synchronized.
It is difficult to monitor traditional processes, data is scattered, and they look unattractive:
- The cost is higher because the ledgers must be updated by all business partners at the same time
- The ledgers are kept by each participant in an asynchronous manner
- Fraud and cyber-attacks on ledgers make it very inefficient and vulnerable. Mistakes can also be made easily
In this process, blockchain can make it much more efficient and radically transform it. Most blockchains allow parties with conflicting interests and no prior knowledge of each other to transact efficiently and reliably.
With blockchain, you can reduce transaction times, save costs, and eliminate paper compared to legacy systems. The blockchain is also tamper-proof and fully auditable.
In general, blockchains are designed so that different parties can see/verify transactions, but not modify them in the future. Depending on the business needs, any new blockchain solution can be tailored.
Blockchain can be extremely beneficial for financial institutions. A blockchain will not only offer business benefits; it will also offer non-functional advantages such as high availability: Blockchains are redundant databases, meaning that they are replicated many times. This makes them highly available.
In some cases, blockchain can offer 100% availability. In addition to business benefits, the blockchain can also provide other non-functional benefits, such as high availability – a blockchain is a redundant database, i.e. it is replicated many times.
Aside from its awesomeness, blockchain can also bring many other benefits, such as fully synchronized databases, increased security, cost savings, verifiability, and audibility.
Peer-to-peer transactions with blockchain provide participants with the ability to share updates. The ledger also includes some cryptography capabilities that ensure that participants only see relevant data according to the business logic.
The blockchain code can include smart contracts as well. Any business logic can be automated using them, including determining how assets are transferred between participants or the conditions under which a transaction occurs. In joining a blockchain network, participants are required to agree on specific rules, such as how transactions are verified and committed. Offline governance oversight is also possible in privileged blockchains. In most cases, non-profits or consortiums of companies bring offline governance models.
Whenever we build a new blockchain, we need to consider not only what business logic is required for the application, but also some characteristics common to all blockchains. Are these characteristics acceptable to all participants in that business network?
Provenance, immutability, finality, and consensus are the main characteristics of blockchains. Make sure to store your Bitcoins in a Bitcoin wallet that is secured with this technology.