A blockchain is often seen as just another . Is it true? What are the differences between the two and which one is better?

What is Blockchain

If you are familiar with digital currency, then you probably have heard about blockchain. A lot of people think that the purpose of blockchain is only to store information data over time. This is the common understanding that causes blockchain to be often seen as "just another database". Although blockchain has been around for more than a decade, there is still much confusion about what a blockchain is and its dichotomy with a database.

The truth is that blockchain and database are not entirely the same. They are not interchangeable because although they both store information data, they differ in design. They also have different purposes which many people perhaps are not aware of. So, let's explore the differences between blockchain and database which one is better than the other.


What Is Blockchain?

Blockchain is essentially a distributed ledger technology that is used to store information in a data structure called "blocks". The first blockchain was introduced back in 2009 with Bitcoin as the first digital currency that implemented it. Now there are many active blockchains available, each with its own unique characteristics and protocols.

Essentially, a blockchain involves many people working together to create a unified, decentralized network. All participants can communicate and share information with each other with the help of the consensus algorithm. When a user sends information to another, a transaction is created. Every transaction must be verified before being recognized as valid and recorded in the blockchain.

In order to add a block to the blockchain, people or the "miners" must compete with one another to solve a mathematical problem. This process is called "crypto mining" and it requires powerful computer hardware. The miners will then receive cryptocurrency and transaction fees as rewards for their hard work. In the Bitcoin protocol, this is called the Proof of Work (PoW) consensus algorithm.

Once a block is added to the system, the information becomes immutable and transparent to the public. As every block added requires verification from all users available on the network, it makes blockchain safer and more reliable compared to other networks.

Here are the advantages of using blockchain:

  • Decentralization
    The blockchain doesn't require access to a centralized database, but instead, all participating nodes in the network can connect with each other. It means that there is no central entity that controls all of the operations. As a result, decentralization can create a permissionless and trustless environment, allowing people to make transactions without having to deal with third parties.

  • Immutability
    Blockchain basically only allows the insertion of data, which means that any data that has been recorded in the blockchain cannot be modified or removed in any way. This makes blockchain more reliable and resistant to manipulation.

  • Time reduction
    As all transactions are processed over the Internet, they can happen almost instantly. Also, without the involvement of third parties, users wouldn't have to go through a lengthy process of verification, settlement, and clearance.

  • Security
    Blockchain uses advanced cryptographic technology so that the information is safely locked inside the blockchain. It also uses distributed ledger technology where all parties get equal access to the blockchain and database each of them holds a copy of the original chain. These features help to protect the blockchain from scams and hackers.


What Is Database?

A traditional database is a data structure that is used to store information. It can be used by many entities such as business firms, financial companies, and even governments. A database can store a large set of data up to millions of records. However, in contrast to the blockchain, the database uses a centralized ledger that is run by an administrator. The administrator can modify, manage, and control the data if necessary. All data can be changed by using a special querying language known as Structured Query Language (SQL).

Historically, databases started off with just hierarchical file systems. But it was later discovered that the system had severe limitations to it, so the system was changed to the relational model. This model is considered more useful because it can give the owner the ability to work with multiple databases at the same time. The information then can be organized effectively using a database management system. All of the data are stored in tables, which contain fields that can record various types of data known as attributes.

Databases also possess some unique features like the ability to read and write. But, only parties with special access can do the actions. Due to its centralization nature, databases can store multiple copies of the same data along with their history. Accessing and managing the data also becomes easier because it is managed by a central server.

The biggest notable drawback is perhaps the probability of corrupted data. Usually, there are multiple backups available, but not everyone uses them. Apart from that, the involvement of a single authority can also reduce the safety of the data as they can control the database and modify the data. This is why it's highly important to only use a trusted server.

Here are the advantages of using database:

  • Multiple User Interfaces and Customization
    Traditional databases can be modified and customized by the administrator depending on the requirements. It can also be distributed to various locations in which the data can be merged into a master database for queries and reports. This gives more liberty for developers to create customized applications that are user-friendly.

  • Easy Maintenance
    The centralized nature of databases makes it easier to manage and maintain the data. Typically, databases are designed for both high-volume transactions and data analytics. The system has long been tested for such operations, thus making it more reliable.

  • Data Backups
    The system provides backup and recovery systems that can add a layer of security to the data. Some databases also use an automatic backup of data so it's protected from hardware and software failures or other technical issues.


Where Does Private Blockchain Stand?

Private blockchain is a new type of blockchain that works in a closed environment. This often makes people confuse private blockchain with database. Even though they sound similar at first, they are fundamentally different. In fact, the only similarity between a private blockchain and a database is the centralized approach.

Private blockchain basically has all the properties that a regular blockchain offers, but it works in a private and permissioned ecosystem. It means that only those who are allowed by the administrator can participate in the blockchain. Sometimes, it is also integrated with databases to create a hybrid system.


Breaking Down the Differences between Blockchain and Database

We've learned that both blockchain and database are used to store information data in a certain data structure, and that's basically where the similarity ends. Now that we have discussed each term separately, it's time to make a head-to-head comparison between the two.


1. Authority and Control

This is perhaps the most notable difference between blockchain and database. Blockchains are designed to work in a decentralized nature, whereas the database is always centralized. The decentralization of blockchain is often seen as a huge milestone in the technology industry because it has a huge potential to be implemented in various other aspects of our everyday lives. Decentralization can bring many changes to the current systems and make it possible to create a trusted business environment without the need for centralized control.


2. Architecture

Blockchain and databases also have different architectures. A database is based on client or server architecture, which works both in small-scale and large-scale environments. The client is basically the receiver and the server is the centralized processing unit. Clients can communicate with the server by using a secure connection.

In contrast, blockchain uses a distributed ledger network architecture, which means it is a peer-to-peer enabled network where they can connect with one another by using secure cryptographic protocols. Because there is no centralized node, users can participate in the consensus algorithm instead. Databases simply don't have any consensus algorithm because the system is completely dependent on the centralized approach.


3. Immutability and Data Handling

In the traditional database, the data are stored rather easily and quickly. The system uses the Create, Read, Update, and Delete (CRUD) system in order to ensure that the application works smoothly. This also means that the data can be easily replaced, modified, and erased.

On the other hand, once data is stored in a blockchain, it becomes immutable. That means the data cannot be modified or removed in any way, so it is free from manipulation and corruption. Since traditional databases don't exhibit immutability, it is considered more prone to being manipulated by the administrator or hackers.


4. Transparency

In this case, blockchain has higher transparency compared to s, hence it's considered more reliable and secure. All data and transaction records written on the blockchain are open to the public, so anyone can access them from their own devices. Such transparency can boost the public's trust in the network.

In comparison, databases don't provide such transparency. Users are prohibited from accessing the whole data record by themselves and cannot verify the information if they want to. It is worth mentioning that the administrator can make a set of data public, but any modification still cannot be done by an individual.


5. Operation and Maintenance Cost

If we talk about implementation cost, a database traditional is relatively cheaper than blockchain. Blockchain does offer low-cost transactions as it eliminates the extra fees for third parties, but remember that it is still a relatively new technology that needs to be improved over time. This means that there's only a limited amount of high-skilled individuals that are capable of dealing with practical blockchain applications, hence their costs can be fairly high at times. This also shows that any entity that's planning to integrate blockchain into their business must have a proper strategy and prepare to adapt to the new technology so that the process can go smoothly.

The traditional database, on the other hand, has been used almost anywhere in the world. It is known to be able to handle both small and large-scale data with less fee and faster processes. This makes it a great choice for people who wish to quickly set up their database system at a lower price.


6. Speed and Performance

In terms of speed, database is usually faster than blockchain and it is capable of handling millions of data at any given time. All data in the database can be processed instantly by the administrator, whereas in blockchain, every transaction must wait to be verified by the miners before it can be added to the record.


Blockchain Adoption

Blockchain uses a brand-new technology that has many unique aspects, such as peer-to-peer transactions, decentralized networks, and more. Based on those features, there are several business entities that are suitable for blockchain.

Firstly, any system that requires proper verification can utilize blockchain. For instance, Business-to-Business transactions such as supply chain, distribution, and inventory management. The transparent system enables businesses to follow the data movement without experiencing much complexity. However, blockchains are still not quite capable of handling large-scale data records just yet.

Another great use case of blockchain is permissioned networks such as voting. These networks can benefit from the decentralized manner of blockchain because it can bring trust and transparency to the whole voting system.

Blockchain can also be used for automating tasks within a platform. The Ethereum blockchain has introduced the concept of smart contracts, which enables users to utilize stored procedures. That means, once a certain condition is met, the code will automatically be executed.

In summary, here are the sectors in which blockchain can be best integrated:

  • Storage value
  • Transfer value
  • Verification of trusted data
  • Monetary transactions
  • Decentralized applications (dApps)
  • Voting systems
  • Public key verification


Best Use Cases of Databases

Databases are best used for enterprise solutions or networks due to their high stability. Also, databases are known to be user-friendly and are already supported by a lot of management systems suitable for developers and administrators. They are proven capable of handling large-scale data storage used by well-known institutions.

Databases can handle millions of records and process thousands of transactions a day without any trouble. Such scale and capability make databases excellent for enterprises out there. Systems that deal with high-volume traffic, such as retail enterprises, are also perfect for databases.

Furthermore, systems that rely on speedy operations like stock exchanges are also suitable for databases for better data flow. Apart from that, the data in databases are stored without having to go through verification during the write and read process, which usually takes a while and needs additional cost. Databases also offer cost-effective systems, especially considering there's no need to do basic bookkeeping.

In a nutshell, here are the best use cases for databases:

  • Online transaction processing that needs to be fast
  • Apps or systems that utilize the continuous flow of data
  • Storing confidential information (not available to the public)
  • Apps or systems where data verification is not needed
  • Standalone apps that store data
  • Relational data


So, Which One Should You Choose?

From the explanation above, we've learned that blockchain and database are not the same. Understanding the difference is one thing, but choosing which one to use is a completely different matter. Each option has its own benefits as well as downsides, so it's best to pick based on what type of business are you working on and what you need the most.

To summarize, the database is winning when it comes to utility, speed, and accuracy. The centralized approach that it uses can provide fast and reliable data storage. Its long track record also has proven that the system is capable of handling various types of businesses, both on a small and large scale. So if you are looking for a data storage system for your high-performance apps or services, then a database is an excellent choice.

On the other hand, blockchain takes the lead when it comes to innovation, automation, and verification. Although the technology is still fairly young, it has already been used in several sectors and seems to continue expanding over time. Many people also believe that the technology has a huge potential to go even bigger in the future, so it might be helpful to learn about it as early as possible and perhaps try using it yourself.