MoneyLife

Blockchain vs Database: What’s the Difference?

By Lindsey Ryan

Cryptocurrencies are a form of digital currency that are the hottest new thing even though they have been around for quite a few years. People are often intimidated by cryptocurrencies because they don’t understand what they are or how they are created. A blockchain and a database are very different but similar. This article will help you understand what the differences between the two are.

What is a blockchain?

There are many different types of cryptocurrencies out there in the world, and they are all essentially created the same way—using blockchains. Blockchain is a specific type of database that stores data in blocks that are chained together. 

Data arrives at the chain and creates a new block. Once this new block is filled with data, it is then chained onto the previous block through a process known as chain linking. This happens over and over again creating a long chain of blocks, or a blockchain. For reference, here are some awesome graphics to help us all understand this concept a little bit better.

Some cryptocurrencies, like Bitcoin, operate in a decentralized method. This means that no single person or system has control. Decentralized blockchains are immutable. Once the data has been entered, there is no way to redo it. The chain linking is irreversible.

What is a database?

A database is a number of different pieces of data that are electronically saved together on a computer system. You can imagine that data looks like an Excel spreadsheet filled out to the absolute maximum, except databases can store much more information than a simple spreadsheet can. 

You can think of a database as a central ledger where one person manages everything. This person has the ability to give access to those who will be updating or maintaining the cryptocurrency.

There is a specific type of database called distribution databases. They are used when the storage devices are not attached to one unit, like the CPU. Thanks to the internet, it is much simpler to connect processing units.

What’s the difference between blockchain vs database? 

The main difference between the two is centralization. The records on a database are centralized, meaning one person manages everything, whereas the records on a blockchain are decentralized, meaning multiple people have control. 

Have you ever heard the saying that a square is a rectangle, but not every rectangle is a square? Well that is similar to how blockchains and databases relate. A blockchain is a database, but a database is not a blockchain.

Problematic

Since blockchain is decentralized, it is very fault-tolerant. If one of the nodes—or a computer in a cryptocurrency peer-to-peer network—crashes, you don’t have to worry about the whole system going down. The remaining nodes will continue to work and run the blockchain. 

Databases have one main computer which is known as the managers. The data of the cryptocurrency is in the hands of one person as opposed to being shared among all of its contributors. When this database server goes down then it affects the entire system. If they never made a backup of the stored information then there isn’t a way to retrieve that data. 

Permissions

Databases are permissioned, which means that they require user accounts from a manager or administrator who sets privileges. Just as you can change the settings on your phone to allow or disallow specific things, there is one person who can say yes or no to privileges on a database. 

The privileges may be “read-only” rather than granting permission for editing the material. They can really set any type of parameter that they want. Blockchain, on the other hand, is open to anyone who would like to participate. For example, you can even buy Bitcoin art.

Transparency

Anything that is created or recorded within the blockchain is visible to anyone who requests access to it. Trust and value is added to the blockchain system because all of the information regarding a transaction cannot be hidden. 

Consensus algorithm blockchain is very important to its contributors as it finds a common agreement that is a win for the whole network.

Speed

A database system is able to work with huge amounts of data and process many transactions per second. Since databases are permissioned, they are super fast because only a few people are able to write data. The data that is recorded only goes to a few services but the data can still be made available to multiple people.

Databases are fast because unlike blockchain, which runs on seven nodes, a database doesn’t run on many nodes. It only requires a powerful server that can process data on the backend. They are actually put through tests to make sure that they are ready for the worst-case scenario.

Recursive

Have you ever typed something on your keyboard and then realize that you should have typed something else instead? All you’d have to do is hit the backspace button and it would be completely gone not to mention forgotten. 

But have you ever tried hitting the backspace button on a typewriter? You probably haven’t because there isn’t one. So, it is impossible to hit the backspace on a typewriter.

In this case, blockchain—an append-only structure—is a typewriter. A database is the oppostie. You can go back and delete what had been typed.

Blockchain is a database, but a database is not blockchain

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