Blockchain and Your Data
Blockchain technology solves problems of auditability, security, and provenance for a variety of purposes, but it is not a panacea for data management.
- By Brian J. Dooley
- June 1, 2017
As a useful addition to the data management toolkit, blockchain has emerged as a significant focus for industry, particularly in areas that have special interests in transaction security.
The current use of blockchain is mixed, but its clearest demonstrable success remains with bitcoin and other digital currencies. To replicate this type of system for other purposes, other forms of verification need to be created, and other limitations also need to be addressed.
What Is Blockchain?
Blockchain makes sophisticated use of hashing and cryptography to create an unalterable chain of transactions that is validated by participants and shared by all. Each block contains recent transactions, data, or pointers that are encrypted, and validation of each block is contained in the next one. This means that transactions are permanent, traceable, validated on the network, and shared.
Blockchain was first implemented as the fundamental technology of the cryptocurrency bitcoin, for which it provides a globally distributed, verifiable ledger of transactions. There are special mechanisms to avoid transaction verification based on payments from mining (decryption exercises that create new bitcoins).
Although bitcoin remains by far the most prominent usage, there have been numerous attempts to incorporate blockchain in different fields, such as finance and healthcare, where security is of increasing importance. The blockchain encrypted ledger system would be suitable for cases in which documents or data need to be maintained in a secure and unalterable state and where disintermediation could result in greater efficiency.
Blockchain is inherently a data management strategy, but it is not a general data management strategy. It has a number of shortcomings that make it a special use technology, and it competes with existing cryptographic mechanisms in RDBMSs.
Pros and Cons
Blockchain can solve a number of data management problems. It provides a distributed and permanent record of transactions that can be encrypted to provide different levels of access to viewers, and new transactions are added and verified according to protocols that prevent duplication and ensure consensus.
On the other hand, blockchain can have high performance costs, and issues can arise in validation, in the degree to which data can be shared, and in overall control of data storage due to lack of a central authority. Furthermore, not all blockchains will provide all benefits; differences such as permissioned/nonpermissioned, public/private, and how transactions are validated will create wide divergence in usability for various situations.
This means blockchain technologies will be most successful in niche areas that need tamper-proof, immutable records, an extra level of security, and an audit trail or provenance for records.
State of the Art
Blockchain remains at an early stage of development, despite its rapid rise on the "hype cycle." The waters are muddied by the fact that it is a composite technology based around hashing, cryptography, and linking concepts that existed previously.
It is easy to call anything that incorporates some of these components a form of blockchain and assume that all the benefits of blockchain will accrue. However, benefits depend on the particulars of the implementation, with validation being one key factor. Inclusion of similar mechanisms in existing database systems also contributes to some confusion.
Nonetheless, focusing on blockchain concepts is creating important insights into the needs of data management today, particularly as we move away from the relatively static and robust data warehouses of the past. With the growth of nontransactional systems, NoSQL, distributed databases, and unstructured data, there is a growing demand for technologies capable of providing better security and improved data provenance for data storage and transaction systems.
Security cannot be an afterthought, and blockchain is likely to remain an important tool in creating a verifiable single version of the truth.
Brian J. Dooley is an author, analyst, and journalist with more than 30 years' experience in analyzing and writing about trends in IT. He has written six books, numerous user manuals, hundreds of reports, and more than 1,000 magazine features. You can contact the author at email@example.com.