Why use a blockchain?
Understanding the significance of the innovation, there’s now buzz about the blockchain technology. This is quite related to the ease of imagining high-level opportunities. The technology however has been closely examined over the years by investing millions of dollars in studies related to the use and functioning of the blockchain technology in various scenarios.
The blockchain technology provides new tools for authentication and authorization that questions the need of central administrators, thereby, creating new digital relationships. The blockchain technology with the creation of a formal and secure digital relationship, is bent on creating a bedrock layer of the internet for transactions and interactions of value (sometimes called the ‘Internet of Value’ as against the ‘Internet of Information’ that makes use of a client-server , accounts and master copy databases used in previous years.)
With the consideration of building a digital backbone of a transactional layer to the internet, the blockchain, private cryptographic keys and cryptocurrencies may not be the option. With different groups creating a flowchart to help users decide between a blockchain and a client-server master copy database, the below factors are a summary of what has been done in the past:
Is the data dynamic with an auditable history?
The complexity of physical seals and its appearance has made it difficult to make a fake paper copy. Like inscribing something in stone, paper documents possess the quality of remaining unchanged indefinitely. But with data coming in regularly, like transactions occurring frequently, then the use of paper as a medium may not be an effective means of keeping records. Manual data entry also has it pitfalls. Therefore, if the data and history play a significant role in the digital roles they are trying to help build, blockchain’s provides a flexibility by creating the opportunity for many parties to write new entries into a system of record (database) help by many.
Should or can the data be controlled by a central authority?
There are many reasons why it is necessary for a third party to be in charge of verification and authorization and is totally appropriate and required. It is possible to secure data without connecting to a network when the most important factor is the privacy of the data. But if the regular IT infrastructure of accounts and log-ins isn’t enough for digital identity security, the solution might be the blockchain technology.
Satoshi Nakamoto wrote in his work, “Bitcoin: A Peer-to-Peer Electronic Cash System” that merchants should try to avoid situations where their customers continue to request more information than they should ordinarily require as a certain percentage of fraud is acceptable as unavoidable.
Private Key cryptography makes push transactions, which do not require central systems and elaborate accounts used in the creation of digital relationships, possible. If the database needs millions of dollars to secure shallow financial transactions, blockchain’s may be a solution.
Is the speed of the transaction the most important consideration?
If a high performance transaction that occurs in milliseconds is what is required, it is advised to remain with the traditional centralized model. Blockchain’s databases are usually slow and the storage of the data comes at a cost – for the mining of every block in a blockchain. The cost for a centralized system of data that makes use of a client-server model is cheap and the model is generally faster… for now.
Summarily, without knowing the full potential and possibilities of the blockchain, we can suggest that the case which has passed inspection has mostly been about the management and security of digital relationships as a system of record.