What is a blockchain?
A blockchain is a list of records called blocks. Each of these blocks contains data - in the case of Bitcoin, transactions that represent the transfer of Bitcoin from one user to another. Blockchains have some unique properties that distinguish them from standard databases and enable new uses, of which Bitcoin is the most important. Blockchains are mainly used to support distributed networks, where members of a network do not necessarily know or trust each other. Each member of the network independently keeps the entire blockchain.
Before the invention of the blockchain it was difficult for distributed parties to agree on a single source of truth, especially one that was constantly updated. How can many individuals keep independent databases and ensure that they remain synchronized? Blockchain solved this problem, known as the Byzantine General problem. However, this was at the expense of the efficiency and speed of traditional databases. Blockchain has caused a lot of excitement in recent years, but it is not a panacea. The unique characteristics of blockchain enable it to solve crucial problems, but there are significant compromises. In many cases, a traditional database is a better solution for the problem in question.
The unique features of a blockchain
Accessibility
The Bitcoin blockchain is completely public and accessible to everyone. Everyone can read and write to the Bitcoin blockchain. This design was deliberately and strictly necessary to prevent Bitcoin from being double issued and to create a free and honest money system. Most traditional databases are not open and accessible to the public for obvious reasons: an open database can be spamed or false information can be placed on it by everyone. To ensure that Bitcoin remained an open system, without gatekeepers or inspectors, the underlying database had to be accessible to everyone. However, this meant that Bitcoin had to solve various problems, including spam and false information.
Inefficiency
In order to maintain the transparency of the blockchain and to prevent spam and false information, strict requirements were set for publishing information on the blockchain. This requirement, proof-of-work , makes writing data to the blockchain much less efficient than traditional databases. A proof-of-work- based blockchain requires intensive calculations to maintain and expand. To publish a block with new data on the Bitcoin blockchain, one must play an energy-intensive council game. Although the actual calculation does not yield anything, the requirement imposes a high cost item on publishing data to the network, which occurs spam and offers an objective way for members of the network to agree on the state of the database.
The high costs of publishing data on the blockchain means that a proof-of-work blockchain is only worthwhile if it supports a free trust, decentralized system. In a centralized system, where only trusted members have the opportunity to read and write to the database, there is no need for proof-of-work or even a blockchain. A normal spreadsheet or SQL database is often sufficient.
Immobility
Another advantage of the proof-of-work mechanism of a blockchain is that, as soon as a block has been added to the blockchain, it is extremely difficult to change or remove. This enables decentralized members of the network to unanimously agree on the state of the blockchain and the data in it. Although this characteristic is a critical basis of a monetary system such as Bitcoin, database universality is only desirable in a limited number of circumstances. Most companies and individuals need databases that they can change as desired. In a system that does not require an immutability, blockchain is more a burden than an innovation.
Use cases of a blockchain
The unique properties of blockchain enable it to solve problems and support usage applications that were previously impossible. Blockchain made Bitcoin possible, a decentralized, without trust, peer-to-peer money system.
