ledger database Pros and cons of blockchain for ERP

Blockchain vs. database: Similarities, differences explained

Choosing between blockchain and traditional databases -- or using them together -- requires knowing how each one handles data management and the skills needed to make them work.

Blockchain and database technologies have numerous similarities and differences and are often compared against each other.

While the two technologies can serve similar purposes and be used together, they work in different ways. Understanding how blockchain and traditional database technologies work is critical to understanding where each technology can best be used in an application deployment or service.

What is a blockchain?

A blockchain is a decentralized, distributed database or ledger that is replicated and synchronized across computers on a network. Since each computer holds a current copy of the ledger, the data isn't vulnerable to a single point of failure. The copies are updated and validated in parallel by every participant.

Blockchain is a type of distributed ledger technology. It is designed to allow the secure recording of data in an immutable ledger, which means the data theoretically can't be tampered with. Data is cryptographically hashed -- that is, converted to strings of characters that can't be easily decoded -- and stored in blocks that are chained together, which is where blockchain gets its name.

Blockchain isn't just used for storing data. It also enables cryptocurrencies such as Bitcoin and Ethereum's Ether. Blockchain technologies are also foundational to Web 3.0 (aka Web3) platforms, which often also rely on cryptocurrency and are touted as the building blocks of the next generation of the web. Blockchain enables the decentralized, peer-to-peer network approach that is a critical to the operations of Web 3.0 technologies, among them decentralized finance, non-fungible tokens and distributed applications.

What is a database?

A database is software that is used to store and retrieve data.

There are many types of databases, including relational databases, which use rows and columns to organize data. Relational databases commonly rely on SQL to let users query and access data. Among the most widely deployed relational databases are Oracle Database, Microsoft SQL Server and the open source PostgreSQL.

Another common type of database is the NoSQL database, which is actually not a single technology but can refer to nonrelational document databases and graph databases. Commonly deployed NoSQL databases include Couchbase, MongoDB and Neo4j.

Databases can serve as a system of record for financial transactions, product catalogs, healthcare systems and supply chain management, among many business uses. Databases are also commonly part of the application stack for applications such as data analytics, ERP, mobile applications and content management systems.

The difference between blockchain and database technology

The two technologies share many overlapping capabilities and can be used for some of the same uses.

Among the similarities of blockchain and databases are the following:

  • Data storage. Both allow users to store information.
  • Data queries. The ability to query data is common to both technologies.
  • Concurrency. The ability of multiple users to execute queries at the same time is a core feature.
  • Integrity and consistency. A hallmark of both technologies is a focus on maintaining data integrity and consistency.
  • Powering applications. Applications of all types use both blockchain and databases as a foundation.
  • Enabling transactions. Blockchain and database technologies are both commonly used to enable transactions, such as product purchases.

Nevertheless, there are important differences between the typical blockchain deployment and a traditional database.

Most databases are controlled and managed from a central location, while those functions are decentralized and distributed in blockchain.

While a traditional database can use encryption for security, it's not an integral part of the database or included by default. In contrast, a blockchain, by definition, includes a cryptographic hash. Cryptography is included by default and is what makes the blockchain ledger immutable.

Modern relational databases use four attributes of transactions -- atomicity, consistency, isolation and durability (ACID) -- which help to ensure that transactions are executed correctly. With blockchain, consistency comes from the consensus algorithms that synchronize data across the nodes on a chain.

graphic comparing blockchain vs. traditional database
While a blockchain has many of the same data management capabilities as a traditional database, its decentralized architecture fundamentally changes how it enables control, security and data consistency.

Advantages of using blockchain

Blockchain potentially provides significant advantages to application developers and users. Among the advantages are the following:

  • Web 3.0 integration. As a foundational element of Web 3.0, blockchain enables developers to build the decentralized applications that are expected to be a defining aspect of Web 3.0.
  • Immutable data. Each transaction in a blockchain is cryptographically hashed to keep it from being tampered with.
  • Privacy. Blockchain helps improve privacy by not requiring users to authenticate with anything more than a combination of public and private keys.
  • Fault tolerance. The distributed structure of most blockchains minimizes the risk of a single point of failure.

Advantages of using traditional databases

Traditional databases are a standard technology that has existed for decades and has many advantages, including the following:

  • Familiarity. Developers and users are likely to be far more familiar with deploying and using a traditional database. It is a tried-and-true technology that has stood the test of time.
  • Compatibility. Traditional databases are compatible with a massive array of enterprise and consumer applications developed over decades.
  • Skills. Traditional database technology has been in use for a long time in critical business processes, and the talent pool of trained database administrators is large.
  • SQL queries. SQL provides developers, data analysts and database administrators with an expansive set of capabilities to access, query and manipulate data.

Blockchain tables integrate blockchain with traditional databases

Is blockchain better than a traditional database? The question calls for a nuanced answer, in part because it's not an either-or choice.

Blockchain is considered by some observers to be one type of distributed database, much like a document database is a type of NoSQL database. For organizations that want to deploy a distributed database instead of a traditional one, blockchain is a highly secure and encrypted option.

To make matters even more interesting, traditional databases can also integrate blockchain. An increasingly popular approach to database product development is to have what is known as a multimodel database. In the multimodel approach, relational, document, graph database and other models -- including blockchain -- are all available in a single database.

Traditional database vendor Oracle, for example, began to integrate blockchain into its multimodel approach with the Oracle Database 21c update that came out in January 2021. With the Oracle approach, a blockchain table -- an immutable, cryptographically assured set of data stored in table format -- is available. It isn't the same fully decentralized approach that normally typifies blockchain, but it is blockchain nonetheless.

Oracle isn't the only traditional database vendor to embrace some of the concepts of blockchain. Microsoft introduced a distributed ledger with blockchain-type functions in its Azure SQL database in May 2021.

Dig Deeper on IT applications, infrastructure and operations

Cloud Computing
Mobile Computing
Data Center
and ESG