In recent years Blockchain has gained much momentum due to the popular cryptocurrencies. Also, there are quite a few reasons why Blockchain has been why businesses are trying to use the good features. However, only a few know about Blockchain alternatives and their different examples.
Although available with numerous features, the technology has been referred to as slow as it takes much time to authenticate the transactions as it passes through various nodes.
There are already various existing blockchain alternatives that provide better performance than Blockchain. In addition, businesses may also want to opt for these available alternative options and new tools that will help them reduce their costs, simplify integration challenges, and simplify the development process.
While there are plenty of articles you may find telling you different things about the various alternatives of Blockchain, we have mentioned some of them that you should look at and decide for yourself if they are better. But before reading further about them, we will throw some light on the Blockchain.
Blockchain is a technology that works as a database that stores digital data in blocks, so they are chained together. While it still differs from the preexisting database due to its structuring of data.
The block does the function of storing information. The new data that comes in enters into a new block. Once data is filled in the block, it is chained with the previous block, creating a chain of data interlinked in chronological order together. Here each block will differ from the previous blocks.
In the world of crypto coins, such as Bitcoin, Ethereum, and others, blockchain technology is best known for storing and maintaining records of transactions.
In the Blockchain, there is a guarantee of data integrity. This data integrity feature assures us that the data is secured, and the critical point to mention here is that there is no involvement of any third party here.
Also, in the case of the current information stored, the Blockchain does not make any changes or alterations, and its function is to keep and distribute the data and not edit it.
Hence as the records are neither altered nor deleted or destroyed, it is assured that the information here will be safe. The data in the blocks get stored, and every time a new transaction takes place, it gets stored along with the pre-stored information in the form of a record permanently, and hence is not possible to reverse it. So Here you know all about what Blockchain is. Now let us move forward towards the blockchain alternative.
Read about public and private blockchains here
Centralized Databases
You talk to anyone from the traditional blockchain community about the reason for using blockchain technology, and the only thing you hear is, “Blockchains are decentralized.”While the community would celebrate the fact that the database is decentralized, there is real value in managing one highly optimized record system in a centralized database.
Decentralized blockchains face significant scalability issues, and these issues will increase further as more people join the networks. On the other hand, centralized databases like Visa are doing much better; they provide better scalability per transaction than decentralized Bitcoin blockchain networks.
If you compare Bitcoin and VISA’s transaction speed, you will find a vast difference between them. The Bitcoin network can only perform 4.6 transactions per second, while when compared with VISA, it can do over 1700 transactions per second. It means that it can do 150 million transactions per second in a day. So there is a vast scope for growth.
Centralized databases, unlike decentralized databases, are maintained at a single location only, and they are managed and modified through a centralized system used by organizations. Since all data gets stored at a single location only thus, it is easier to access and coordinate data. But at times, it can happen that as a central authority manages all the data, if any system failure occurs at the centralized database system, the entire data will be destroyed.
Centralized Ledgers
The next one on the list is centralized ledgers. A centralized ledger system is a system where a compilation of all transactions is controlled or handled by a single authority, i.e., it has been controlled through a single point of control. It tracks all of a company’s assets, liabilities, equity, revenue, and expenses in one centralized ledger, also called a general ledger.
A ledger is required for recording any transaction or maybe anything that holds a financial value, even if it costs a single penny. In today’s time, a computerized ledger, i.e., Enterprise resource planning (ERP), works as a central repository for accounting purposes where the data is transferred from all sub-ledgers cash management, fixed assets, purchasing, and projects.
For any organization holding data, be it financial or non-financial, a general ledger is essential as it is the backbone of any financial ledger. A general ledger is nothing but the collection of all accounts. Places that don’t prefer using computerized systems and prefer working manually, in that case, they may have a large book. Accounts in the general ledger can contain one page or even more pages.
For a long time, a central ledger has been used to manage all the accounting work, including recording the company’s financial transactions with different companies and entities for financial analysis, tax reporting, and more. The downside of this approach is that it has a disadvantage, although it is efficient. The ledger is vulnerable to any mistakes made by any central authority, either intentionally or unintentionally.
Distributed Databases
Technology-based on distributed ledgers is a more recent evolution of ledgers that attempts to decentralize the bookkeeping process and eliminate a single point of failure by removing the central authority. In terms of decentralized ledgers, Bitcoin’s Blockchain is one of the most successful examples.
A distributed database is a database that isn’t limited to one computer or network but is instead spread across several computers or over multiple networks, making it appear as if it is one. There are various locations for its physical components, which do not share physical components. The primary goal of distributed databases is to provide efficient, low-cost services that can offer efficient and at a low cost and deliver great scalability.
Here, there is a primary consideration to keep in mind that a distributed database, along with no data redundancy, also needs to maintain the data and network security. There is the possibility of data theft and the misuse of network resources.
Cloud Storage
Blockchain stores data in storage systems across various nodes; we have been very familiar with it. It is also considered that Blockchain is a reliable way to build redundant data storage systems because of the “backup” of data being stored on multiple nodes.
However, enterprise data volumes keep growing significantly with time. This may be only reliable for small volumes of data; hence, it is impossible to replicate it across multiple devices. Instead, businesses can use highly capable and highly stable cloud storage services hosted in high-quality data centers. Cloud storage will be a much more practical alternative to blockchain storage.
Cloud storage data is divided into multiple encrypted segments through a hashing function. Segments of these secured networks are distributed across the network, with each segment in its decentralized location. Cloud storage has robust security features, such as transaction ledgers, encryption via public/private keys, and hashed blocks. Such security features ensure a reliable and robust defense against hackers.
Decentralized Storage
The decentralized system can be compared to a peer-to-peer network in which a network of users stores a portion of the overall data rather than one central server operated by a single company or organization. This creates remarkably secure, resilient, and scalable storage systems. Depending on the network, they may be decentralized blockchain-based applications or peer-to-peer networks.
We know that Blockchain is one the most common Digital Ledger. However, other Distributed ledger technology products are emerging as valid alternatives to the Blockchain when it comes to sharing and storing data.
Find insight about Dex and Cex here
Corda is an example of a digital ledger that maintains scalability while integrating distributed ledgers. In Corda, each transaction is unique and never put into a block that others can access.
Other Distributed Ledger Technologies
In contrast to private blockchains, which require permission in some instances to conduct specific operations, an application can write data quickly with the DAG (Directed Acyclic Graphs) approach. Still, it takes a while before the transaction is confirmed.
DAGs have some major advantages over private blockchains in that they can write data quickly. However, the process takes a much longer time before a transaction is confirmed than the private blockchain approach, which needs permission to run certain operations. To address these issues, applications need to notify users when conflicts arise, and rules are usually included in the protocol to help.
Below are some of the other existing decentralized ledger technology alternatives:
Iota Tangle
Each node or vertex in an Iota Tangle represents a transaction. This organization developed distributed ledger technology to support development and standardization.
The network grows through transactions rather than a computer-intensive mining process like Blockchain. In addition to micropayments, Iota also supports transactions across IoT devices.
Despite its decentralized nature, it does need a coordinator node to oversee and confirm new transactions as they occur.
Hashgraph
Hashgraph is among the other Distributed ledgers that also eliminate the need for mining as, unlike blockchains, Hasgraphs do not use miners for validating transactions in the ledger.
Hashgraph works on the top of a protocol called gossip about gossip that network nodes use to share information, come to POS(proof of stake) consensus and add new transactions to the DAG. An audit trail is also appended to the distributed ledger as new data is added. Due to POS consensus, it is believed to have security concerns for some reason.
One more thing about the Hashgraph is that it is patented by Swirlds, which belongs to Leemon, the developer of Hashgraph. The Hashgraph is licensed at a 10% fee developer, and hence this distributed ledger like Blockchain cannot belong to the public.
R3 Corda
Corda was invented to make it easier for businesses to record and process financial transactions. It is a peer-to-peer model that stores data in peers related to all its participated transactions. Thus, it becomes necessary to search across multiple nodes involved in a chain of transactions to recreate an audit trail. By securing the appropriate peer group, the distributed ledger can assist in securing transactions.
Compared to the above two other DAG-based distributed ledger technologies, Corda simplifies smart contract creation, automation, and enforcement, making them a key feature of blockchains.
However, other alternatives possess functions similar to Corda’s, which may work better and prove better alternatives than the current prevalent distributed ledgers. One of which was announced by the Foundation of Iota that they are creating an alpha version of Iota smart contracts providing similar functions as Corda.
Final Thoughts On The Blockchain Alternatives
The volume of business data is growing, increasing the demand for secure and inexpensive storage technologies. Blockchain technology has given rise to decentralized data storage systems that are highly secure, scalable, and affordable.
Considering the technology’s relative lack of development, it may take a while to gain wide acceptance. Despite the apparent shortcomings, developers are still struggling to resolve them. However, the recognized benefits of decentralized storage attributable to Blockchain already overshadow those of traditional centralized storage methods – and this technology is only going to get better.