Distributed Ledger Technology Expert and Ex-Coinbase CTO on The Utility of Blockchain Databases


Recently, a poster on Hacker News seemingly took the position that blockchain:

“is the world’s worst database, created entirely to maintain the reputation of venture capital firms.”

A recent article on CoinDesk countered, arguing that:

“blockchains are useful for storing shared state, particularly when that shared state represent valuable data that users want to export/import without error – like their money.”

Here is a summary of the interesting case that the article makes. There is a data export/import problem. There are a number of cloud diagrams such as Amazon Web Services, Microsoft Azure, or Google Cloud. Each diagram represents a single entity.

The question that arises here is whether one entity interoperate with another, whether users can extract their data from the application and place it in another, and whether users can be confident that their data is not modified during import and export.

The answer is no – there is no interoperability between single entity applications because of incentives. Internet services do not have a financial incentive to enable users to export their data and to quickly import that data.

The article proposes that there are a number of current approaches to this problem, and a number of mechanisms that may address it include APIs, JSON/PDF/CSV exports, MBOX files, and specific to the banking context is SFTP.

API is an Application Programing Interface that some businesses apply that allows users to export their data or to write data into an account – but there is a cost associated. Usually those who use an API must follow the requirements of the API provider.

JSON permits users to download JSON files, or to read or write them before APIs. Each platform that implements JSON may provide users with varying results.

PDF is probably the most recognized. This is a document that can be read by other applications, but it is particularly used for people. As a result, it is not intended to be placed in an application other than a PDF viewer.

CSV typically represents a table and it ca be edited locally by a user through a spreadsheet or used as a machine-readable input to a local cloud application.

MBOX represents collections of email messages and it represents long-structured data. It usually comes in the form of a plain text file of email messages in chronological order. SFTP is a secure file transfer protocol. Financial institutions that use this format have access to electronic transaction data in specifically formatted files.

Ultimately, these mechanisms are insufficient for exporting and importing data between entities. Thus, it may be a better solution to consider a public blockchain. Public blockchains are able to convert data and resolve import and export issues by turning them into a shared state problem.

In addition, blockchains cannot be shut down by as ingle actor, they allow entities to export data to their local computer, they provide entities the ability to interoperate the blockchain, and they give financial incentives for interoperability.

Essentially, blockhain is a solution.

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