6 alternatives to blockchain for businesses to consider

Blockchain has risen to prominence thanks to enthusiasm over cryptocurrencies such as Bitcoin, Ethereum and Dogecoin. Businesses have also taken note of the promise of blockchain technology to improve the transparency and data integrity of distributed transactions.

However, despite the promise, adoption of blockchain without proof of concept has been slow. One major problem was the relatively slow performance of early blockchain technologies. The first blockchain networks were limited to a few transactions per second and could take up to an hour to guarantee the authenticity of transactions.

Several alternatives to blockchain that offer better performance have emerged. Businesses may also want to consider them to reduce costs, simplify development, and reduce integration challenges.

But asking about alternatives to blockchain is somewhat backward, according to Derek Brink, vice president and research associate at Aberdeen Strategy & Research, a technology consulting firm. This is because blockchain is the alternative in many cases. The real issue, he said, is finding new ways to reinvent business processes by disintermediating the middleman, regardless of whether blockchain is, strictly speaking, the middleman. Indeed, some of the most promising alternatives to blockchain will include centralized databases, decentralized storage and other technologies that use the same distributed ledger technology as blockchain, Brink said.

Is it blockchain or isn’t it?

Fundamentally, blockchain is a type of distributed ledger designed to provide a permanent, tamper-proof record of business transactions. It is essentially a decentralized database running on a peer-to-peer network, with each computer maintaining a copy of the current ledger. Data security and reliability are the main advantages, as the data cannot be easily changed and the redundant copies make data loss unlikely. You do not need a middleman, such as a bank or broker, to carry out transactions.

One of the challenges in finding alternatives to blockchain is knowing which products and technologies use blockchain and which other technologies use similar functions.

Brian Platz

“Blockchain has kind of become Kleenex, where it means a category of things,” said Brian Platz, co-CEO of Fluree, a blockchain database provider. “Other technologies that aren’t even distributed ledgers are all thrown into the mix and are also called blockchains.”

For example, people in the blockchain community have started to adopt distributed storage tools like Storj and InterPlanetary File System (IPFS). Others are starting to take advantage of distributed databases like OrbitDB. Additionally, a wide variety of distributed ledgers are beginning to emerge.

At the same time, good old-fashioned centralized ledgers have worked well for years, and now the cloud makes it easier to share access across trusted users.

Here’s what the six main alternatives to blockchain have to offer.

1. Centralized databases

One of the biggest concerns about traditional blockchains has been scalability.

Decentralization inherently adds overhead for maintaining multiple copies of the data and ensuring consistency. Blockchains also add significant computing needs and energy consumption problems.

While the blockchain community gets excited about decentralizing the database, there is real value in running one highly optimized system of record in a centralized database.

Newer blockchain implementations are getting better, but their performance still pales in comparison to what is possible with a well-managed centralized database. For example, the Visa network (VisaNet) has a capacity of 65,000 transactions per second, while the Bitcoin network can only handle a few transactions per second. VisaNet currently handles an average of 2,000 transactions per second, so there is plenty of room for growth.

One of the great promises of blockchain was its potential to improve security. But the success of VisaNet suggests that businesses can continue to successfully use alternatives to blockchain for things like securing transactions, improving product tracking, facilitating product recalls, protecting privacy and maintaining audit trails.

2. Centralized ledgers

Few companies have the resources to replicate VisaNet. Another option is the centralized ledgers that cloud providers have begun to offer.

Alex-Paul Manders

For example, Amazon’s Quantum Ledger Database simplifies the process of implementing a shared database designed for ledger-like applications that provides a cryptographically verifiable audit trail without all the overhead of a distributed ledger or blockchain. It promises the immutability and verifiability of blockchain combined with the ease and scalability of a traditional cloud service. However, Amazon cautions that a proper blockchain may be a better option in cases where untrusted parties are involved.

However, centralized databases and ledgers are not all upside down. Both have points of failure that are prone to cybersecurity hacks and data breaches, says Alex-Paul Manders, partner at ISG, a technology research and advisory firm.

3. Distributed databases

For years, major database vendors such as Oracle and Microsoft have offered distributed databases that use some combination of data replication and deduplication to ensure data consistency and integrity.

More recently, the OrbitDB open source project has emerged to support the creation of a distributed, peer-to-peer database that operates without a traditional blockchain. It allows companies to develop decentralized applications that run when disconnected from the Internet and then synchronize with other database nodes when connected. It can also allow the sharing of data in a way that enforces privacy and provides transparency about how data is used. OrbitDB sits on top of a distributed file system that allows operation even if one node goes down—another blockchain-like feature.

4. Cloud storage

Blockchain is sometimes promoted as a way to store data in a decentralized manner. But blockchain storage comes at a high cost.

Suseel Menon

Suseel Menon, practice director at Everest Group, said the trust and security policies and management layers of cloud services are sufficient for most enterprise applications. In addition, various third-party data storage services can provide better management and security with far less overhead than a blockchain would involve, he said.

5. Decentralized storage

IPFS has emerged as a promising approach for storing data over a peer-to-peer network. Platz, of Fluree, said it is attracting a lot of interest from blockchain developers because of its ability to decentralize storage that can be integrated into other applications. It’s not technically a blockchain, although Platz sometimes hears it referred to as one. IPFS allows developers to store web pages, content, and data in ways that can reduce bandwidth requirements, improve resiliency, and mitigate the impact of censorship.

Storj is another promising distributed storage technology that allows developers to encrypt files, split them into chunks, and then distribute them across a global cloud network. It is directly compatible with Amazon S3 storage tools, which should make it easy for cloud developers to weave into applications without learning new tools.

6. Other distributed ledger technologies

ISG’s Manders said a distributed ledger would be his recommended blockchain alternative for trusted decentralized applications. He does not see a particular need to build a decentralized ledger from the ground up and recommends using one of the several options already available. Attractive blockchain alternatives for distributed ledgers include Hashgraph, Iota Tangle, and R3 Corda.

Both Iota and Hashgraph use directed acyclic graphs (DAGs) as an alternative data structure for maintaining the ledger. DAGs have been commonly used in computer languages ​​for over 30 years to represent the dependencies in an application and there is nothing inherently unique about applying them to transactions.

One of the main advantages of the DAG approach is that it allows an application to write data quickly, but it has a relatively longer time before the transaction can be confirmed compared to private blockchains, which require permission to execute certain operations. to feed The applications must be configured to notify users when conflicts occur, and rules are often built into the protocol to help resolve these issues.

Iota Tangle

An Iota Tangle stores data over a DAG in which each node, or vertex, represents a transaction. It is an open source project in which the network grows through transactions rather than through a computer-intensive mining process like blockchain uses. Iota supports micropayments and transactions across IoT devices. Although mostly decentralized, it requires a coordinator node that oversees and validates the addition of new transactions.

Hashgraph

Hashgraph is another DAG ledger that also eliminates the need for mining to grow the ledger. It works on top of a protocol called gossip over gossip that uses network nodes to share information, reach consensus (another key process in blockchain) and add new transactions to the DAG. As new data is added, an audit trail is also attached to the distributed ledger. Adoption of the blockchain alternative started slowly, but momentum is growing.

R3 Corda

Corda was developed to make it easier to record and process financial transactions. It uses a peer-to-peer model in which each peer stores data related to all the transactions in which it has participated. Consequently, recreating an audit trail requires querying multiple nodes involved in a chain of transactions. This approach can secure data about transactions by ensuring the appropriate set of peers. One difference between Corda and the other two is that it simplifies the creation, automation and enforcement of smart contracts – a key application of blockchain – compared to DAG-based distributed ledger technologies. However, the Iota Foundation has just announced an alpha version of the Iota Smart Contracts Protocol, which can provide functions similar to Corda’s.