Problems of Centralized Systems
Centralised systems have been accounting for management, communication, and operations of many enterprises for years because of their ability to collect and process data from various sources and centralise them. Examples of centralised systems include governments, organisations, and businesses. Governments have their own tax systems for collecting individuals’ information on income, jobs, properties, and dependent to calculate and record taxes for every citizen. Organisations have their own systems to manage their employees, equipment, products, customers, and sales. Banks have their own software to manage customers, accounts, transactions, exchange rates, and interests.
While those systems are awesome and always assumed to be extremely secure, there are many drawbacks to them. These may motivate you to find a solution in the new generation of software systems. Before walking through the motivations, let’s address the most important problems of centralised systems in modern applications.
In a centralised system, data is collected, stored, and protected by only one party: the system administrators. And, it’s very attractive for attackers to play around this central. The system has to have a powerful shield to prevent data theft, loss, changes, and, especially, unavailability. While those shields have been improved over the years, there are regularly breaking news stories of government sites hacked, bank sites attacked, or web browser security holes revealed.
Many systems have recently come under fire for the illegal or unintended use of their users’ information. In such systems, the data is collected and manipulated by the system providers under strict regulations (e.g. GDPR). However, in the end, users have to accept service agreements that allow the providers to use the data without users’ attention or knowledge. Data is an asset. It is also the most valuable resource for most organisations. Hence, users would always struggle to know what is happening with their own information.
Data is centralised, but you would easily realise that there are increasingly more ‘centrals.’ Your identity is managed by a government system while your certificates and transcripts are issued by your educational institutes. Your health and treatment are recorded by your medical centres while your insurance companies cover your healthcare costs.
Overall, your data is fragmented to different centrals, and combining them is becoming more complex. Let’s say you are applying for a job and the recruiter has to verify your identity, certificates, and experiences (work history) from four different sources. If there are ten candidates in the shortlist, the recruiter has to contact and get confirmation from about forty different centralised systems. Similarly, let’s imagine that one ordered a pepper-coasted salami at the local warehouse retailer, Costco, and suffered from food poisoning. Investigators would like to trace back for root causes by querying the retail system for the suppliers before asking for the origins of the salami. According to the Chicago Tribune, Deniele Inc. announced a recall of approximately 1.24 million pounds of salami because of possible concerns of salmonella. However, it is not certainly that in other cases: information and its provenance is spread across systems. Obviously, there may be corruptions at some stops.
Motivations of Decentralised Systems
The motivation for decentralised systems came out of a need for secure systems in regions that are politically unstable. Users are wary to put their assets in traditional systems (e.g. banks) for fear of nationalisation or government takeovers.
Generally, people sought for an ‘all-data-in-one user-transparent secured system,’ and thus, Blockchain, as a decentralised system, was founded. The first famous Blockchain—Bitcoin—solved those problems in a financial context and then promoted Blockchain to the technology of future.
The Blockchains are organised in the form of chains of data blocks, and those chains are decentralised across multiple sites to form decentralised systems. Those chains represent shared databases to which system parties and users could write any information. The decentralisation of those databases causes them to be replicated to various sites before being broken down into multiple chunks that are distributed across many physical machines.
How Blockchain Addresses the Problems
The fact that the data is replicated and distributed across various sites and machines makes it much more secure in specific senses. For example, in order to damage or change the system data, attackers have to ruin hundreds, possibly thousands, of copies across multiple geographical locations. Likewise, making the data unavailable is also to let tons of servers down. Moreover, through immutability (one of the most important characteristics of Blockchain), the data provenance is a key for many scenarios in which historical data is prior concerned.
In addition, because the data is handled by multi-sites (multi-centrals) and any data is added under their consensus, no one can simply create blocks without others’ attention. This forms a multi-ownership scenario in which each party holds a copy and contributes to the data manipulation.
Since Blockchains are shared databases, they can be an all-in-one data storage to which many systems can defragment their data together. At that time, through the Blockchains, if you are submitting applications with on-chain information, the job recruiters in the aforementioned example could verify all of your information at once. Similarly, through Blockchains, the investigators could find all proven information regarding nutrients, expiration, suppliers, and origins of any products in a warehouse in one step.
Blockchain is motivated by the problems of the centralised systems, and obviously most of them are resolved. However, Blockchain has raised new concerns as trade-offs for the traditional systems. The first one is the performance of the ‘shared databases.’ While old systems can execute thousands or millions of transactions per second, a typical Blockchain can only record hundreds of transactions in the same time span. Powerful systems can perform multi-criteria search from millions of data records while Blockchains can only search by a key or an index.
One other drawback of Blockchain technology is the requirement of many sites. Decentralisation is a highlight of Blockchain technology, but forming such a decentralised infrastructure requires contributions from a rather large community, or a wide range of organisations. Simultaneously, changing data replicating at several servers is much simpler for attackers than doing the same to a thousand replicas located at different geographical locations. Furthermore, data kept by different organisations—from governments, banks, companies, unions to users that share the benefits and responsibilities—would be safer than one handled by a few beneficiaries.
Blockchain is a future technology and the development of Blockchain is still in progress. Understanding the current problems with and comprehending Blockchain is a key for your success in the coming asset digitisation.