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Blockchain Data Storage Solutions and Natural Selection

How to Store Data in Blockchain? Expert’s Voice

By Alex Mazniy, Co-Founder of PM Partners

Modern business is often compared to Charles Darwin’s theory of evolution. After all, as in the animal world, natural selection in the market is impossible without adaptation to modern fintech trends. One of the most obvious examples is Blockchain Data solutions, which are intriguing in their potential. Large firms are ready to use various ways of storing databases, but it is the blockchain that we hear about more and more every year. Why is this happening? Let’s see.

Is Blockchain Our Everything?

The reasons are many. First of all, the fact is that blockchain is a technology for decentralized data storage. It can be used as an addition to traditional databases, or as a replacement. Due to decentralization, the blockchain is highly resistant to unauthorized interference. This is an important quality to protect your data in various situations.

In addition, Blockchain technology has many business benefits. As follows:

  • Guarantee that no one will change the stored information 

For example, the number of goods or personal data. All the information you put on the blockchain is guaranteed to stay there. With a decentralized approach, such interference is immediately detected and corrected.

  • Keeping things under control

You can always keep track of what edits each user makes by monitoring this process. Adding, updating, deleting, nothing will pass you by. This is especially useful if you are working with an “open” system.

  • Data security guarantees

You can guarantee third parties the integrity of data for audit. No one, not even your employees or system administrators, will be able to make changes. This function is especially important in financial institutions or cases of verification of illegal activities. You can store all emails, documents, and SMS messages on the blockchain. These entries cannot be deleted or modified, making it easier to verify or investigate.

Data storage in the Blockchain is actively used by companies for their needs. Let’s see what is it used for. 

Blockchain Technology for Business Usage

  1. Data management
  2. Publication of business reports
  3. Keeping financial records
  4. Audited accounts
  5. Energy 

This area has a wide range of blockchain applications from the development of some Internet-based energy technologies based on Blockchain and solving problems in the field of energy generation and consumption, to applications that simplify data analysis and testing, and management of smart grids.

  1. Organization of private and public administration

Some blockchain-based platforms such as Otonomos, BoardRoom, and Colony are actively used for effective management within organizations. They automate the process of forming, financing, and managing a company using Blockchain, and some have additional features, such as allowing residents from around the world to create online companies.

Blockchain Technology for Business
  1. Gemstone Industry

Gemstones have a bad reputation as a money laundering commodity due to their high cost and easy transportation. However, Blockchain can change this situation by creating a “digital passport” for each diamond, which buyers, insurance companies, and law enforcement agencies have access.

Private Blockchain Technology Usage

Private users are also actively using this technology for their needs. Blockchain is already being used to:

  1. Save data that cannot be changed
  2. Store data on the assets of an individual
  3. Save documents
  4. Have photos with metadata
  5. Confirm authorship and ownership
  6. Confirm digital identity, authenticate and verify access rights
  7. Use in gambling and video games

Many modern online games operate based on blockchain technologies with their token. In addition, the collected data is actively used to process the results and source information about the results of matches.

How Can Blockchain be Used in Data Storage?

Speaking about the blockchain, it is difficult not to talk about its design features. First of all, as we know, the blockchain is based on a sequence of blocks. Each of these blocks carries a certain amount of information and this amount is strictly limited by the blockchain framework. As you know, for Bitcoin it is 1 MB. This limit tells us the maximum file size that we can upload to the Bitcoin blockchain. And if 1 MB is enough to store information about transactions, if you need to save a video file or an image, then obviously you need to think about another solution.

In theory, the Ethereum blockchain could be such a solution. After all, it simply does not have restrictions on the block size. However, in this case, we have another problem, the cost of information storage will become unreasonably high. After all, uploading data to the Ethereum blockchain is not something free. Ethereum gas is spent on this process, and it costs real money. So, the larger the file size that we upload, the more precious gas leaves our wallet.

Solving the Blockchain Storage Problem

Solving Blockchain Data Storage

However, there is nothing that people have not learned to deal with and the problem with limiting the maximum block size is no exception. Theoretically, we can find a solution in several ways. The simplest one is:

  1. Segmenting

Splitting a file into segments (shards), the size of which is less than the block size. Thus, even the largest file can be written to the blockchain with small block size.

  1. Encrypting

Encryption of data in fragments so that only their owner can understand what is written in them. This will allow you to store information in an open blockchain and be sure of its confidentiality.

  1. Distributing

Distribution of shards across the blockchain network. Thanks to this, the file will be saved unchanged as long as at least one user is synchronized with the blockchain.

This approach is borrowed from torrent trackers. However, even if you remove the fees for conducting transactions, it is hardly suitable for storing data using the blockchain. There are several reasons for this:

  • Firstly, information is recorded in the blockchain through transactions, and they require confirmation. 

This is a lengthy process that will require several thousand transactions. This may take several hours or even days.

  • Secondly, the information in the blockchain remains unchanged. 

Therefore, you cannot simply change or delete unnecessary data. You need to understand that all files that have entered the network, as well as their possible variations, will remain in the blockchain forever. In turn, this means that sooner or later someone else will be able to view them.

  • Thirdly, immutability will lead to another problem. 

The increase in the size of the blockchain can become an avalanche. After all, if information cannot be deleted, it is obvious that it will accumulate. Over time, such processes will make the size of the blockchain just huge for the average user to use. Even now, the size of the Bitcoin blockchain is over 420 GB, in turn, the size of the Ethereum is over 480 GB. Increasing the size of the blockchain will be a problem, as even the current sizes are too big for tablets, smartphones, and many laptops.

Summing up, we can say that storing information directly on the blockchain is not the best idea when it comes to big data. This option is suitable only in cases where the amount of information is within a few kilobytes. For example, when it comes to financial transactions, STO, personal data, or workflow. 

IPFS – a New Round of Evolution?

Interplanetary File System, IPFS

In this vein, the prospect of using peer-to-peer file systems such as IPFS is very interesting. In simple terms, the Interplanetary File System (IPFS) is a distributed peer-to-peer file sharing network that is poised to become the backbone of a new decentralized network.

This blockchain technology has a protocol similar in principle to BitTorrent. This involves splitting files into fragments and storing them in multiple copies on the computers of system participants. All computers connected to IPFS create a decentralized web system. These so-called nodes can store data and make it available to those who request it. The file or web page you request is copied to your site. Thus, the more requests for a file, the more copies of it are created. and all subsequent requests to this file can be satisfied by any node on which the file is located. This allows you to distribute the load of responses to requests and provision of files between nodes.

Anyone who wants to access information on these servers must establish an HTTPS connection from their browser to the appropriate server. The server is at the center, serving all requests for access to the data it stores. IPFS objects are data that is stored in blocks of 256 KB. In this case, larger files are split into the required number of IPFS objects. One IPFS object per file contains references to all other IPFS objects that are part of that file. When a file is added to the IPFS network, it receives a unique 24-character hash ID. This is called the Content Identifier or CID. Recalculating the hash when a file is retrieved verifies the integrity of the file. If the check fails, then the file has been modified. 

Pros and Cons of IPFS

Like any technology, IPFS has its pros and cons that you should be aware of.

Benefits of IPFS:

  • Value

The file will be downloaded by users only if it is of interest to someone;

  • Relevance

Popular files are downloaded/shared very quickly;

  • Authenticity

The data is address-dependent, so it is impossible to falsify the internal content of the file;

Disadvantages of IPFS:

  • The need for online

Uploading a file to the network occurs only if the user is online and such a system serves only static data;

  • Necessity of reference

You can access a file only by knowing its name or path.

In general, the IPFS file system has more positives than negatives. The blockchain in this scheme is used as an intermediary that links the participants together and is responsible for verifying the authenticity and integrity of the files. In addition, it can be used to monetize the process: seeds get money for sharing files, and peers pay for downloading them.

Decentralized Cloud Storage

There is an opinion that decentralized data storage based on Blockchain can be a solution to the problems of confidentiality, availability, and data integrity. After all, decentralization means removing a central point of control and data storage, that is the rejection of a third trusted party – an intermediary.

The secure storage model on the blockchain is a distributed network of personal computers. These are ordinary cloud storage like Dropbox. Only the data is not hosted on the company’s servers, but on the devices of the users who rent it out. There are many similar startups, such as Swarm, Storj, and Sia. In turn, such a service as. Arweave also looks like a very interesting solution. After all, Arweave is 100% community-driven and designed to work with Linux only.

Speaking of decentralized storage networks, it is impossible not to mention BitTorrent, one of the most famous systems. BitTorrent is a scalable decentralized storage system designed to reduce storage costs, increase fault tolerance, and even prevent government censorship. Another good example is BTFS, which is suitable for both transferring and storing files. And of course, FileCoin is a well-known P2P network service that uses blockchain and its cryptocurrency to provide storage services.

And since we talked about the fight against censorship earlier, it would be wrong not to mention Utopia. This P2P network positions itself as a tool to restore online freedom and anonymity in the digital space. Utopia ensures secure communications and prevents surveillance by third parties or even the government. Other services like MaidSafe and Safe Network aim to provide a secure, public alternative to the World Wide Web. These projects aim to eliminate corporate and government tracking, making the Internet cleaner and safer.

What are the Options for Combined Blockchain Data Storage?

A hybrid cloud option, when a public blockchain is used along with IPFS, looks like a very promising approach in a data management strategy. After all, data management in a hybrid cloud supports the growth of the entire storage system. This, in turn, gives enterprises the ability to easily and completely transparently transfer data from the local environment to the system of cloud providers. 

This process also works in reverse without any problems. The combined version of the cloud system allows you to cope with changing circumstances and, most importantly, adapt to them. As an example of such a solution, we can recall the Ethereum blockchain.

Recording a link with a file in such a blockchain is not difficult. The Ethereum blockchain has a date field, and when generating a transaction, you can add a link to a direct link there, which is an absolute advantage. It combines IPFS and a public blockchain and allows you to generate transactions periodically. This is extremely useful in the financial sector. For example, to publish reports, save them in the blockchain. Through smart contracts. Such a contract will be filled with records with links to files in IPFS about the information of this company. 

The hybrid approach at the same time ensures the cheapness of such a solution because one transaction costs now: $ 4, and IPFS is free. For that $4, you get the ability to keep structured information about the company’s most important indicators indefinitely!

Summing Up

Although technologies in the modern world are constantly evolving, certain development trends in fintech are already clear, if not obvious. Blockchain as a tool for storing data is very promising since it has many undeniable advantages. At the same time, this is the case when current technologies lag behind the idea itself. After all, inside the blockchain, we can’t store large amounts of information.

Along with many other benefits, Blockchain decentralized data storage enhances user privacy and security through encryption. However, so far, blockchain storage solutions have not reached the desired level of speed and also need to evolve in terms of latency and scalability. By solving these problems, Blockchain decentralized data storage will simply replace traditional cloud storage solutions. After all, now there is no doubt that Blockchains will create ever larger volumes of immutable data, and, accordingly, more and more new ways of storing them will be invented.

Now we are just starting to use this technology, finding every year more and more new applications for Blockchain for storage. However, there is every reason to believe that soon, these technologies will improve significantly, and we will get opportunities that can change the financial world we are used to. And then, “natural selection” will come into force again, leaving in a winning situation only those businesses that were the first to adapt and apply these technologies in practice.

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