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Blockchain As A Database

Faculty Andrew Wu makes a comparison between blockchain and database technology
<v ->Hello, my name’s Andrew.</v> I’m a professor of technology and operations at the University of Michigan’s Ross School of Business. And I’m the faculty co-director for the Michigan Ross FinTech initiative.
In this video, I’ll explain at the 30,000 foot level, what the blockchain technology really is.
A blockchain is for all intents and purposes, very similar to a database. It’s actually not that different from your good old SQL database and how it works.
You’ve probably used Dropbox or Google Drive, right?
Dropbox, for example, is a database. Suppose you write a work document that you want to share with your colleagues, okay? This document is just a piece of text data, a bunch of ones and zeros that you generate using a client application, like the word processor on your computer or on your phone.
And once you write it and upload it, the file goes into Dropbox’s file server, which receives it and processes it by maybe zipping it up, converting it to a compatible format, et cetera. And once the processing is done, the data is then stored in the database using some predefined format, say SQL or Hadoop, which use particular file types designed to facilitate fast data searching and fast data retrieval.
You can keep the data there for storage or share it with other people.
Now, a blockchain does the same thing, just using a different process. Let’s go back to the beginning. Say you want to upload some data on the blockchain instead.
And just like your word processor, you use some app to generate the data, an app like a Bitcoin wallet.
As a user, you’re not part of the blockchain network, you’re just generating the data to be uploaded and hosted there.
And the next step is where the key differences begin.
First, instead of uploading it to a Dropbox server, on a blockchain you’re essentially broadcasting your data to a peer to peer network of connected computers, which are called nodes.
These nodes comprise the blockchain network and collectively, these computers take on the rule of a single Dropbox server.
They first receive your data in a peculiar way called a gossip protocol, then collectively they quote unquote, “process” your data again, in a rather unique way, using a so-called, distributed consensus algorithm.
Of course the network is not going to do it for free. So just like you paid Dropbox to process and store your data, you’re gonna the network of computers on the blockchain, one way or the other, to process your data there.
And once processed the data will again be stored on this network of connected nodes. Each node, keeping a copy of the data, using a rather unique data format that sort of chains each piece of data together, again, to facilitate data searching and retrieval.
And that’s really there is to it. No matter what kind of blockchain it is, Bitcoin, Ethereum and others, at a 30,000 foot level, they all work the same way. Like a decentralized database, a decentralized version of Dropbox or Google Docs.

Andrew Wu, Assistant Professor of Technology and Operations and Finance, Stein Research Scholar, and Michael R. and Mary Kay Hallman Fellow at the University of Michigan, explains blockchain as a type of database.

Andrew makes a comparison to DropBox, which is a type of file sharing service. You may also have heard of Google Drive, Apple iCloud, or Mega. Whereas a traditional database is centralized, blockchain is decentralized and uses peer to peer networking to collectively store and share information.

Discussion: What questions do you have about the technical side of blockchain?

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