DECENTRALIZED VS. CENTRALIZED DATABASE SOLUTIONS IN BLOCKCHAIN: ADVANTAGES, CHALLENGES, AND USE CASES

Abstract

This study provides a comprehensive examination of decentralized and centralized database solutions within the realm of blockchain technology, exploring the inherent strengths and weaknesses of each approach and their implications for various industries. Decentralized databases, characterized by distributed ledger technology, offer robust security and transparency by eliminating the need for a central authority, thereby reducing the risk of data tampering and fostering trust among participants. However, these benefits come with significant trade-offs, particularly in terms of scalability and performance, as the consensus mechanisms required in decentralized systems often result in slower transaction processing and higher resource consumption. In contrast, centralized databases, typically used in private or permissioned blockchains, excel in operational efficiency and scalability, enabling faster transaction processing and more streamlined management due to the presence of a central authority. Nevertheless, centralized systems introduce vulnerabilities, such as single points of failure and reduced transparency, which can undermine trust and compromise data integrity. The study also highlights industry-specific preferences, with sectors like healthcare and public governance leaning towards decentralized solutions for their emphasis on data integrity, while industries such as finance and logistics favor centralized systems for their superior performance and low latency. Moreover, the research identifies a critical gap in the literature regarding hybrid database models that could potentially integrate the strengths of both decentralized and centralized systems, offering a balanced approach that mitigates their respective weaknesses. These findings underscore the necessity for a tailored approach to database selection in blockchain implementations, aligned with the specific needs and goals of different industries, and suggest that further exploration of hybrid models could lead to more effective and adaptable blockchain solutions in the future.