HBC Blockchain 101 – Part14 : On-chain and off-chain data

On-chain and off-chain data

 

The Four Categories of Data:

  1. On-chain data generated on the blockchain: This category includes information such as cryptocurrency balances. Transactions are initiated by an external input, but the entire data flow and subsequent changes occur within the blockchain, ensuring the creation of tamper-proof and immutable records.

  2. External data stored on-chain: In this case, we are dealing with data that originates from external sources and is written onto the blockchain. However, Finlow-Bates emphasizes that the veracity of such data cannot be guaranteed. An individual could write a false statement (e.g., “I am the King of Spain”) on the blockchain, and it would be recorded immutably, without automatically making it true.

  3. Off-chain data with integrity verification: Systems like the InterPlanetary File System (IPFS) fall into this category. Data integrity is verifiable through the use of hashes: any modification to the data generates a different hash, revealing any tampering attempts. However, unlike blockchains, IPFS does not guarantee data persistence. Data can be deleted or “unpinned” at a later stage, rendering it inaccessible.

  4. Unverified off-chain data: This category encompasses conventional databases, where data integrity and persistence depend entirely on the entity managing the database. There is no inherent guarantee of reliability, as administrators have complete control over the data.

Debunking Misconceptions:

The video strongly emphasizes that not all on-chain data is inherently true. The use of Oracles, systems that incentivize the reporting of truthful data, can help improve the accuracy of some on-chain data from external sources.

Beyond the Binary Dichotomy:

Finlow-Bates goes beyond simply presenting the two categories, highlighting the complexity and nuances that characterize them. In fact, there are various technologies and approaches that can be used to improve the security, integrity, and persistence of data, both on-chain and off-chain.

Final Thoughts:

The video, albeit longer than usual, offers an in-depth and thought-provoking analysis of the topic of on-chain and off-chain data. Understanding the different implications and consciously choosing the type of data most suited to one’s needs are crucial aspects for anyone operating in the blockchain world.

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