How Much Data Can Fit Into Blockchain

Blockchain is going through a lot of growing pains and there's a lot of subconscious costs that come up along with it. Blockchain won't be able to disrupt whatever real-world industry unless the trouble of data storage is resolved. What are the alternatives? Some of them are more decentralized than others, some are cheaper than others – merely they all piece of work.

Blockchain is supposed to transform just about every manufacture – from healthcare to educational activity. Simply behind all the talk of "immutable records" and "trustless storage of data" in that location's a large caveat. Where volition all that data go?

The subconscious toll

It'due south tempting to imagine a futurity where nobody can tamper with our healthcare records, insurance policies, or market reviews. In this vivid new globe, all sensitive data is magically stored on a blockchain and remains at that place forever – for free, evidently.

Here are merely a couple of examples:

blockchain

Credits: Surety.ai

Nonetheless, blockchain projects making such bold claims usually forget to mention a crucial detail. Storing any serious corporeality of data on a public blockchain similar Ethereum is very, very expensive. Let's come across how much it actually costs to put an insurance policy on the blockchain, for instance.

The vast majority of blockchain startups still cling to Ethereum and its ERC20 token standard. This means that you'd have to pay for gas whenever you transact on their platforms.

Ethereum's Yellow Paper states that information technology costs 20 000 gas to shop 1 256-bit give-and-take. Now, let's practice some math. Eight bit make one byte, so one word is 32 byte. 1024 byte brand one kilobyte. So the amount of gas you'd pay to shop 1 kilobyte equals 32*20 000 gas=640 000 gas. The price of gas in ETH isn't stock-still, though: users can ready their own. According to ETH Gas Station, the average price equally of November 2019 is 6 gwei, or 0.000006 ETH. Thus, to shop simply 1 kilobyte of information yous'd pay on average 640 000 gas*0.000006 ETH = 0.00384, or $0.73 at the current ETH/USD price.

That's just one kilobyte, though. Let's say an average insurance policy document weights 1 MB. To store that amount of data, you'd pay $0.73*1024 = $747.52. Whoops! That's way too much. And let's not forget that you'll have to pay every time yous read that information, also.

Another outcome is the fourth dimension information technology takes to write data to the Ethereum blockchain. There'due south a limit on how much gas people can spend on the transactions in each block. This limit is currently set at ten 1000000 gas. We've seen that it takes 640 000 gas per kilobyte – and that makes over 655 million gas per megabyte. Therefore, it would require 66 blocks to record the whole file. At the boilerplate block time of 13 seconds, you lot'd demand to wait for over 14 minutes to save simply 1 MB.

What are the alternatives?

Ethereum wasn't designed to store any other records simply elementary transactions. An average payment on the blockchain takes upwards about 100 bytes – that's why transaction fees are so low.

Storing things like contracts, policies, or reviews on a public distributed ledger like Ethereum is unrealistic. Whenever you see such a merits coming from a blockchain startup, an alarm signal should get off in your head. Are they trying to fool you? Or perhaps the founders themselves don't know how the organisation works?

There are several solutions to the problem, though. Some of them are more decentralized than others, some are cheaper than others – only they all work.

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1) Centralized storage + blockchain hashes.

In this scenario, a platform stores content on a traditional server rented from a hosting company. Merely whenever a new document is added to the arrangement, a transaction is recorded on the blockchain, and the document gets its own unique hash. This is the nigh realistic method for now, since true distributed storage systems are nonetheless in their infancy.

2) P2P information sharing networks.

Examples include IPFS (Interplanetary File Storage System), Swarm, and Arweave. In such systems, files are stored on individual users' servers and drives. Each file is addressed past its unique hash and can be stored in many copies beyond the network. Similar in Bittorrent, you can receive data from many nodes at once, so even if some of them malfunction, your data will remain accessible.

blockchain

Credits: blog.cloudflare.com

IPFS is already operational and completely free, at to the lowest degree for now. However, it's not reliable enough to store sensitive information. It definitely can't compete with the leading hosting providers, which offer 99.95%+ uptime and a response time below 0.5 seconds.

Swarm and Arweave promise to exist fast and very cheap. But they are however in the early stages of evolution. It will have years before they can be used in such industries as insurance and education.

iii) Permissioned (private) blockchains

Whoever creates a blockchain sets their own fees. Instead of using Ethereum, y'all tin design your own distributed ledger and fix data storage fees to zip. In that case, you can save all the files you desire – for free. Yet, in that location are downsides to private blockchains:

Centralization: the creators of a private blockchain retain full control over it. It's very far from the middlemen-free ideal of blockchain enthusiasts.
Less secure: since there are fewer nodes to validate transactions, a individual blockchain is less resistant to hacker attacks, abusive behavior by nodes, etc.
Scaling: new nodes tin can't freely join the network, so it will take longer for a private blockchain to grow.
Lack of trust: users might not be willing to entrust their records to a platform if they have nada control or function in the blockchain.

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In decision

Blockchain won't be able to disrupt whatever real-world industry unless the problem of data storage is resolved. Distributed ledgers weren't originally created to manage supermarket supply lines or agricultural loans. But on the other hand, nobody thought of smart phones when LED screens were invented.

Blockchain engineering science is going through major growing pains right at present, and a solution will surely be found.

What will it exist?

An incredibly fast P2P data network?

A new blockchain-derived engineering science, similar Arweave's blockweave?

Or perhaps private blockchains operating in a cloud?

Time will tell. For now, recall: if a startup promises to store vast amounts of records on the blockchain, you should accept that merits with a large grain of salt.