Taraxa Project
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Taraxa Project

What kinds of data work well with blockchain?

This was a question asked by the audience during one of our meetups.


Blockchain technology is often touted to guarantee the veracity, provenance, and immutability of data in a wide variety of applications. But is this true? Or more precisely, is this true for all kinds of data? A similar question was posed at one of Taraxa’s meetups, and here we elaborate our thoughts on the subject.

What does “work well” mean?

While many metrics of excellence exist when it comes to handling or processing data, blockchain’s first application, bitcoin, has cemented a few interesting characteristics within the popular psyche — we describe a few here that are particularly relevant to the discussion.

Can blockchain technology guarantee these properties for all kinds of data?

What kinds of data are there (in the context of blockchain)?

In the context of blockchain, we divide data into three categories.

How much of each type of data is there? In the very unscientifically drawn illustration above, on-chain data is the tiniest, followed by off-chain known to many, and finally most of the world’s data is generated off-chain and known only to a few.

What can blockchain guarantee for each kind of data?

Now let’s put the two parts together and see which properties can blockchain guarantee for each kind of data.

For data that’s generated on-chain, we have the trifecta.

But since this type of data only really exist for cryptocurrencies or other types of purely on-chain assets, the scope of such guarantees is highly limited. These strong guarantees are precisely what makes blockchain technology so alluring, but as we move onto other kinds of data, these guarantees become weaker.

For data that’s generated off-chain but known to many, we have weaker guarantees.

For data that’s generated off-chain but known only to a few, the guarantees are weaker still — keeping in mind that kind of data accounts for most of the data in the world.

For most of the world’s data, blockchain loses the ability to guarantee the most attractive property of all — veracity. This may seem to be bad news but keep in mind that the other two properties, provenance and immutability, are still very powerful.

Working with IoT

Almost all IoT-generated data fall squarely into the third category (they’re generated off-chain and are almost never made publicly available). This means that blockchain can only guarantee provenance and immutability, but it also means the addressable market is extremely large. At Taraxa, we are building and deploying many solutions to address these large-scale problems.

As the world becomes more connected (through devices) and automated, we’re increasingly reliant upon device-generated data as the basis for business transactions. Sensors provide data on usage patterns, quality of service, contractual adherence, etc. the list goes on and on. Without basic trust in device-generated data, business models become frictional or outright impossible, leading to massive added operational and opportunity costs.

Blockchain gives devices identities through cryptographic keys, helping them to prove data provenance, and data immutability, helping them to prove the data wasn’t tampered with after generation. Such properties create a foundation of trust enabling innovative business models.

Taraxa is committed to help IoT devices become trusted entities through blockchain technology and do so at scale, and we are working hard to deploy practical solutions to business pain points today.

Stay tuned.



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