This taken from the Causevest Whitepaper appendix
This thread is for discussion of this section of the White Paper, and future reference.
Why use a blockchain instead of a database?
It is true that the social enterprises that form the Causevest network could work with an entirely centralised database system on the backend. What do you gain from using a blockchain over a traditional database that is publicly accessible? After all, a blockchain is only data, and if that data is publicly accessible, there is no point in using a blockchain, right? Let me tell you a story.
In the winter of 2016, there was a panic in a community that dealt with open, publicly accessible data. Over 40 terabytes of climate data stored on US government databases was hastily backed up by independent researchers over fears that the incoming, climate-hostile Trump administration would destroy the data when it came to power.
A kickstarter raised over £16,000 to preserve this data and make sure it remained publicly available to all (http://math.ucr.edu/home/baez/azimuth_backup_project/). The servers that the government used were well run, and the data was publically accessible to all; and yet, it came close to being lost forever. The open, public databases used by the government were not as safe as people were led to believe, based purely on their technical merits. They had an unexpected and dangerous single point of failure.
Data on a public blockchain is public in a way that even secure, open, publicly accessible, backed-up data run by the government cannot be. Because the data stored on a blockchain is held by an arbitrary number of independent entities in unknown jurisdictions, kept alive by automatic and internal rewards, it is free in a way that even open source software cannot match. GitHub could go down or be censored, private servers can be destroyed, but the data stored in the Bitcoin and Ethereum blockchains is the most secure data on the planet.
A point of centralization is a point of leverage, a point of weakness. A chain is only as strong as its weakest link, be it a chain made of metal or of custody. No matter how many backups you have, how strong your encryption is or how convinced you are of the righteousness of your operators, if all knowledge of your data structure is held in a single mind, that mind is the weakest link. In a blockchain system, nobody – not even the people who developed the system – knows where all of the data is being stored, and so long as someone, anyone anywhere in the world, is willing to pay for the upkeep of the chain, the data is safe.
There is important enough data that makes paying the extra cost for a public blockchain worth it. Data whose history and content should not be changed by anyone and should be freely available to everyone for as long as humanly possible. Charity audit data is one such use case. Charity is one of the most vulnerable sectors for data loss and corruption, because fraud is endemic to the sector. In nearly all business transactions, customers get something for their money. If the item or service is faulty, they have personal knowledge about it and a direct incentive to punish the offending party. However, in the charity sector, people give away money and get nothing directly in return. This makes finding and punishing fraudsters difficult.