What is Cryptographic Immutability?

Cryptographic immutability is a powerful tool for securing data, which requires encryption methods on each transaction to guarantee immutability. It’s often used for blockchains and distributed ledger systems to mitigate fraud.

But for high-throughput, centralized application ledgers, cryptographic immutability ultimately causes bottlenecks and slows down applications.

To understand cryptographic immutability, let’s look closer at its two core concepts:

1. Immutability is a necessity for any ledger. It means that once data is written, it can’t be modified or deleted. Within a ledger system, this means you can only append data (called “append-only”), not delete it. Essentially, all changes require new entries, and nothing is ever overwritten.
2. Cryptographic means using cryptographic algorithms to secure data, ensuring authenticity while preventing and detecting any attempts at tampering. Examples include:
   1. Hashing (e.g., SHA-256) produces a fixed-length “digital fingerprint” of your data.
   2. Digital signatures verify the authenticity of transactions within the ledger system.

Why Cryptographic Immutability Works for Distributed Ledgers

The clearest example of why cryptographic immutability works for distributed ledgers can be seen in blockchain transactions. Within the blockchain, every ledger is hashed, and each new entry references the previous hash. That means you can quickly tell if it’s been tampered with or if fraud occurs because it “breaks” the chain.

In distributed databases, cryptographic immutability enables different participants to verify that the system will maintain integrity and that any fraud will be apparent. And, since the blockchain prioritizes security, most users understand that there will be latency and are willing to accept the delays. The tradeoff of latency to guarantee protection against tampering is unrealistic for ledgers that require high throughput.

Why Cryptographic Immutability Doesn’t Work for Application Ledgers

The majority of major financial applications don’t operate as distributed systems and instead use a centralized ledger. Interestingly, many of Modern Treasury’s cryptocurrency or stablecoin customers also maintain a separate ledger outside of the blockchain. Doing this allows them to track transactions and maintain a single source of truth, whereas on the blockchain, the transaction history is distributed.

In a single ledger in which each written transaction requires hash computation in a growing chain, the verification process introduces Central Processing Unit (CPU) overhead. This is an approach that Amazon’s now depreciated Quantum Ledger Database used and caused several delays that a major brokerage customer described as “terrible.” The latency and low throughput simply equal poor customer service.

It’s necessary to remember that chained design limits parallelism, where transactions can happen concurrently. This can cause delays unsuitable for high-volume applications in which concurrency or speed matter.

Let’s look at how cryptographic immutability could affect latency in practice:

1. A transaction is written to the ledger
2. The system creates a hash that is stored with the data entry
3. When retrieved, hashes are computed to verify integrity

If each new transaction depends on the previous transaction, and each transaction’s hash must be computed for verification, things start to fall apart. An API call that previously took milliseconds (e.g., expected balance on [a specific date]) suddenly takes several seconds because of computations. Those seconds add up when you’re processing thousands of transactions happening simultaneously.

Immutability Without Cryptography

Immutability without cryptography is a better design for high-throughput applications and centralized systems:

• Append-only writes, without transactions being overwritten, duplicated, or deleted
• Audit logs that allow historical data to be reconstructed whenever necessary
• ACID compliance, which ensures both consistency and durability

When deciding how to secure your ledger, weigh the tradeoffs: Do you need tamper resistance, or do you need practical throughput? Choosing the right process for your situation impacts speed, audits, and the customer experience.