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I have two different options using database in a desktop application. I prefer the Service-based database even locally. But should I use the Local database instead?
Depends of further requirements.
Server-Based: MS-SQL Express. Is essentially the same engine as larger editions, this will scale well when you need it bigger. Note that there is an attached-file mode that means you don’t need to permanently register each database with the server.
Local: SQL Compact Editon, embedded file-based solution. Much easier to deploy but not 100% upward compatible. Basically a single-user solution (but that is going to change with v4)