Although blockchain is directly associated with and enables cryptocurrencies, it is not the only application of the latest. Blockchain application is available for any project where openness, transparency, and security in storing and transmitting data are important.
According to research firm Blockdata, 81 of the world's top 100 companies use blockchain technology, including Microsoft, Amazon, Tencent, Nvidia, J.P. Morgan, Walmart, Alibaba, PayPal, Samsung, and others. Big players set the trend, many other companies follow it right off, and the amount of requests to create their own blockchain is increasing.
If you have decided now or want to create your own blockchain in the future, you need to be clear about your goals, as well as oriented in the budget you can allocate for it.
In this article, we'll explain what is blockchain, what are the ways to create blockchain as well as show each stage of its development, breaking down the nuances and details.
What Are blockchain and how to develop the one
Blockchain is a decentralized database that is represented in a video of a continuous chain of blocks with information about the transactions of network users. Blockchain is decentralized and immutable. This means that information is stored simultaneously by all network participants and cannot be tampered with or deleted, as each block is linked to each other and contains its own unique hash.
If the information in one block changes, then the hash of the block will also change. And since this hash is included in the next block, the next block changes too. As a result, because of one small change, the data in the whole network changes. Therefore, no one user can change any information without everyone noticing.
Blockchain technology is a complex network, so before you start developing it, it is important to determine how to create it. You can either create a blue coat from scratch or use off-the-shelf blockchain solutions.
Blockchain from scratch or off-the-shelf blockchain solutions
Developing a blockchain platform from scratch is the most expensive and time-consuming option. Therefore, it is important to assess the risks and capabilities of your team before taking on such work.
Building a blockchain from scratch will require a team of highly skilled professionals with experience in cryptography, programming, network protocols, and modern operating systems. Finding and hiring such specialists is not only difficult, but also financially costly, since specialists who can boast relevant skills are very few in the market and they are highly valued.
In addition, during blockchain development from scratch, the pressure of deadlines, plans, and quick fixes is inappropriate. This is a task for specialists who can work freely and allocate any amount of time to research the issue that has arisen. Because of the cost of hiring such staff and the inability to set project deadlines, customers rarely stop at blockchain development from scratch.
When is blockchain development from scratch the only option?
Spending this amount of time and financial resources to create your own blockchain is optimal only if you come up with a truly unique and innovative solution.
In all other cases, the optimal option is to use an off-the-shelf blockchain solution. The crypto market offers many platforms on which you can build your own blockchain. We will discuss them below.
First, you need to define the objectives of the blockchain, as well as choose a consensus algorithm.
Blockchain tasks and specifications
Before choosing a blockchain, the team needs to define the following technical criteria.
- Scope of transactions
There are different types of transactions depending on what tasks they perform.
The first type is transactions with limited functionality, which can change several balances at once and store large amounts of data in the storage. There are no cryptographic calculations in such transactions, so they are processed quickly. This type of transaction stresses the hard disk and RAM.
The second type is complex transactions that perform cryptographic calculations, loading the computer's processor.
- Blockchain Work Scenarios
A work scenario refers to the required number of transactions that a blockchain processes in a given unit of time. This can be the processing of many transactions from a few participants, or conversely, a constant stream of users who make few transactions.
Choosing a consensus algorithm
The consensus algorithm ensures that the rules of the protocol are followed and that all transactions are valid. In simple words, it is responsible for ensuring that all validators are in agreement when a new block is added to the network.
Depending on the consensus used, some blockchains have a mining mechanism for mining new coins and others have a stacking mechanism, some networks are faster but prone to centralization, while others are slower but harder for fraudsters to control. So it's important to understand the differences between PoW, PoS, PoA to properly assess a project's prospects.
PoW (Proof of Work)
The first cryptocurrency consensus algorithm that Satoshi Nakamoto used during the creation of bitcoin. The PoW mechanism provides the ability for each node to verify that the miner performed the computation. The verification process involves finding the block hash (the part of the blockchain that contains a reference to the previous block and the summed value of the transactions in it). In this way, PoW allows all nodes to agree on a single version of the blockchain, as well as to validate data about new transactions in the block. This algorithm is also responsible for mining.
PoW algorithm tasks are not intended to be solved by humans, they can be solved by a computer using a lot of processing power. But, given the ever-increasing complexity of the network, for such a consensus it is necessary to immediately plan the work of mining pools, which combine a large amount of power.
If you decide to run a blockchain on the PoW algorithm, installing serious computing power is an important aspect that should not be overlooked. Some projects operate on a strategy of gradually increasing complexity, which increases the risk of a 51% attack, where attackers rent many servers and take over 51% of the power and have control over the blockchain.
PoS (Proof of Stake)
The main technical feature and difference between PoS and PoW is that there is no need to perform complex calculations with powerful hardware. PoS participants do not compete with each other for computing power, but pledge their assets to the network. The algorithm selects one validator to validate a transaction based on its share. That is, if a participant owns a share of 5%, only 5% of transactions will be validated.
The main advantage of the PoS algorithm is minimizing the risk of a 51% attack. Attackers would need more than 50% of the total assets to create it. Even if an attacker can concentrate that amount of assets, he will upset the balance and suffer his own attack.
PoA (Proof of Authority)
If a blockchain runs on a PoA algorithm, pre-assigned users can make blocks and vote to accept or exclude participants. Due to the fact that this mechanism is based on the authority of the participants, transactions are faster than in the above-mentioned algorithms. Transactions and block creation are done automatically by the computing power of the validator.
The advantage of PoA is to minimize the cost of maintaining the algorithm, but the disadvantage is the centralization of the blockchain that uses this algorithm. Therefore, the PoA mechanism is the best option for corporate use or test networks.
Choosing an off-the-shelf blockchain solution
Working with an off-the-shelf blockchain solution is the best option if the blockchain does not have a unique architecture and needs to be implemented within a certain time frame. Let's start breaking down popular blockchain solutions.
Ethereum
The list opens with the most popular and developed platform for blockchain projects, which allows developing blockchains with any consensus algorithm and functional smart contracts. The security of Ethereum has been verified by multiple working networks.
Ethereum runs on the PoW algorithm, but the network will make the global transition to PoS as early as September 15. Ethereum test networks support PoA and PoS consensus. With Ethereum, you can develop not only cryptocurrency, but also your own decentralized organizations (DAOs).
The network is managed by an EVM virtual machine and smart contracts that are written in Solidity. EVM contract code is responsible for large amounts of cryptocurrency. Therefore, the vulnerabilities found attract a lot of attention from the cryptocurrency community as well as the media, making the security of EVM contracts extremely high.
EOS
The second most functional and secure network, with which you can run your own blockchain with smart contracts to make any transactions.
You can also use EOS as a cross-corporate platform, create a user-friendly account management system and integrate any functionality with C++ plugins and smart contracts.
The consensus algorithms and fast blocks in EOS allow the system to respond quickly to users, which is important when working with decentralized blockchain applications.
Smart contracts in EOS are created with the help of the WebAssembly virtual machine and allow the owner to replace, update the contract or correct a mistake in it. This makes EOS different from Ethereum, where immutability of smart contracts is the main condition.
Parity Substrate
Parity Technologies is an Ethereum startup that has developed the Substrate tool for running decentralized blockchain apps and customized blockchains. In other words, Substrate is a blockchain builder that enables developers to create a blockchain with complex consensus and logic using off-the-shelf modules.
The platform has an elaborate and flexible architecture on the basis of which the team can create complex internal logic and economics, and integrate network management.
Unlike previous platforms, Parity Substrate processes contracts using runtime code, which is executed by a WebAssembly virtual machine.
Preparing to launch a blockchain
Once you've decided on the specifications, chosen a platform for your blockchain, and launched the first version, it's important to test the network and test its performance in an environment that's similar to the real world.
Stages of launching a core network
- Large-scale testing of the network. This involves testing the network with as many validators as there will be in the core network. During testing, it's critical to see if there are any critical vulnerabilities or bugs in the network. This is especially relevant if you are developing a blockchain from scratch rather than using an off-the-shelf algorithm.
- Conducting a testnet. It is essential to launch a testnet to see if the network can handle the load of large numbers of users and active transactions. As part of the testnet it is critical to test all the functionality of the project, which will be in the main network, with many participants. For participation in TestNet the team can give users a reward in the form of popular cryptocurrencies or coins of the network. Testnet allows developers not only to test the performance, but also to observe the actions of participants, calculating all possible scenarios of events.
- Forming an initial list of validators. Before the start, it is important to create a list of validators and determine when to start full-fledged block creation. It is technically possible to register all validators at once in the initial blocks of the network or connect only your validators, gradually replacing them with new ones.
- Starting the mainnet (main network). During the launch of the mainnet the technical team needs to actively monitor the situation and respond quickly to problems that arise. It is important to pay special attention to the functionality, which is responsible for the transfer of assets, as the actual balances of the users depend on it.
- Support and code updates. The core network is up and running, but the work does not stop. The technical team needs to constantly update and optimize the code, as well as fix bugs that have accumulated, so that the performance of the network does not deteriorate.
Summary
Developing and running a blockchain, either from scratch or with an off-the-shelf solution, is a difficult and costly process. But if you choose the right approach to development, the right platform, determine all the critical technical characteristics, and test and run the network intelligently, you stand a good chance of surprising your users. With the right approach, you can create a secure and workable blockchain with fast transaction processing.
Or you can always contact RVA Fintech Solutions, and we will take care of all these difficulties. In the next articles you will find more useful information about testing, design, development and other things. Subscribe to the e-mail newsletter of the RVA blog to keep abreast of all the leading trends.