What to ask yourself before building with blockchain
First, there was Siri. Or actually — first, there were iPhones. No, first there was Myspace, Napster, personal computers, indoor plumbing, the printing press. No matter where you start, it’s the same story: A technological innovation comes along and presto, we’re radically defying the status quo. The impossible — even the unimaginable — becomes de rigueur in what often feels like quick order.
All eyes are watching blockchain right now, with everyone and their dog wondering if it’s going to make it to de rigueur status given the spectacular volatility of crypto. But as my colleague Thomas Morgenroth recently wrote, if major players like Goldman Sachs and Morgan Stanely haven’t thrown the blockchain baby out with the crypto bathwater, then maybe it’s worth exploring — carefully — how your company might apply distributed ledger technology in a way that’s both innovative and enduring.
The way we look at it, approaching blockchain extremely pragmatically and asking yourself the right questions from the get-go will deliver clarity and head off hasty decisions you’ll later regret.
What’s your use case for blockchain or distributed ledger technology?
It can be tempting to dream that blockchain will be the panacea for your technical problems, whatever those happen to be. Blockchain delivers peer-to-peer, distributed intermediation, and the comfort enterprise businesses now show around the tech indicates that blockchain is no longer niche. But it’s still nascent — and it’s fair to say that thanks to the crypto winter (or maybe ice age), it’s going to spend more than a few hot minutes in Gartner’s dreaded trough of disillusionment.
Still, if you’re looking for distributed ledgers to provide trustless verification and non-repudiation, then you’re likely barking up the right tree: There’s no reason to think it’s not a great solution for data authentication, recordkeeping, and smart contract execution.
If that’s not what you’re envisioning, then you’re taking a risk. We’re not against trying something entirely new — that’s kinda the point of working in tech — but we are against slapping blockchain against the wall and seeing if it sticks.
What chain should you use?
When building a blockchain solution, Ethereum is an obvious choice. It’s the largest decentralized software platform (with, as noted above, the most developers), enabling you to build decentralized applications (dApps) and smart contracts. All this makes it an attractive (read: stable and reliable) choice for new projects.
That doesn’t mean Ethereum comes without drawbacks of its own. From the network’s scalability concerns to costly transaction fees, Ethereum’s challenges have created fertile ground for competitors. Other blockchain solutions, such as Near and Solana, provide stronger scaling and lower transaction prices, but lack the robust developer community and security of Ethereum.
Is the trade-off worth it? Here’s our read: Ethereum’s challenges are real, but you’ll still be hard-pressed to find a stronger option than Ethereum on the current market.
“With blockchain still in its infancy, it’s always a good idea to stick with well-established products to the extent possible,” says Dave Hecker, Vention CTO. “Adopt new, esoteric technologies with caution.”
Are you looking for a centralized or decentralized solution?
While choosing your chain, you’ll inevitably have to decide how important centralization — or decentralization — is to your product vision.
A centralized blockchain might seem like an oxymoron. Isn’t the value add of distributed ledger technology that it decentralizes transactions and other asset management? It depends: While decentralization’s trustless processes and might be the main draw for one blockchain project, another project might find that volatility and the potential for bad actors make a decentralized solution not worth the hype.
Centralized technology provides an answer. Andrew Haines, Vention's Global Head of Fintech, says that many enterprises and organizations don’t want to give up control to a trustless decentralized blockchain. “They want the immutable ledger and the ability to create efficiency through automation using smart contracts on a centralized platform. But, they want to restrict access.” In those instances, Andrew suggests technologies like Hyperledger Fabric and Corda, which are better for such use cases.
Do you have the resources you need to build with blockchain?
For the time being, blockchain projects require more of everything: more resources, more time, and more money than other software development. It’s hard to identify and recruit qualified blockchain engineers, and if you’re planning on integrating your blockchain with say, multi-currency exchange and AI, then your costs are going to go up even more.
There are also differences in how much the actual chains cost. Gas fees for Ethereum and other distributed ledger technologies can fluctuate wildly in pricing, but are essential for ensuring that blockchain validators are awarded for the work performed. Ethereum’s relatively high demand makes its gas fees pricey compared to less expensive chains like Avalanche, but Ethereum has a larger dev community than Avalanche, so it’s easier to find and hire experts.
The fact is, cloud-based solutions aren’t as glamorous as blockchain, but they won’t burn a bitcoin-sized hole in your pocket — which is the last thing you need if you’re building a startup (or any business, for that matter).
How much do you plan to scale your app?
Scalability concerns are hardly unique to Ethereum. Scaling is a problem for all decentralized public blockchains to some degree. Why? A record of any ledger exists across all user devices for the purposes of verification, security, and redundancy — and that eats up a lot of processing power. Visa, for instance, can process up to 24,000 transactions per second, whereas Ethereum can process 20.
That disparity will surely narrow as the technology matures. But if you’re looking to scale in the short term, leveraging private blockchain technology could be preferable to a public platform. Private blockchains, like IBM’s Hyperledger Fabric referenced above, are still peer-to-peer platforms. However, by gatekeeping permissions around access and transactions, you’ll have more robust controls over transaction speed, and you’ll be able to limit bad actors and scale more effectively.
What other tech stacks and tools will you need to integrate with?
Blockchain projects never rely solely on blockchain platforms, so one of the greatest challenges of developing an app that relies on blockchain lies in integrating the distributed ledger elements with the rest of your traditional technical architecture.
To do that, traditional frameworks and tools can prove useful supplements for your blockchain project. These include:
- Solidity for implementing smart contracts
- Truffle: a popular suite of tools for smart contract development that includes Solidity
- Hardhat: a framework for flexible, extensible Ethereum development
- Brownie: a Python-based framework for blockchain development
- Alchemy: a platform for securely testing and monitoring scalable blockchain apps
We don’t have to tell you that your tech stack will be determined by the business goals for your project. Think beyond its application of blockchain technology, and consider the services and integrations your project will require to function as desired.
Putting together a blockchain development team, as well as shepherding a blockchain project to fruition, requires radical thinking. It also requires a serious evaluation of how you plan to use this technology — and a serious evaluation of risk.
So what separates red-hot innovation from one more wintry crypto product? A project where goals and architecture are properly aligned, with a thorough roadmap of your staffing needs and technical requirements. With that approach, any business has far better chances of getting through a tough crypto winter.
