There is a growing demand for convenient blockchain for business. What you need to know before choosing a platform that will meet all the tasks of the project - read in the new article.
Blockchain is a technology that is rapidly developing and gradually comes to many areas of life. If not so long ago, only companies in the FinTech and IT sectors of the economy were interested in blockchain opportunities for business, but now the situation on the market has changed. The need for a convenient platform for expanding business and creating decentralized applications has appeared in many industries.
The number of open and closed blockchain solutions for various business areas from mobile games to taxi aggregators is growing every day. This diversity can be difficult to sort out. Where to start if you decide to build your project on the opportunities that blockchain can provide
Each block in the chain contains information and is linked to the previous block. You can imagine the blockchain as a huge database that is not located in one place. Since the blocks are interconnected, it is almost impossible to change the information in the blockchain after the fact, because each block contains part of the information of the previous block. In simple terms, a special algorithm that checks the fact that the data in the blockchain is written correctly and confirms the transaction.
Blockchain was conceived as a new, more secure and transparent way to transfer data, which is decentralized and does not require an intermediary. There are many options for using blockchains - banks, marketplaces, payment systems, bureaucratic departments, the state election system or medicine - in an ideal world, blockchain can replace or improve all of this.
What are the types of blockchain
Three large groups of blockchains: public, private and consortium.
Public blockchains are publicly available - anyone can create blocks with information, read them and participate in the mechanism of work. Such blockchains are decentralized, which means they do not have an administrator. Consensus mechanisms, which will be discussed below, confirm the transaction and the fact that the information is recorded correctly. Most well-known blockchains such as Bitcoin, Ethereum, Tron and others are public.
In private blockchains, only participants who have been entrusted with this right will be able to record information. Access to information may be general, or limited - this will depend on the nature and goals of such a blockchain.
Private networks can be used in large companies to store and quickly transmit information, or in government institutions, for example, as a replacement for the land registry and other bureaucratic departments.
Consortium blockchains are partially decentralized networks whose operation is determined by several pre-selected organizations. For example, several companies have organized a platform through which they can quickly conduct transactions and exchange information. Consortium members can make public access to information, or completely close it.
If you can’t choose the right blockchain, create your own. In theory, each company, with the availability of resources, can create its own blockchain that will meet all the needs of the business. But in practice, this solution will require large financial resources and a reliable team of programmers.
There are many consensus algorithms and their derivatives - each has its own principle of operation and properties. Let's analyze some of them:
Proof of work. One of the very first blockchain proof-of-work algorithms that became famous thanks to bitcoin. To confirm transactions, a decentralized network of computers (miners) is used, which compete with each other and try to solve a mathematical problem. The computer that finds its solution, confirms the transaction and creates a new block - receives a reward. The main disadvantages of this algorithm are high power consumption and low information transfer rate.
Proof-of-stake. This algorithm was created as a faster and greener alternative to PoW. Any user can become a network validator by leaving a certain amount of coins as collateral. Validators are selected randomly and receive a commission for each validated and confirmed block in the network. The more coins a validator has in a stake, the more likely it is that the system will choose it to confirm the transaction. The advantages of this method of proof of work are environmental friendliness and higher transaction speed. The downside is the threat of centralization - validators with a large number of coins can control a large part of the network.
Proof-of-burn. The consensus algorithm is similar to PoW, but does not require powerful computers or video cards. Instead, users are investing in virtual mining hardware. During the block validation process, the cryptocurrency is deliberately “burned” to ensure the reliability of the network. The more coins a user burns in favor of the stability of the system, the more options that he will be chosen as a validator. The advantages of PoB are low power consumption and the fact that burning can have a positive effect on the growth in the value of coins on the network. The main disadvantage of networks using this consensus mechanism is that it is suitable for mature projects that have already issued coins.
How to choose the right blockchain for your business?Before choosing a blockchain for your project or application, you need to pay attention to several important points.
- Decide on the type of blockchain - private or public, based on logic and benefits for each business. In some cases, it may not be practical to use a public blockchain and it is better to choose closed software solutions.
- Analyze technical issues before developing your application - what programming language is used on the network, the consensus protocol, and whether there is support for smart contracts.
- Assess how the selected network can scale and provide transaction speed. For example, for the idea of a decentralized money transfer application, a network is needed that is capable of providing a high speed of transaction confirmation with a low network fee.
- Evaluate already created applications in a particular network. Many blockchains are created for a specific business sector. For example, Ripple is suitable for financial sector services, Binance Smart Chain for fast trading, and Polkadot is popular among GameFi and NFT project developers.
The most popular platform is Ethereum, but whether it is so good depends on the business objectives
Thanks to the explosive growth of NFT and DeFi in 2021, Ethereum has become an industry giant. The introduction of smart contracts into the blockchain and the freedom of imagination for developers have made ether not so much a payment system like bitcoin, but a platform for building many applications and ideas. However, the popularity of this blockchain has affected it in a negative way - a huge number of applications and projects have significantly reduced the speed of transactions and increased the commission, known as gas fees.
Ethereum remains the leader and a good platform for building the project, because the creators continue to work on improving and scaling the network, which will be able to ensure the smooth and fast operation of the blockchain. But before making a decision, it is necessary to take into account the goals of the project and perhaps take a closer look at new networks.
On the "cons" of Ethereum, a lot of blockchains have risen, which make an application for the status of "Ether killer", as they managed to take into account some of the platform's shortcomings in their networks. For example, in the latest report from Cointelegraph, experts assessed the chances of three platforms for rapid growth - Solana, Polkadot and Algorand.
The main advantage of Solana is the speed of transactions. Thanks to the hybrid proof-of-stake and proof-of-history consensus algorithm, the network developers managed to achieve up to 150,000 transactions per second - for comparison, Ethereum still gives out about 4,000 TPS. The Solana network is chosen by financial services and DeFi projects.
The foundation of Polkadot is its interoperability with other networks. In the future, developers will provide solutions for an easy way to move between blockchains and projects. A single ecosystem instead of hundreds of isolated networks is what the developers of this platform are striving for, so Polkadot can be the right solution for Web 3.0 projects.
Algorand promises immediate confirmation of transactions and good network scalability. In addition, the blockchain architecture allows you to build private networks based on the main one. This is a convenient solution for game developers and government companies.