Own Blockchain Network
With the advent of blockchain technology, the way transactions and records in the digital world are handled has been revolutionized. Rather than being dependent solely on the central authority, blockchain technology allows multiple parties to manage and verify shared records using the decentralized nature of the blockchain network.
While a lot of applications have been built on existing blockchain platforms, some require an extra blockchain due to technical reasons or for other concerns. While there are advantages to creating an extra blockchain, certain aspects must be considered.
It is important to understand the pros and cons of using an independent blockchain to determine its viability.
What Does Running Your Own Blockchain Network Mean?
Running one’s own blockchain network consists of setting up a blockchain protocol that has its own settings, validation system, and operational principles. Depending on the type of blockchain network, a token of its own, special validators, and governance system may be part of it as well.
In general, blockchain networks are based on various participation types. In public blockchain networks, anyone can participate, whereas in private networks, only approved entities participate in the network operations. In consortium blockchain networks, various organizations operate the network.
Different participation types bring various challenges in terms of transparency, management, decentralization, and security. The correct approach depends on the application area.
Benefits of an Independent Blockchain Network
1. Control Over Network Rules
An independent blockchain gives the freedom to design its protocol rules based on some particular demands. They could include the validation of transactions, block creation, fees, and updates to the software.
For instance, an organization-specific blockchain would favor the accessibility and predictability of transactions. On the other hand, the demands of a public blockchain may include the open nature and anti-censorship features.
Flexibility is advantageous when the application’s demands are in disagreement with the pre-existing design of the blockchain. But increased control translates into increased responsibility too.
2. Flexible Consensus Mechanisms
Consensus algorithms enable the participating nodes in the blockchain network to reach an agreement about the state of the blockchain. There exist different algorithms that provide different tradeoffs between security, efficiency, energy usage, and decentralization.
Proof of Stake utilizes incentives and validators. Proof of Authority makes use of validators, whereas Byzantine Fault Tolerant algorithms assist in reaching agreements among a group of nodes under certain failure scenarios.
Each consensus algorithm impacts transaction confirmation and the network’s response to disruptions differently. There isn’t a consensus algorithm that would suit all situations and is the best in all of them.
3. Control Over Transaction Fees
Fees for transactions on public blockchains can be subject to change depending on the level of demand on the network. The benefit of an independent blockchain is that there will be more flexibility with respect to the setting of the fees and how the transactions can be processed.
Some examples of fee structures include fixed parameters, dynamic fees, or other ways of paying for transaction fees. In any case, low transaction fees do not mean the absence of costs incurred by the network itself.
4. Defined Participation and Access
Depending on its structure, the standalone blockchain could create rules concerning who is allowed to become node operators, process transactions, or gain access to specific records.
This can prove helpful where there are several organizations that want to maintain a common ledger, but within certain participation policies. Permissioned blockchain systems allow restricting transaction validation operations to particular participants.
However, there are also downsides to introducing participation control. The greater control over participation can lead to less openness and decentralization, so the blockchain design should suit user needs.
Limitations and Challenges
1. Security Responsibilities
The blockchain being created is not guaranteed security because of the existing network since it depends on many other factors such as the design of the protocols, the number of validators, the implementation, and the resources that will be used to secure the system.
A smaller number of validators makes coordination easier but may be more prone to collusion or service disruption. Poor consensus and software bugs may cause problems with transactions and availability of the network.
In order to ensure security, there should be extensive testing, code review and vulnerabilities detection.
2. Infrastructure and Maintenance
It is not sufficient to have software that generates blocks. Communication between nodes needs to take place, transactions need to be verified, and data in the network should be accessible.
Running one’s own blockchain network also entails planning for software updates, back-ups, monitoring, recovery, and compatibility between different versions of the protocol.
All of this should take place even after the launch of the blockchain network. Otherwise, the network might experience problems in the future.
3. Adoption and Ecosystem Development
The operation of a blockchain can be significantly user-dependent. A newly developed blockchain would not possess as many integrations, tools for developers, liquidity, and community engagement as a preexisting platform.
Participation can take time to build up. Lack of participation may limit the functionalities of the network and make it challenging to have a properly decentralized validation community.
4. Interoperability and Governance
The linking of different blockchains can pose technical problems. It can include bridging, messaging systems, and other types of interoperability solutions which each comes with its own set of security issues.
Governance is also an issue that needs to be thought about. The blockchain needs a way for participants to propose and pass new protocols. Different opinions on upgrades and network policies can slow down decision making, sometimes resulting in diverging chains.
Conclusion
Maintaining a private blockchain network provides increased autonomy in relation to the rules of the network, its consensus algorithm, transaction costs, and participants. Yet, it entails constant spending on security, infrastructure, maintenance, and ecosystem development.
The decision to maintain one’s own blockchain network should be based on the requirements and needs of the business. With careful consideration of both strengths and weaknesses, businesses will be able to assess whether it is necessary to develop their own blockchain network or opt for an existing platform.
Exploring the Benefits and Limitations of Running Your Own Blockchain Network was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.