As the blockchain industry continues to mature, a greater number of businesses are beginning to explore how they can adopt blockchain technology.
A 2019 report from Deloitte notes, “The question for executives is no longer, ‘Will blockchain work?’ but, ‘How can we make blockchain work for us?’”
As such, many businesses— from finteh startups to major enterprise corporations— are taking a new look at blockchain and exploring opportunities for an effective and profitable implementation of the technology.
However, blockchain is still complex and difficult to fully understand. How do you go about adopting blockchain technology? What options are available and what are the relative merits of each method?
Traditionally, there are three main entry points into the world of blockchain:
- coding a new blockchain protocol from scratch
- forking an existing blockchain’s source code
- submitting a program, game, or app to a smart contract platform
As you probably already know, there are major differences between these three methods. And now, as blockchain technology continues to evolve, a fourth option is emerging:
- launching an application-specific blockchain on a multi-chain platform
This article will examine all 4 ways to adopt blockchain technology and help you make the right choice for your business. In the end, we'll see why creating an application-specific blockchain on a multi-chain platform is the superior choice for almost all circumstances and industries.
Method 1: Code A New Blockchain Protocol From Scratch
The first option for implementing blockchain technology is to code a blockchain from the ground up. The person (or persons) known as Satoshi Nakamoto was the first to complete this extraordinary task at the end of 2009.
Since then, a handful of development teams have tried their hand at building a blockchain protocol from scratch, to varying degrees of success. Notable examples include Ethereum, EOS, Hyperledger, Stellar, Cardano, QTUM, and Tezos.
High level of customization — Coding a new blockchain protocol means that your chain can be tailor-made to fit your desired blockchain use case as perfectly as possible.
Complete autonomy and independence — When you create a blockchain protocol, it isn’t reliant upon any other networks, blockchains, or platforms. This lets you operate with autonomy and make decisions based solely on what’s best for your business.
Low Operating Costs — Although initial startup costs are high, operating costs are often very reasonable once the development of a new blockchain protocol is complete. Monitoring and maintaining a well-coded blockchain is easily managed with the right talent.
Low-level Security — Security is almost always a concern for brand-new blockchains. If the network is not sufficiently large, the entire project will be extremely vulnerable. This is especially true if the chain uses a Proof of Work consensus mechanism, which leaves it exposed to 51% attacks and Diff Strand Attacks.
Very difficult — Since blockchain is still such a young technology, finding expert developers is challenging. Generally speaking, you need a virtuosic team to code an entirely new blockchain protocol. Even if you can assemble an impressive team of talented blockchain engineers, there’s literally no room for error when creating a new blockchain protocol. The smallest of mistakes can have catastrophic consequences.
Limited Interoperability — A new blockchain protocol is generally not interoperable with other blockchain protocols. While the level of blockchain interoperability a new protocol will have is variable, coding a blockchain that can interface with heterogeneous blockchains is not easy.
High costs — With blockchain developers in short supply, hiring a talented team is costly. Coupled with the fact that the development process is long and challenging, coding a new blockchain protocol is an expensive project. A significant commitment of resources is required to take this approach.
While creating a new blockchain protocol offers the most room for innovation and the greatest degree of adaptability, it’s not a business-friendly solution. Most businesses need flexible technology that can be implemented quickly and efficiently.
Method 2: Fork An Existing Blockchain’s Source Code
The second method of adopting blockchain technology is to fork an existing blockchain’s code. Since virtually all blockchain projects are open-source, this option is considerably easier— and therefore more common— than the first.
Comparatively Easy — Forking an existing chain’s source code is far easier than coding a brand-new protocol. It also lets you leverage proven technology, minimizing the risk of accidentally introducing critical vulnerabilities and greatly accelerating development time.
Cost-effective — As it’s a much easier method of adoption, forking an existing blockchain is also a relatively quick and cost-effective way to start using the technology. Operating costs will also remain low once the forked blockchain is up and running.
Autonomy and independence — Just as with creating a brand-new chain, forking gives you your own blockchain with an independent network. This provides autonomy from other projects and platforms. You control your own development, your business isn’t locked into a platform, and customers don’t need to pay gas fees in a foreign currency to run your products.
Reduced adaptability — This option offers considerably less flexibility than coding a protocol from scratch. A forked chain will be largely restricted to the original code base from which it was cloned. Of course, new features can be coded in, but then the task becomes comparable to coding a new protocol altogether. Reduced customizability makes forking an existing blockchain’s source code an unappealing option for most businesses.
Low-level Security — Like creating a new chain, forking presents security concerns. New networks are generally very small and therefore highly vulnerable. Without a large network or a third-party solution like Komodo’s Blockchain Security Service, forked chains are not secure. This is especially true if they are using an algorithm with lots of hash rate available for rent.
Limited Interoperability — As with coding a new chain, the level of blockchain interoperability of a forked chain is variable. It depends entirely on which chain’s code base was cloned. For instance, if you fork a Bitcoin-protocol-based chain, you will have a moderate level of interop with other BTC-protocol chains.
However, in general, there isn’t a large degree of interop within the blockchain space, so regardless of which chain’s code base is forked, cross-chain interoperability will be limited.
It’s important to note that, although forking a blockchain offers several benefits over coding a new protocol, this method has drawbacks. Security is still a serious challenge. Moreover, changes to the code base of an existing blockchain can be made, but this is risky. There is always the possibility that adjustments to the code will disrupt the basic functionality of the blockchain and introduce bugs.
Method 3: Use A Smart Contract Platform
The third and perhaps most popular option for adopting blockchain technology is to use a smart contract platform. This path to blockchain adoption provides some advantages over the first two options but, of course, it has its drawbacks, too.
Minimal Startup Costs — Creating a smart contract is a relatively easy task. There are templates to leverage and even developers without experience in blockchain can manage to write a simple smart contract. This makes it a cost-effective approach to using blockchain.
Simple and Efficient — This method of adoption is rather straightforward. You simply create your contract, submit it to the platform, and pay the gas fees. It’s a quick and easy way to leverage the technology and doesn’t require any prior experience with blockchain development.
High Level of Security — Smart contact platforms offer a shared-security model, providing a high level of security to all third-party projects. Since everyone is using the platform’s network, there’s no need for each individual project to to worry about building up their own network.
High Operating Costs — As noted above, it’s inexpensive to create a smart contract. However, you need to pay a fee for every process you want completed. These “gas” fees are highly variable and depend on the amount of activity on the network at that time, as well as the price of the platform’s coin at the time of payment. In times of congestion, fees can shoot up and make it unreasonably expensive to run your smart contract. This makes it extremely costly to run any applications of even moderate complexity. It also makes it impossible to predict operating costs.
Very Limited Autonomy — While creating a smart contract is a convenient and secure way to adopt blockchain technology, it’s essential to understand that this method does not actually give you a blockchain. Instead, you are paying “gas” fees to use someone else’s blockchain.
This has several major consequences. First, you don’t have your own blockchain or your own network so your project is just one among hundreds or even thousands. Your success is not prioritized. Second, if you build on a smart contract platform, you are locked into that platform. There is no way to migrate off the platform without having to abandon your work and start over.
Finally, you have no control or decision-making capacity about the development of the platform itself. The platform’s development, or lack thereof, may present a barrier to your success.
A Lack of Adaptability — Smart contracts are Turing complete and offer a reasonable degree of flexibility but, at the end of the day, all smart contracts must be processed by the platform’s network. This limits the extent to which blockchain solutions can be customized because any complex applications that need the network to process many operations are very costly to run.
No Ability to Scale — The single, shared-blockchain model of smart contract platforms causes severe congestion. This makes it hard for any projects to operate economically, let alone grow beyond their current state. This inability to scale out is an unacceptable disadvantage for anyone who is seriously considering adopting blockchain technology.
Smart contract platforms contributed a great deal to the blockchain industry. Specifically, they made it quicker and easier than ever before to adopt blockchain. This ushered thousands of new businesses and developers into the industry.
However, their underlying architecture is flawed. Single-chain smart contract platforms are closed environments that make it very difficult to profitably adopt blockchain technology. Businesses need more than just simplicity and security— they need autonomy, adaptability, and scalability.
Method 4: Launch An Application-Specific Blockchain
With the limitations of smart contract platforms becoming abundantly clear throughout the blockchain industry, a new breed of blockchain platform emerged: the multi-chain platform. These platforms allow you to generate your own application-specific blockchain. In almost every way imaginable, this is the new-and-improved method of blockchain adoption.
As the name suggests, multi-chain platforms can support a multitude of blockchains. Unlike the single-chain smart contract platforms that previously dominated the industry, multi-chain platforms give every third-party project an independent blockchain.
It’s important to make the distinction between DLT (distributed ledger technology) and blockchain. A DLT is a private, permissioned, and centralized variety of a distributed ledger that is well-suited for protecting proprietary data. Blockchains are public, peer-to-peer networks that anyone in the world can join and participate in.
While projects like Hyperledger and Enterprise Ethereum from Consensys offer private DLT, they do not offer custom blockchain solutions. Blockchain, by definition, is a publicly available technology. That’s why application-specific blockchains are better suited for public-facing projects in the fintech and DeFi sectors, as well as for other blockchain use cases like gaming or the tokenization of real-world assets.
Komodo innovated the multi-chain architecture that makes application-specific blockchains possible. Now, a number of prominent competitors have pursued the same multi-chain approach that Komodo pioneered— Cosmos, Polkadot, Aion— but Komodo remains the industry leader.
For the purposes of this blog post, we’ll keep things general to all multi-chain platforms. Let’s look at how these platforms stack up against the first three methods of blockchain adoption we’ve examined in this article.
When you build an application-specific blockchain on a multi-chain platform, you get a sovereign chain without needing to code a protocol from the ground up or fork an existing chain’s code base. Better still, you can customize your chain prior to launch (to varying degrees, depending largely on which multi-chain platform you use).
Moreover, your application-specific chain is programmable. That means it can natively support games, contracts, apps, and other types of software. So, rather than building your product and paying for someone else’s blockchain to run it— as is the case with single-chain smart contract platforms— you simply run your product on your own sovereign chain and network.
Simple and Efficient — You can create an application-specific blockchain with ease on multi-chain platforms. It’s much, much simpler and quicker than coding a new protocol or forking an existing chain’s source code.
Cost-effective — Multi-chain platforms are open source, making them, to an extent, permissionless and free. In most cases, you’ll need to pay for some additional features— security, interoperability features, listings on wallets or exchanges— but you generally don’t need to pay anything to launch the chain and build your product.
Of course, building an excellent product still requires a talented team, which requires funding, but, with multi-chain platforms, you can skip the lower-level blockchain coding and focus exclusively on creating your solutions.
Moderate-to-High level of Customization — Blockchians launched with a multi-chain platform are customizable, although the level of customization varies between platforms. For instance, chains launched with Cosmos use Tendermint BFT consensus engine so, while they are high-performance chains, they aren’t very customizable. On the other hand, blockchains launched with Komodo’s technology are customizable along 18 different parameters.
More generally, what makes application-specific blockchains customizable isn’t the details of the blockchain itself, but rather of the ability to build custom programs and apps atop that chain. This is a crucial advantage over other methods of adopting blockchain technology.
High Level of Security — Multi-chain platforms vary slightly on this matter— some offer a shared security model, while others do not— but they have all built some type of security solution into the offering. After all, what good would a blockchain without adequate security? It’s absolutely essential to provide a strong level of security to all businesses adopting blockchain.
High Level of Scalability — The primary scalability issue with single-chain smart contract platforms results from all third-party projects are sharing a single network. So if one project’s product becomes extremely popular— think CryptoKitties— all projects on that platform suffer.
Multi-chain platforms avoid this scalability problem completely by offering sovereign, application-specific blockchains to each and every business. That way, every product runs atop an independent chain with an autonomous network, preventing congestion and bottlenecks.
On top of that, most multi-chain platforms offer the ability to scale out horizontally after launch. In other words, if your product becomes so popular that a single application-specific chain isn’t enough to support it, you can add more chains to keep up with growth.
Autonomy and Independence — As explained above, application-specific blockchains are autonomous and independent from the multi-chain platform that allowed their creation. Unlike single-chain smart contract platforms, there is no vendor lock-in. Transaction fees are always paid in each chain’s native coin. Applications are run natively on each chain. Each project has complete control over the development of their chain and their product.
It’s worth noting that there may be, in some cases, a small degree of reliance upon multi-chain platforms. For example, to receive interoperability benefits within the Cosmos ecosystem, each chain must connect to the Cosmos Hub, which requires fees paid in ATOM, Cosmos’ native currency. Similarly, Komodo’s delayed Proof of Work (dPoW) security solution requires either setting up your own notary node network or integrating to Komodo’s notary node network, which requires fees paid in KMD, Komodo’s native coin.
In both cases, the additional features are not mandatory so if a chain wanted to be completely free of dependence upon a platform, they could certainly achieve that. But many businesses are happy to pay modest fees for out-of-the-box solutions and drastically reduced development time.
Moderate-to-High Level of Interoperability — As with other metrics of evaluation, the level of interoperability varies slightly from one multi-chain platform to another. But, on the whole, multi-chain platforms offer a much greater level of interoperability than alternative methods of blockchain adoption.
Cosmos, for instance, built Ethermint, which is a bridge between the Cosmos Hub and the Ethereum blockchain. Komodo offers industry-leading atomic swap technology that allows peer-to-peer cross-chain trades, even across different platforms and different protocols.
A New Environment — One of the drawbacks to multi-chain platforms is that they are still relatively new. The Polkadot mainnet has yet to go live. The Cosmos mainnet went live in March 2019 but there has yet to be a significant amount of adoption within the Cosmos ecosystem.
Since most multi-chain platforms are just getting started, it remains to be seen whether major bugs or vulnerabilities will be discovered the hard way.
This is another area where Komodo stands out. It’s been more than two and a half years since the Komodo mainnet went live and there are already a number of projects building atop independent blockchains created with Komodo’s technology.
Complications With Fundraising — Throughout 2016 and 2017, a project could create a website, publish a white paper, create tokens, and hold an ICO with almost no regulatory friction whatsoever.
In many ways, this was an incredible development— peer-to-peer fundraising made possible through blockchain technology, all without the headache of red tape. Many projects were able to crowdfund development this way. Some became very successful after raising funds in an ICO.
Of course, the downside to this frictionless fundraising was that it allowed scammers to steal enormous amounts of money from investors through the facade of an ICO. Some of these projects were complete scams, with no intention of ever creating a real product, and others were just uninspired ideas that oversold and over-promised their way into small fortunes.
Now, the Wild West days of crypto are long behind us. The SEC and other regulatory bodies around the world have cracked down on unregistered security offerings as well as unregulated exchanges. To raise funds in today’s world, you need to make sure you’re compliant.
How projects may be able to fundraise on multi-chain platforms remains unclear. If fundraising is an essential component of your business plan, this is an aspect that you must consider carefully.
It’s important to state that not all projects need a sovereign, application-specific blockchain. Some simple programs or apps may even be better suited for a smart contract platform.
Further, many smart contract platform ecosystems are far more advanced than their multi-chain counterparts— for instance, better documentation and educational resources, more experienced developers, and an abundance of other projects already building within the ecosystem. This undeniably adds value to smart contract platforms, even as the underlying architecture is flawed.
At the same time, multi-chain platforms are sure to catch up. The blockchain race is just getting started and these ecosystems will become vibrant soon enough.
Begin Building Your Blockchain With Komodo
If you’d like to learn a bit more about building an independent blockchain with Komodo technology, check out our custom blockchain solutions. Komodo allows you to customize and launch your own chain, add the UTXO smart contracts you need to accelerate development, and code custom products on top of your own chain in whatever blockchain programming language suits your project best.
If you’re ready to start building now, there are several ways to get started.
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