13 July 2022
Introduction
Blockchain technology has been with us for more than 10 years, with many lessons learnt along the way. Many projects had highs and lows, whilst people got to discover where the real value lies. Bitcoin(BTC) proved it can withstand the Fear, Uncertainty and Doubt (FUD) along with the harsh market conditions as the price stabilized around the $20k mark during the economic crash. Poor financial practices, bad actors and mismanagement of projects, has led to an even bigger crash in the crypto market. This impact could’ve been softened significantly if the companies were practicing good business habits. As a result, it actually cleaned up the market from over leverage positions and got the attention of the entire market to get their act together. Many smaller projects felt the brunt of this crash, due to the heavy dependence on major blockchain networks such as Ethereum(ETH). If ETH were to significantly fall in price, it can affect the prices of all projects built on that chain. This has led to the question, what are the pros and cons of building an independent blockchain?
Pros
- Uniquely designed for your project's focus. Each project may have a different idea on how they would like the tokenomics and ecosystem function. These differences can range from gas prices, transaction speed, centralized or decentralized, private networks and more. Global Companies, which are growing faster in recent times, can build a blockchain specific for the employees around the world. Decentralized Autonomous Organizations (DAOs) are widely spreading and you can see this as the direction in which this sub sector will take.
- Security. All blockchains aren’t built equally. Bitcoin(BTC) is known to be the most secure decentralized asset, but lacks the utility for application development. Blockchain technology is secure for the most part but with slight differences in protocols and network architectures, some vulnerabilities can arise. Building your own blockchain, you can choose which other networks you would grant permission to access and control the assets that can be traded on the ledger.
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Control or the Lack of Control. You can decide to build a fully decentralized, trust-less blockchain just like bitcoin, where nobody has control over the network once it has been deployed. Some people or companies may have a different view and choose to build an open-source, governance based or even centralized and fully controlled by the development team. Being able to continually upgrade your technology, utilizing the Ethereum Virtual Machine(EVM) without the need of a Hard Fork(a radical change to a network's protocol that makes previously invalid blocks and transactions valid, or invalid), your business can easily continue to innovate with the ever changing world.
Cons
- Cost. Building your own blockchain can be expensive. It can run you in the 10s of thousands and that is pre-deployment. Deployment fees and maintenance is another cost to take into consideration with independent blockchain.
Cost of Blockchain Implementation: Process
The following table represents the cost percentage with respect to a specific development:
Milestone Wise Cost Distribution In-House
Consulting 10%
Designing 15%
Development 50%
Quality Assurance 25%
(Deployment and
3rd party Cost) Private Blockchain: ~$1500/month
Public Blockchain: $0.01 / transaction-based for public blockchain + ~$750 for 3rd party
Maintenance Cost ~15% to 25% of the overall project cost
Link to article with cost of implementation: https://www.leewayhertz.com/cost-of-blockchain-implementation/
- Lack of Exposure. Building your own blockchain will leave you in the situation where you will have to spend significant time advertising and exposing people to the project. Joining an already competitive market without a good plan of execution to get exposure to your blockchain will only leave you with a nice product with nobody to use it.
- Accessibility. Getting the native coin of the independent blockchain as accessible to the wider public will be a major challenge. The major currencies such as Ethereum(ETH) and Litecoin(LTC) can be purchased and traded on almost any crypto exchange or platform. This will take some planning and investment to get to a level where you can compete with the big boys.
Summary
All in all, it comes down to what the team behind the project is looking for in the long term. If you're a small budget company or project I would suggest building on one of the established blockchains to save time and resources. If you have the team and resources, building an independent blockchain might be the way to go. Projects such as Cardano(ADA), Stellar(XLM), Ripple(XRP), OnixCoin(ONIX), DigitalNote(XDN), Hedera(HBAR) and a few others, already built an independent blockchain to support the needs of their target market. Despite this huge market crash, these projects are still holding up and may very well be here in the future. Blockchain technology is here to stay, as innovation continues to lead this new asset class to be the leading sector in the future global economy.
