The problems of blockchain integration into a business model
Blockchain is a kind of decentralized accounting system (which is very difficult to falsify), it allows you to check transactions in real time, without requiring permission from a trusted third party. The use cases of a blockchain are endless: insurance, banks, logistics, supply chain, government and even identity verification. That’s why many companies have moved from PoC (proof of concept) to concrete achievements of blockchain technology.
The main achievements of the technology are available in open source, any aspiring developer can implement in their workplace a small private blockchain and run it on a network of multiple computers. The opportunity to explore in practice the concepts of such an environment, such as crypto mining, creation of a crypto wallet or even a crypto exchange is of great interest to companies all around the world.
How to integrate blockchain in your business?
Choose your blockchain type
There are two types of blockchains: public and private.
Public blockchain. As the name implies, a public blockchain is a public network that anyone can use without the permission of third parties. Anyone who has access to the Internet has the right to access a public blockchain. Public blockchain systems usually reward their members for mining and maintaining the network unchanged. An example of using a public blockchain is Bitcoin.
Public blockchains allow communities around the world to share information openly and securely. However, the obvious disadvantage of this type of blockchain is that it can be compromised. The rules adopted and applied from the very beginning of the system’s blockchain development cannot be changed long after they have been adopted.
Private Blockchain. Unlike a public blockchain, private blockchains are those that are used only by trusted participants. The overall control over the network is in the hands of the system owners. Moreover, the rules of private blockchains of the system can be changed depending on different levels of power, exposure, number of participants, authorization and so on.
Private blockchains can operate independently of other processes or can be combined with other blockchains. This option is usually used by enterprises and organizations in the oil and gas industry. Thus, the level of trust required among participants is higher in private than in public chains.
Choose your platform
There are many solutions for creating blockchain platforms, such as Ethereum, Hyperledger, Multichain, Open Ledger, Chain, Corda, etc. D. Some of them are still immature platforms. Thus, it is necessary to choose the most suitable platform for your expectations based on your needs.
The Ethereum-based development is the most popular process for creating blockchain projects. Due to the dynamism and responsiveness of the Ethereum community, as well as the diversity of its documentation, the concept of a blockchain built on this platform means that objects will be fully autonomous and belong only to themselves.
The Ethereum development environment is based on the most common languages such as C++ (Cpp-ethereum), Haskell (ethereumH), JavaScript (EthereumJS-lib) or Python (Pyethapp). The Go-based blockchain will be the safest (Go-ethereum or Geth). This is the most used Ethereum client in the world. By default, it connects to Homestead, the main platform network. The first step is to install Geth on its workstation (it exists for Linux, iOS, Android, MacOS and Windows).
The second most popular platform is Hyperledger Fabric. Hyperledger Fabric is a relatively new platform for building a blockchain. Hyperledger Fabric has several distinctive characteristics compared to other modern models of blockchains; whether these characteristics are advantages or disadvantages, often depends on the context.
Hyperledger Fabric is a software framework for developing applications and specialized business solutions based on blockchain. One of the features of Hyperledger is the fundamental rejection of creating custom crypto assets. Hyperledger members develop projects strictly as information technology.
Regardless of how the blockchain technology is used, companies will either turn to their supplier partners for software development or work on developing the technology internally. Regardless of whether a company implements blockchain technology through an internal or external team, it is important that the company gain experience with blockchain technology, since the technology is new and complex for most companies.
For IT companies that want to implement blockchain technology, there is a very wide, albeit immature, ecosystem that is developing around blockchain technology. According to a recent report from 451 Research, there are nearly 300 blockchain startups worldwide that are working to develop technologies in education, finance, food, warehousing, sales and retail, intellectual contracts, social media, supply chain management, identity management, retail and IoT.
Most major IT companies are actively working with blockchain, in particular, IBM, which has allocated significant resources for the Hyperledger project for the Linux Foundation and Microsoft, which works with the banking industry consortium R3 CEV to enable system chain testing using Microsoft Azure.
Create your first chain of blocks
To initialize a blockchain, you need to create the first block, then the blocks will be automatically created and structured. This block should contain all characteristics of a chain. After that, the blocks will be available for all nodes (or users) of the network. To start creating a blockchain you need to create a JSON file. You need to specify several parameters: “nonce” (a usual cryptographic hash that generates a random value), “time stamp” (time of checking between two consecutive blocks), etc. After filling in the JSON file everything depends on Geth client. Create a folder containing the blockchain (chaindata) and initialize it.
The goal is to be able to replicate as many commands as your network has nodes. To nodes exchange data in a blockchain, they must be connected to each other. For Geth to connect to a node in the network and coordinate a lot of actions, it must have its own identifier, called enode in Ethereum.
To ensure the spread of the technology in the ecosystem of Ethereum, it will be necessary to have a cryptocurrency in Gas to get the necessary computing power from the network members.
Choose the consensus protocol
Choosing the right consensual protocol is a very important step in the implementation of your blockchain organization, as it will greatly affect its operation and optimization. The main task of consensus is to solve mathematical problems that require a lot of computational power. For example, when one of the cryptocurrency miners finds the right solution to a mathematical problem, the answer must be quickly and easily checked by all members of the network, so there are different consensus systems, such as PoW and PoS.
There are more than 25 consensual protocols, each of which has its own features and shortcomings. The most popular protocols at the moment are Proof of Work and Proof of Stake. They are the easiest to implement and understand.
Proof-of- Work (PoW) is when the technical equipment of the miner solves complex mathematical problems. For adding a confirmed block to a blockchain, the miner is rewarded with a cryptocurrency. Searching for solutions is a complex process that requires significant computing power. As soon as a computer finds a solution, it sends a message to other computers in the community for checking. The solution is easy to verify because the other computers are given the answer. In the case of development of decentralized applications, this is not the case, for example, the use of a blockchain in a marketplace is very different from the classic development of a marketplace.
The key feature of this mathematical problem is asymmetry: it must be moderately complex for the miner, but simple enough for the network as a whole. This is achieved by cryptography. Every miner in the network tries to find a solution to the problem first; in fact, it can only be found by direct search, so many attempts are required for a successful solution.
Proof of Stake (PoS) is used when the miner blocks a predefined number of coins to check the transaction block. Cryptographic computations in PoS are much simpler for computers. You only need to prove that you own a certain percentage of all coins available in a given currency.
For example, if someone owns 2% of the total amount of Ethereum, they can get 2% of all transactions through Ethereum. Some people think that PoS will be a more fair system than PoW, because technically anyone can become a miner. PoS offers a linear scale relative to the percentage of blocks that the miner can confirm based on that person’s share of the crypt currency. This means that the person who has ten times more coins can only create 10 times more blocks than the other person.
Unlike Proof-of-Work, where the algorithm rewards miners who perform calculations to validate transactions and create new blocks, in Proof-of-Stake, the creator of a new block is selected by the system in advance based on its state, i.e. the share in the total number of cryptocurrency.
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