Building a blockchain database that is efficient, cost-effective, compliant, and sustainable requires careful planning
There are countless creators in the IT universe that are currently building blockchain ecosystems, both in the front-end and the back-end space. Infrastructure strategy is fundamental to building a viable blockchain offering, and there are a range of key variables that determine infrastructure success. Understanding infrastructure variables help to reduce your costs and lower management overheads, without compromising on efficiency, flexibility, or regulatory oversight.
Blockchain creators in the front-end space
Many innovators working in the front-end space are Software-as-a-Service (SaaS) providers, and software houses. Many specialise in decentralised applications (Dapps) and decentralised exchanges (Dex) creation, as well as Decentralized Finance (DeFi) applications that are consumed by large fin-tech and fin-op companies, or even Decentralized Autonomous Organizations (DAO). Use cases for blockchain technologies have also surged in gaming, the metaverse (VR/AR/XR), Internet of Things (IoT), art, NFT’s, and AI.
Blockchain creators in the back-end space
There are also many blockchain creators innovating in the back-end space. This includes mining pools that operate large clusters of equipment with highly powerful, efficient, multi-GPU based dedicated servers.
Staking businesses are similar but less resource intensive. They operate nodes that are equipped with cryptocurrency assets that ensure the legitimacy of transactions. These businesses operate blockchain validations on Proof of Stake (PoS) networks.
The choices that businesses make during the early-stage development of their infrastructure setup can dramatically accelerate the chances of success
Companies such as Blockchain-as-a-Service (BaaS) providers also fall under this umbrella. Their expertise involves utilising ready-to-connect services. They have ready-to-go solutions that are based on nodes equipped with a specific software stack that are interoperable with the P2P network. These solutions may also be based on automation nodes (API) that are ready to be integrated with both front-end and back-end software layers.
Many blockchain companies offer the back-end network itself, whether it is a private blockchain solution, such as hyperledger fabric, or the public blockchains, such as Ethereum network. Some networks are offering inter-Blockchain communication protocols (IBC), such as Cosmos.
There are companies that operate in both front-end and back-end spaces. They usually have comprehensively designed private blockchain solutions, often in industries such as retail and logistics. These businesses are known as System Integrators (SI’s). They usually own the hardware in their data centres and build the front-end software layer, as well as tailoring the back-end functionality. This is mostly offered as a service for businesses. Discussing private solutions, however, is limiting as they may be decentralised over several countries or continents. Solutions may also be limited to decentralisation among a few nodes in a single data centre, depending on the use case.
OPEX vs CAPEX blockchain data infrastructures
Increasingly, companies opt for operating expenditures (OPEX), rather than a traditional capital expenditures (CAPEX) model. This is largely because CAPEX requires large capital sum investments up-front. The OPEX model allows for higher elasticity – especially in the start-up and scale-up phase, where companies are limited to a tight budget. The OPEX pricing model also offers transparent operational costs for infrastructure.
Cloud-based infrastructure products are not only available as monthly expenditure costs, but they are also highly scalable,and therefore help to contain management overheads, and improve efficiency.
Whereas OPEX allows companies to decrease financial risk, by removing the need to invest in infrastructure that doesn’t meet the demand requirements. The flexibility of cloud services can unlock the need for minimal users per profitable project, providing a better ability to set a margin per end-user or consumer. This allows early stage blockchain adopters to maximise their cost effectiveness with just a small pool of users. OPEX is key for businesses with huge uncertainty or volatility from a demand perspective, whereas CAPEX infrastructures can be expensive with a lot of scalability unknowns.
Blockchain data regulatory requirements
GDPR and digital sovereignty are vital concerns for European based companies, many think that data should be stored locally in data centres within the EU region. Some business verticals also need to ensure that there are extra infrastructure security layers in place. Examples of these use cases include health-tech companies, whose infrastructure is HIPAA or HDS certified. As well as fin-tech businesses, who require PCI-DSS certified solutions.
It might only be a matter of time before there is increased regulatory oversight for specific blockchain use cases. Regulatory policies will likely be aimed at protecting end-user data, or data that is related to specific end-user locations. Many companies, especially those with limited operational budgets, might struggle to comply with new regulations. Cloud service providers that offer the appropriate regulatory safeguards will however be more able to offer more practical safeguarding solutions.
Building a successful Blockchain Infrastructure strategy
With an ever-increasing number of businesses working in the blockchain industry, new and creative ways of powering blockchain services are starting to appear, and making the right choices during the early-stage setup and development of infrastructures can accelerate the chances of success.
The most popular infrastructure approach involves buying either semi-managed or fully managed cloud products with ready-made software layers, and additional functionalities to enhance networking management. Integrated automation features like monitoring, as well as out-of-the-box backup solutions and functionalities can be added to ensure high availability, such as disaster recovery options.
It is vital for companies to consider infrastructure strategies, such as the multi-product, multi-cloud, or hybrid-cloud solutions. Getting these early-stage decisions right will reduce infrastructure management, giving teams the flexibility to focus their energy and talents on research and development.
Bare-metal servers usually come with root access, and cloud-integrated security layers, but they can be highly demanding in terms of the internal workforce required to build and maintain the right infrastructure functionality.
It is a challenge to estimate ingress and egress traffic for infrastructure when working with the major cloud service providers, and this represents a real pain point for every company operating blockchain infrastructure. Most cloud service providers charge additional fees that are added to the cost of the infrastructure itself. This lack of predictability makes it almost impossible to estimate the infrastructure operating costs.
Blockchain business data infrastructure round-up
Many key variables need to be considered before technical decision-makers decide on their ideal infrastructure setup, these include:
- An infrastructure strategy that considers the connectivity and interoperability of products and services
- Financial strategies decided on OPEX vs CAPEX
- Transparency to data traffic fees and predictable billing
- Compliance and readiness for future regulatory requirements
Importantly, blockchain developers should partner with a provider who offers dedicated support. Strong partnerships with providers can ensure an infrastructure fully supports your business ambition, whilst easing and optimising any management overheads.
|About the author: Omar Abi Issa is an award winning Blockchain expert, with over 7 years of enterprise B2B SME client experience. He specialises in helping tech companies with a strong focus in the Blockchain sector. Read his latest blog on how to use the cloud to solve blockchain challenges.