Blockchain for Business Part III: Choosing the Right Chain

In our last two episodes, we explored industries that stand to gain from blockchain and shared tips on determining if your business is prepared for blockchain adoption. At this stage, one pivotal question needs to be answered: How do you choose the ideal blockchain protocol that aligns with your unique needs and goals? Below we will try to address this question and run you through some of the main factors to consider when choosing a blockchain protocol.

What to Look for In a Blockchain

Every business has its unique needs and goals, but when it comes to evaluating the fundamental aspects of a blockchain infrastructure, there are key aspects that are universally necessary for seamless operation, namely: reliability, cost effectiveness, scalability, interoperability and usability. Let’s take a look at how to evaluate each of these features.

Judging Blockchain Reliability

Reliability in a blockchain network is paramount. It means your business can trust the system for consistent uptime, data integrity, and security. But what are the main indicators to look for when evaluating the reliability of a blockchain network?

One of the first indicators is definitely the longevity of a network as well as track record. Blockchains with a history of stability and trustworthiness over time inspire confidence in their reliability and signal a certain maturity of the protocol. High uptime is crucial. Downtime can disrupt business operations and erode trust. Hence, dependable blockchains maintain consistent operations without frequent interruptions. In order to check a blockchain’s uptime you can consult their Explorer Website or check out community forums.

The second indicator of reliability is the approach used by blockchains to guarantee the security of the network. Looking at the consensus mechanisms implemented is going to help you evaluate whether the network is able to successfully ensure the integrity of transactions and protect against malicious attacks.

Currently, the most resilient consensus mechanisms have shown to be Proof of Work, (PoW), Proof of Stake (PoS), Delegated Proof of Stake (DPoS), and Byzantine Fault Tolerance (BFT). Each of these mechanisms will come with a set of trade trade offs, on security, decentralization and execution. Although these might be complex concepts to grapple with, it's worth spending a bit of time to understand which option you are more comfortable with. At the bottom of this article you will find some valuable resources to dive deeper into it.

It’s important to keep in mind that decentralization is a fundamental characteristic of a blockchain network. A blockchain that operates without a central authority and relies on a distributed network is more resilient to attacks as its decentralized nature minimizes the risk of a single point of failure.

Lastly, an important indicator of reliability is an active development community that can guarantee that the network is continuously enhanced and vulnerabilities are swiftly addressed. A good way to determine that is to check out the GitHub repository activity, documentation, SDKs, and community governance.

Layer-1 or Layer-2?

In 2015 Ethereum launched bringing to the popularization of smart contracts in the blockchain space. Being the first chain to introduce a fully functional smart contract platform it created a new environment for the creation of decentralized apps, opening up new possibilities for the development of Web3 native business models. However, as Ethereum gained momentum the gas fees required to operate on the network also went up signaling a scalability problem.

Due to this limitation, Layer-2 blockchains like Polygon emerged, aiming to enhance scalability, reduce transaction fees, and accelerate transaction processing. Simultaneously, the next generation of Layer-1 blockchains also entered the scene. Layer-1 blockchains like NEAR Protocol are self-reliant chains designed with innovative scaling solutions from the outset. They then utilize Ethereum Virtual Machines (EVMs) such as Aurora to facilitate interoperability among chains and create an Ethereum-like environment.

Understanding the distinction between Layer-1 and Layer-2 blockchains and their scaling approaches is pivotal when determining the blockchain to underpin your business. While scalability, transaction costs, and throughput exhibit minimal disparities between next-gen Layer-1 and Layer-2 blockchains, opting for a next-generation Layer-1 can offer additional advantages, including heightened security and greater control over blockchain parameters.

Evaluating Interoperability

Determining the level of interoperability of a blockchain involves an evaluation of its capacity to collaborate, exchange data, and share assets with other blockchain networks. Firstly, cross-chain compatibility is a pivotal aspect. It's essential to investigate whether the blockchain incorporates mechanisms or bridges designed to facilitate communication and asset transfer between multiple blockchains. These bridges create cross-chain compatibility and enable assets to move seamlessly between different networks. Additionally, the support for atomic swaps, which allow users to directly exchange assets from different blockchains without the need for intermediaries, contributes to a higher level of interoperability.

The blockchain's adherence to common interoperability standards is another vital element. These standards, encompassing widely recognized token standards such as ERC-20 and ERC-721, enable effortless interaction with other chains. Furthermore, the utilization of interoperable middleware layers or toolsets can enhance interoperability capabilities.

Smart contract capabilities also should not be overlooked. Evaluate whether the blockchain supports interoperability features within its smart contract platform, allowing smart contracts to seamlessly interact with those on other blockchains. This is particularly relevant for applications that rely on cross-chain smart contract execution.

Last but not least, ecosystem partnerships and integrations are indicative of a chain's interoperability efforts. Collaborations with other blockchain projects, networks, or platforms, as well as participation in cross-chain DeFi ecosystems, reflect a commitment to interoperability.

Developer tools and documentation are instrumental in fostering interoperability. The availability of APIs and SDKs that simplify cross-chain development can be a significant advantage. Comprehensive documentation further facilitates the integration of interoperability features into applications.

The strength and activity of the blockchain's developer community are also critical. A thriving community often contributes to the development of interoperability solutions, and community-driven projects focusing on cross-chain interoperability can be valuable resources.

By carefully considering these factors and conducting thorough research, you can gauge the level of interoperability offered by a blockchain and determine its suitability for your specific project requirements related to interacting with other blockchain networks and ecosystems.

Assessing Blockchain Usability

Scalability, interoperability and affordability are the cornerstones of a usable blockchain, however, a truly usable blockchain will also prove user-friendly for developers and users alike.

A blockchain that provides extensive developer documentation, tutorials and educational material will provide a smooth development experience and allow newcomers to easily navigate its ecosystem. Robust APIs and SDKs and clear documentation will make a huge difference in your Web3 journey as well as a responsive community and feedback channels.

As a business, you also want to provide your users with a frictionless user experience that limits their exposure to the complexities of blockchain. For this reason more and more blockchain started developing specific business tools and packages to offer a Web2 like experience to businesses and their customers.

Aurora Cloud, developed by Aurora Labs, is an example of such comprehensive business tooling, which allows any business to customize their own chain, abstract gas fees from their customers, and provide a swift entrance to the Web3 world with Aurora Pass. The availability of such tools is something you might want to have as you start your own Web3 business and it is a good marker of the usability of a blockchain.

Final Remarks

In the past few years, the blockchain space has witnessed an incredible amount of development and innovation. As time passes, blockchain networks become more reliable, faster, cheaper and increasingly accessible. There are currently many different options for businesses looking to tap into Web3, so many that it might sometimes feel overwhelming. Knowing what to look for in a blockchain is a good starting point to make the best decision for your business. In our next episode we will dive deeper into some of the aspects we touched on in this article to provide you with even more insights to navigate the fast evolving space of blockchain.

Resources

Consensus Mechanisms

https://www.coinbase.com/learn/crypto-basics/what-is-proof-of-work-or-proof-of-stake
https://www.gemini.com/cryptopedia/proof-of-stake-delegated-pos-dpos
https://academy.binance.com/en/articles/byzantine-fault-tolerance-explained

Layer-1 vs Layer-2

https://www.youtube.com/watch?v=qniz6h2fYuc
https://thedefiant.io/what-are-layer-1s-and-layer-2s

Scaling Approaches

https://cointelegraph.com/explained/blockchains-scaling-problem-explained
https://cointelegraph.com/learn/a-beginners-guide-on-blockchain-layer-2-scaling-solutions
https://chain.link/education-hub/blockchain-scalability
https://medium.com/nearprotocol/how-nears-simple-nightshade-works-90f1c8e6e8af

About Aurora

Aurora is a platform for Web3 developers to build pioneering and scalable distributed applications. Powered by its high-performance Ethereum Virtual Machine (the Aurora Engine) and fully trustless bridge (the Rainbow Bridge), Aurora combines the builder-friendly development experience of Ethereum with the modern blockchain performance of the NEAR Protocol to offer an environment for creating highly scalable, carbon-neutral, future-safe, and low-cost Web3 services.