Blockchain in the cloud – Building successful blockchain infrastructures (Part 2)
Disclaimer: The text below is a press release that is not part of Cryptonews.com editorial content.
This is part two in a three-part series about how blockchain and cloud technology can change the internet. We recommend reading part one, titled “Blockchain in the cloud - A greener future for blockchain developers.”
Building successful blockchain infrastructures
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 is a range of key variables that will determine infrastructure success.
Understanding infrastructure variables will help keep your costs and management overheads low, without compromising on efficiency, flexibility, or regulatory oversight. - Omar Abi Issa
Creators in the front-end space
Many innovators working in the front-end space are Software-as-a-Service providers and software houses. Many specialize in decentralized applications (Dapp) and exchanges (Dex) creation, as well as Decentralized Finance (DeFi) applications consumed by large fin-tech and fin-ops companies, or even Decentralized Autonomous Organizations (DAO). Use cases for blockchain technology have also surged in gaming, the metaverse (VR/AR/XR), the Internet of Things (IoT), art, NFTs, and AI.
Creators in the back-end space
There are also many creators innovating in the back-end space. This includes mining pools – large clusters equipped with highly powerful, efficient, multi-GPU-based dedicated servers.
Staking businesses are similar but less resource intensive. They operate nodes equipped with cryptocurrency assets that ensure the legitimacy of transactions. These businesses operate blockchain validation on Proof of Stake (PoS) networks. See the first in this series of articles.
Companies such as Blockchain-as-a-Service (BaaS) providers also fall under this umbrella. Their expertise involves utilizing ready-to-connect services. They have ready-to-go solutions that are based on nodes equipped with a specific software stack that is 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’s a private blockchain solution, such as Hyperledger fabric, or a public blockchain, such as the Ethereum network. Some networks offer 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 centers 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 decentralized over several countries or continents. Solutions may also be limited to decentralization among a few nodes in a single data center, depending on the use case.
Infrastructure strategy variables
Building a sustainable blockchain database is one thing, but building one that is efficient, cost-effective, and compliant is another. This process requires careful planning, and an understanding of how underlying infrastructure impacts the success of your blockchain company.
OPEX vs. CAPEX
Increasingly, companies opt for OPEX expenditure, rather than the traditional CAPEX model. This is largely because CAPEX requires the company to invest large capital sums up-front. The OPEX model allows for higher elasticity, especially in the start-up and scale-up phase, where companies are limited on budget. The OPEX pricing model offers transparent operational costs for infrastructure.
Cloud-based infrastructure products are not only available as monthly expenditure costs, but they are highly scalable. Cloud helps contain management overheads and improve efficiency.
OPEX allows companies to decrease financial risk, by removing the need to invest in infrastructure that doesn’t meet the demand requirements of end users. The flexibility of cloud services unlocks the need for minimal users per profitable project, providing the ability to set the margin per end-user or consumer. This allows early-stage blockchain adopters to maximize cost-effectiveness with just a small pool of users. OPEX is key for businesses with huge uncertainty or volatility from a demand perspective.
GDPR and digital sovereignty are vital concerns for European-based companies. Many think that data should be stored locally in data centers within the EU region. Some business verticals ensure that there are extra infrastructure security layers in place. Examples of these use cases include health-tech companies, whose infrastructures are HIPAA or HDS certified. As well as fin-tech businesses, that 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 related to its location. Many companies, especially those with limited operational budgets, might struggle to comply with new regulations. Cloud service providers who offer the appropriate regulatory safeguards will be able to offer practical, cutting-edge solutions and become the preferred strategic partner.
Building a successful strategy
With an ever-increasing number of businesses working in the blockchain industry, new, creative ways of powering blockchain services are starting to appear. The choices businesses make during the early-stage development of their infrastructure setup 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, 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 multi-product, multi-cloud, or hybrid cloud. Getting these early-stage decisions right will reduce infrastructure management, giving teams the flexibility to focus their energy and talents on R&D.
Bare-metal servers usually come with root access, and cloud-integrated security layers, but they can be highly demanding regarding 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 then added to the cost of the infrastructure itself. This lack of predictability makes it almost impossible to estimate the infrastructure operating costs.
Many key variables need to be considered before technical decision-makers decide on their ideal infrastructure setup, these include:
- Infrastructure strategy- The connectivity and interoperability of products and services
- Financial strategy- Including your decision on OPEX vs. CAPEX
- Transparency- Your provider's approach to data traffic fees and predictable billing
- Compliance- Readiness for future regulatory requirements
Importantly, blockchain developers should partner with a provider who offers dedicated support.
A strong partnership with your provider will ensure the infrastructure supports your business ambition, while easing management overheads and keeping costs optimized. - Omar Abi Issa
Explore the next blockchain article in the mini-series
To make the most of your IT setup, you may, at some point, decide to utilize a multi-product, multi-cloud, or hybrid-cloud approach. But how does Cloud complement blockchain strategies, and what should a blockchain developer look for in a cloud provider? Read our next article in this mini-series: ‘How to use Cloud to Solve Blockchain Challenges,’ to find out more.
To learn more about Blockchain in the Cloud, speak to industry expert Omar Abi Issa:
Email: [email protected]
To read the third and final part of the mini-series, please follow this link: How to use Cloud to Solve Blockchain Challenges (Part 3)