How to Build a Blockchain (In 5 Simple Steps)
6 Dec 2023 by Rory Kejzerko 9 min read
How to Build a Blockchain (In 5 Simple Steps)

As DeFi adoption rates continue to surge, more and more crypto-curious people may be wondering how to build a blockchain. 

However, building a blockchain intuitively comes with a whole heap of costs, as from the genesis block to maintaining an entire network, a lot of technical knowledge, time, and capital are required in order for you to be successful. 

With these difficulties in mind, this article will take you through how to build a blockchain using five simple steps. In following it, you’ll stand in better stead for launching quickly, leaving you more time for building features such as user interfaces, stakeholder management, and optimising your blockchain for its specific use case. 


How to Build a Blockchain - 5 Steps

As stated, building a blockchain requires a lot of technical knowledge, time, and capital, however the process can be streamlined by following the 5 following steps

  1. Select an appropriate use case.

  2. Choose the right protocol.

  3. Identify the most suitable consensus algorithm.

  4. Set up your network.

  5. Launch your first smart contract.


  1. Select a Blockchain That Suits Your Use Case

Blockchain creation poses an array of challenges, with the first being that you must ensure that your desired use case actually necessitates Web3 application. If not - and if a simpler Web2 application suffices - it’s probably best to stop before you’ve started. 

To determine the suitability of your use case in Web3, consider the following questions:

1. Does your scenario involve multiple entities collaborating in business activities?

Blockchain is an optimal solution when there's a need to bring together parties for business transactions. Whether establishing a business network, directly engaging with users or fans, or any system requiring information exchange beyond traditional office boundaries, blockchain is apt. Additionally, the creation of multi-party systems simplifies the collection, storage, and secure transmission of data.

2. Does any aspect of your business rely on trust agents or a centralised authority serving as an intermediary?

Taking insurance as an example, if you aim to establish a system enabling different insurance companies to securely share data while safeguarding proprietary information, a specialised blockchain business network is necessary. This entails a central repository of information, systems for proper identity management, and a shared ledger to document transactions between organisations.

3. Is there a lack of trust in your processes or transactions?

Revisiting the insurance scenario, envision constructing a business network connecting competitors. Here, blockchain applications allow you to embed safeguards into your network, ensuring secure data transmission and the confidentiality of sensitive information.

4. Do you require a traceable, auditable, and verifiable tracking mechanism for your assets?

Supply chains exemplify ideal blockchain use cases due to the industry’s demand for real-time tracking, potential for automated processes and transactions, and need for verified assets and certifications.

5. Are there aspects of your business operations that can be automated and executed through a smart contract, eliminating the need for manual intervention?

Whether managing royalty payments, tracking provenance and future transactions, or streamlining real estate transactions, blockchain facilitates the digitisation of legacy systems, enabling automated business processes.


  1. Choose the Right Protocol 

Choosing which protocol to build on is the next big question you have to attend to when building a blockchain. Although there are a plethora of protocol offerings out there, the likes of Ethereum, Hyperledger Fabric, R3 Corda, and Polygon Edge are notable mentions of ours. 

With each offering different implantation avenues, the Ethereum family hosts a diverse selection of protocol choices, such as Geth, Polygon Edge, Quorum, and Hyperledger Besu. Here, each client encompasses distinct protocol functionalities, such as support for private transactions, and offers configurable consensus implementations. Such flexibility allows the creation of individual networks tailored to meet consortia-level performance and privacy requirements.

For Corda, the choice lies between its OS (open source) and Enterprise versions. Although both versions fully support the Corda protocol - meaning there’s no discernible functional differences between them - non-functional disparities exist, as the Enterprise version provides enhanced deployment flexibility to align with enterprise security standards (including features such as support for notary clusters and compatibility with Hardware Security Modules (HSM)). 

Here’s a further look into Ethereum, Hyperledger Fabric, and Corda:

In Ethereum, the majority of smart contracts are coded using a specialised programming language called Solidity. These contracts are then compiled into ‘bytecode’ before being deployed onto the Ethereum blockchain alongside transactions. While the Ethereum mainnet exhibits low throughput and high transaction fees, it boasts strong security measures and a global reach. Permissioned Ethereum chains also offer a workaround for lowering gas fees, and can enhance transaction throughput.

Hyperledger Fabric, on the other hand, employs Fabric Chaincode, which is written in Go or Node.js, to implement a predefined interface. This chaincode operates independently from the peer, as it manages the ledger state through transactions initiated by applications. In essence, Hyperledger Fabric is designed as a foundational platform for constructing applications with a modular architecture.

And finally there’s Corda, which takes on a different approach through its CorDapps being written in a restricted subset of Java or Kotlin code. These applications define the flow, data, and business logic of a transaction, which is then compiled into Jar files, signed, and distributed to nodes. Corda's adaptable smart contracts, along with its flows and ledger, offer an excellent framework for tracking and managing digital assets.

 

  1. Identify the Best Consensus Algorithm 

After ‘The Merge’ in September 2022, the public Ethereum mainnet now operates the Proof-of-Stake (PoS) consensus mechanism - a system wherein blocks are validated by individuals with the largest holdings (a.k.a. stakes).

In contrast, private chains utilise permission-based algorithms that rely on voting rounds and digital signatures for state agreement and security. Examples include Clique Proof of Authority (PoA), Istanbul BFT (Byzantine Fault Tolerant), and Raft.

PoA or IBFT permits designated ‘signer’ nodes to participate in voting rounds, appending a digital signature to proposed blocks as proof of validation. On the other hand, Raft employs a single static leader node to distribute blocks to the network.

These private chain algorithms - such as PoA or IBFT - incorporate round changes between blocks, ensuring fair participation and enabling the democratic removal of unreliable or malicious participants.

In a private chain, nodes responsible for mining and proposing blocks do not receive incentives, and their role is confined to packaging transactions in the pending transactions pool and generating a block for validation. Unlike public chains, where gas fees serve as incentives for miners, private chains lack such financial rewards for transaction validation.


  1. Network Setup 

Once you've selected your protocol and consensus algorithm, the next step is deploying your network. A reliable blockchain service provider can assist in hosting your environment via one of three approaches: cloud, on-premises, or hybrid.

In a cloud solution, a third-party hosts your server, eliminating the need for on-premise hardware. You can opt for either a public or private cloud based on your data handling preferences. For instance, blockchain providers like Kaleido seamlessly integrate with major cloud platforms such as AWS or Azure.

On-premises solutions enable you to utilise your own hardware, while hybrid solutions allow you to leverage a combination of your hardware and cloud resources.

There's no one-size-fits-all solution as organisations have different preferences for data handling. If scalability is a priority and you anticipate future growth, a cloud solution might be preferable. On the other hand, if you already have an established data infrastructure, a hybrid cloud approach might suit your needs.

Deploying your blockchain also involves setting up members and organisations. Decentralised applications necessitate key management and peer-to-peer communication setups to verify identities and facilitate business activities on the blockchain. This foundational step is crucial to the seamless operation of your blockchain network.


  1. Smart Contract Launch

As a go-to solution for smart contract launches, Kaleido offers enterprise-grade smart contract management as an integral part of its platform. Setting an industry precedent by introducing unique capabilities, this feature automatically generates REST APIs for any smart contract, enabling developers to seamlessly build on Web3 using familiar programming patterns.

A notable application of this capability is the deployment of tokens using Kaleido's token factory. This tool empowers users to swiftly create and deploy their custom token smart contracts. To begin this process, all you need to do is set up a free account, providing an accessible entry point for developers to leverage Kaleido's platform for their tokenization needs.

However, depending on your specific preferences when it comes to launching your smart contract, you may want to opt for a different platform. With this in mind, you may want to consider other industry leaders, such as WavesHyperledger FabricClause for DocuSignEthereumSolana and Velas.


How to Build a Blockchain - Conclusion 

As we’ve demonstrated, launching a blockchain requires just five straightforward steps. However despite the apparent simplicity, the complexity involved across such steps is not to be underestimated. 

This is why smart contract launchers such as Kaleido (etc.) can make the process remarkably swift, as by design, such platforms are meticulously crafted by blockchain developers for blockchain developers. Boasting over 500 pre-built services and APIs, Kaleido is also engineered to accelerate your journey to production by streamlining initial stages, and helping you circumvent the common challenges that often derail many blockchain projects.


How to Build a Blockchain - FAQ

How much does it cost to create a blockchain?

Depending on various factors - including your project's use cases, complexity, and development approach - rendering an exact cost estimate on blockchain developments is challenging. However considering all project necessities, the average cost typically falls within the range of $5,000 to $500,000.

How much do blockchain developers make? 

Approximately 80% of blockchain developers earn annual salaries exceeding $115,000, with less than 10% earning below $100,000. This indicates a substantial opportunity for individuals in the blockchain development field to secure a high six-figure income.

How long does it take to build your own blockchain?

Timelines for blockchain development typically range from 4 to 12+ months, contingent on the complexity of the chosen solution. The cost is variable and depends on factors such as the approach to blockchain network implementation and other associated expenses. On average, the payback period for a custom blockchain is estimated to be between 12 and 18 months.

How difficult is blockchain coding?

Undoubtedly, blockchain coding is a challenging endeavour due to the significant level of technical expertise and knowledge required to effectively code a blockchain. Nevertheless, numerous resources are accessible to aid individuals in acquiring the skills needed for blockchain coding, with a free one being YouTube. 

What is the easiest blockchain to develop on?

Among the myriad blockchain platforms accessible to developers, Ethereum, Binance Smart Chain, and Tron emerge as particularly user-friendly for development. These platforms provide distinct advantages, including ease of use with user-friendly programming languages, huge compatibility with existing projects, and cost-effectiveness.


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This article is intended for educational purposes and is not financial advice.