Blockchain technologies comparison and selection algorithm

    July 11, 2019

    Nowadays, more and more businesses are trying to snatch some hype from blockchain topics. However, a few of them do this well enough to earn a reasonable profit from it. In this article, we will cover the three most popular blockchain solutions, their advantages, and cases where you might one to choose one.

    Cryptocurrency

    The most popular form of any blockchain project is, of course, cryptocurrency creation. A typical request would sound like, ‘We would like to have an Ethereum/Bitcoin/Ripple-based currency but with more focus on security and speed’. Fortunately, this tendency is on a decrease with more and more stakeholders understanding that to compete with giants of the decentralized currency system, you need to have a killer-feature or even multiple. As an example Ripple aims towards the banking system, DASH implements an anonymity system, IOTA has magnificent transaction time and is available on low-power devices.

    Smart-contracts

    Smart contracts have become a revolution in the blockchain world since the introduction of the Ethereum platform. These small programs that are linked to a specific blockchain could introduce a new level of transparency to your project. Nick Szabo, in 1996, described a smart contract as “a set of promises, specified in digital form, including protocols within which the parties perform on these promises”.

    Smart contracts could be used in various kinds of business problems, but the most typical use case (aside from creating cryptocurrency using smart contracts) is Financial Data Recording. People develop their own rules describing the roles of the system, responsibilities, rewards, and punishments. Besides, the ecosystem is fully managed by the platform itself. However, despite having a lot of positive characteristics, smart contracts have limitations.

    Firstly, most platforms do not introduce a cheap way of performing smart contract manipulations. Ethereum has a gas price for every operation you perform using a smart contract, EOS offers you to buy the network’s CPU time and RAM to be able to set up your smart contract.

    Secondly, smart contracts can’t use off-chain data easily. To be able to do that they need special nodes called Oracles to query information from the outside world, which also comes with its price.

    Finally, even modern public smart-contract platforms are not able to compete with centralized solutions in terms of transaction speed (most are around 10–100 transactions per second), which makes them not that useful in real-time applications like Stock Exchanges.

    Permissioned Blockchains

    The most recent solution of all presented in the list is a permissioned blockchain technology (sometimes referred to as private or enterprise blockchains). These solutions are designed to provide speed and maximal levels of flexibility. The key feature is the ability to give users different levels of permissions, which allows us to build solutions with different types of users. Among the most typical solutions are Stock Exchanges (brokers & traders), Digital Rights Management platforms (regular users & notarization parties), and P2P Lending systems (borrowers & legal authorities). Moreover, the solution could be brought to the market fairly quickly due to the existence of specific frameworks like Exonum, Corda, and Hyperledger Fabric.

    Technical parameters comparison

    As for performance permission, blockchain systems have an obvious victory here, with 1700–5000 transactions per second on average. Most smart-contract systems and cryptocurrencies of older generations (Ethereum, Bitcoin, etc.), on average, can produce 5–13 transactions a second, while modern smart-contracts could scale up to 1000 TPS.

    Winner: Permissioned blockchain

    Development characteristics

    Developing a decent raw cryptocurrency platform could be a hard time without a group of experts with a few years of experience in any of the statically typed languages (C/C++, Rust, Java, Go) and in-depth knowledge of all the blockchain inside. Moreover, this process might take at least 9–10 months to get a first working prototype. But as soon as you pull the first version out, you are in control of any part of your system. Contrary to that, a simple smart contract can be built in a week or two and doesn’t require so much expertise in the blockchain area. However, this is compensated by the lack of bullet-proof stability and dependency on the platform. Permissioned blockchain systems appear as a hybrid of two previous categories. Having a lot of tools packed inside a framework, it is a great choice for any platform that aims to be more or less independent and easy to develop.

    Winner: Draw

    Platform support

    Supporting any cryptocurrency platform can be a nightmare, with critical bugs that may break the whole system and make your currency cost less than a penny. Also, you might need to have a dozen computers to keep the network up and running. If you go for smart-contracts, you are good since platform developers will solve all the problems for you. Once again permissioned blockchain platform is a hybrid of the previous two, requiring you to have a running pool of 3–5 computers and maintain a code base. Perse, since the solution is framework-based it has decent security.

    Winner: Smart-contracts

    Flexibility

    Adding new features to classic cryptocurrency platforms might take years and could even split the community to form a fork. Smart contracts can be a good choice for tasks that don’t have a huge level of flexibility, like communicating with the external world. However, if you need to query some data or perform some external database transactions, you might want to take one of the permissioned blockchain frameworks. The main advantage is that you can change the consensus and bend the rules of your platforms as much as you’d want to.

    Winner: Permissioned blockchain

    Maturity

    Bitcoin, as the first cryptocurrency on the market, skyrocketed the whole idea of blockchain into the mainstream. On the other hand, Ethereum blew our minds when it established the first smart contract platform. Even though this might succumb to personal belief, I think that the idea of pure cryptocurrency is accepted by more people and thus is more respectable and mature.

    Winner: Cryptocurrency

    Conclusions

    In conclusion, the solution you would choose should only depend on the business case. My simple guide for choosing your best-fit solution to be expressed in 6 lines of code:

    If “from_scratch_development” and “killer_feature”: 
        Return cryptocurrency 
    Else if “stability” and “reasonable_price”: 
        Return smart-contract 
    Else if “flexibility” and “speed”:
        Return permissioned_blockchain
    • #Blockchain
    • #Computer science
    • #Cryptocurrency
    • #Smart contracts

    Share Article

    Success stories

    LLM-based financial investment advisory chatbot
    #FinTech
    #Large Language Model
    #NLP
    #Text analysis

    LLM-powered investment advisory chatbot for efficient investment decision making

    Digital financial market infrastructure platform
    #Distributed ledger technology
    #FinTech
    #KYC
    #Transaction monitoring

    Building a scalable, secured system allows users to instantly create transactions in any asset, from anywhere on Earth, at any time.

    Transaction monitoring and suspicious data detection solution
    #Data analytics
    #FinTech
    #Sensitive data
    #Transaction monitoring

    Transaction monitoring system development with complying data security standards

    CONNECT WITH OUR EXPERTS

    Certifications
    Certification thumbnail