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A blockchain is a collection of components or layers, the first being the hardware infrastructure layer. When it comes to blockchain, this hardware layer is a group of peer-to-peer machines computing, validating and recording transactions on a shared ledger. The result is a distributed database, or ledger storing all the transactions carried out on the blockchain.
The hardware layer has a number of stakeholders, in particular those people who operate nodes in the blockchain. The hardware layer is also comprised of the cloud providers who host the DApps written for the particular blockchain protocol in question.
The second layer is the data layer which, in a blockchain, is expressed as linked blocks containing transactions. The data structure consists of two elements: pointers and a linked list. The linked list is the chain of blocks containing data, while the pointers refer back to the previous block.
The data layer is a Merkle tree of binary hashes, providing security, integrity, and irrefutability. Data contained in the blockchain is digitally signed, with a private key to sign the transactions and a public key - anyone with the public key can use it to verify the block signer. The digital signature ensures data can’t be tampered with, because tampering renders the signature invalid.
Stakeholders in the data layer include anyone who is processing transactions on the blockchain (that is, adding blocks) as well as the node providers and those developers who are writing smart contracts and dApps for the blockchain.
Layer three is the network layer, or the P2P layer as it’s commonly known. Each machine in the blockchain acts as a node and the network layer binds them together and allows them to communicate. Discovery, transactions and block propagation are all handled by the network layer.
The network layer has several stakeholders, including those operating the node and those with vested interests in creating blocks, writing smart contracts, and developers handling dApps.
The fourth layer is consensus, and without a consensus layer a blockchain cannot exist. The consensus layer, regardless of the blockchain protocol being used - in the case of Tezos it’s Liquid Proof of Stake - permits block validation, block order, and ensures that there is agreement on transactions.
For the consensus layer, stakeholders are everyone involved in the blockchain, from those baking blocks and transacting to developers and node providers.
Finally, there’s the application layer. This consists of smart contracts and decentralized applications (DApps). It’s further divided into the application and execution layers. Scripts, APIs, user interfaces and frameworks are all part of the application layer.
This final layer has a number of stakeholders. Everyone involved in the blockchain has an interest in ensuring the application layer functions, but those with a particular interest include those people writing smart contracts and dApps for the blockchain.
There are three groups of stakeholders in the protocol layer – developers, researchers, and academia.
The role of developers depends on whether the blockchain is a private or public chain. In the case of a public chain, the underlying protocol is open source, meaning anyone can access it. Developers have the job of setting up the protocols serving the networks. They can also, through the consensus process, submit changes to the protocol.
With a private blockchain, developers have a different role. They have the job of developing the underlying protocol and submitting changes privately to the blockchain operator.
Researchers and academia can contribute to either type of blockchain, with their changes to the algorithm also going through the consensus process.
The network layer is composed of two groups of stakeholders: the validator nodes and a blockchain ecosystem’s participants.
For validators, the networking layer dictates how the underlying protocols operate. Validators run nodes, which store a complete copy of the blockchain in question on their devices/ operating systems.
There are limited numbers of nodes with a private blockchain, and the number of validators are therefore not as important. For a public blockchain, the nodes are the essence of the blockchain’s decentralized nature. The more nodes, the more entities are there to validate transactions on the network.
When designing the network, it’s also important to consider who is participating in the network (public or private); what the transaction and energy costs will be; the difficulty of participating in the network, including the specialized hardware required for a node; and finally, how large the network is going to be.
For the blockchain ecosystem, regulators will play an increasing role in the future. Although public blockchains lack centralized authority, private blockchains, particularly those in the financial services industries, will likely become subject to regulation as time goes on.
The top layer, or the application layer, has five groups of stakeholders, including developers, entrepreneurs, corporations, end-users, and investors.
Developers are the ones in the trenches, doing the actual technical work of coding the blockchain, along with the smart contracts and dApps. It’s critical to have developer support early on, as well as professional product managers who can scope the project and communicate in a language developers understand.
Entrepreneurs build applications on top of the blockchain protocols. Their motivation is varied, as some will simply want to make a profit, while others are disruptors looking to innovate beyond existing industries and services.
End users are the people who use applications and services on the blockchain. Their buy-in is important because it informs what entrepreneurs develop. End users impact the businesses created on the blockchain, and they exist because current services do not match their needs, so they are looking toward non-traditional services. This could be art, currency or smart contracts.
Corporations are looking to blockchain solutions, particularly private blockchain, to solve business problems that can’t be fixed using existing technologies. They interact with both external and internal stakeholders, especially regulators and end-users.
Finally, as their name suggests, venture capitalists provide the working capital to establish a blockchain infrastructure. They are motivated by the hunt for outsized returns on their investment, looking for better ways of doing business.
When selecting a blockchain, the decision also needs to come down to energy efficiency of the chain and the amount of energy it requires to run and complete transactions. Proof of Work blockchains use up excessive energy as they demand high computing power, with the greenhouse effects coming from massive power consumption.
Tezos uses a Liquid Proof of Stake as its consensus method, a technique which is far more energy efficient than Proof of Work. With PoS, trust is put in the number of tokens held by a baker (Tezos parlance for mining). The bakers then take turns baking the next block in the chain, instead of competing through raw computing power. This component changes the energy requirements of the blockchain.
Put another way, choosing the right blockchain protocol matters when building a sustainable blockchain business.
Hurdles and blockers: what they are and how to address them
We will come out and say it: building an enterprise, or enterprise applications on the blockchain isn’t easy. There are hurdles and blockers getting in the way. Two of the best tips for getting around these are to:
Here, we look at some of the other details which might get in the way of your blockchain initiative:
Stakeholders. It’s important to take into account the people involved in any decision to implement a blockchain solution. Stakeholders and steering committees within large organizations such as financial institutions involve between six and ten key decision makers. Within an organization, the adoption of blockchain is seen as a huge technical undertaking that involves a number of departments, including technology, risk, compliance, legal and business operations. Without the help of a blockchain consultant, it is very difficult for employees to scope out the business requirements, risk mitigations, and technical requirements.
Full stack readiness. To develop a blockchain project or to integrate blockchain goes beyond just smart contract development. This can include everything from front-end to back-end development. It is important to plan for the full stack architecture and understand the technical requirements before commencing.
Deciding on the right blockchain. Choosing the right blockchain for the project is critical. Will the blockchain be used for just data storage or does it involve complex operations? These factors will determine the right blockchain for different use cases.
Speaking the right language. Different blockchains also mean utilizing different programming languages and requires hiring developers with specific technical knowledge. A popular blockchain like Ethereum which uses Solidity may have more hits when searched on Google. However, at the same time a more diversified community such as Tezos has a more tight-knit developer community which offers the ability to exchange ideas and provide support.
Security. Blockchain isn’t necessarily more secure than other solutions; there are just different ways to attack it. This is because policy matters. People maintaining the policy should not be the ones who execute it, and vice versa.
There is also some argument about the enforceability of smart contracts which is beyond the scope of this article. Put simply, whether or not a smart contract is enforceable comes down to jurisdiction law - contracts written across multiple jurisdictions, as could well happen with a smart contract on a distributed ledger, haven’t been tested in court.
