How to Build Blockchain Infrastructure: Requirements & Challenges

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Blockchain development

Blockchain infrastructure provides companies with an immutable data log that helps run daily operations without central authority or third-party clearinghouses. It also makes your transactions transparent and protects your data from corruption and unauthorized modifications. However, complying with blockchain infrastructure requirements and regulations is challenging.

There’s also an issue of the understanding of blockchain technology. Developing a network from scratch is too expensive, time-consuming, and complex for most companies. But with a better understanding of the infrastructure elements, building your blockchain solution becomes much more manageable and cost-effective.

Our article explains essential blockchain infrastructure layers, technology limitations, and development challenges. But that’s not all. We’ll also show how you can build a reliable blockchain solution in a matter of weeks.

Core layers of blockchain architecture

Blockchain architecture consists of several layers, but you don’t need to program all of them to set up your solution. Some layers are entirely optional, like an incentive layer that distributes rewards earned by hashing the nodes. 

We’ll focus on the six most critical layers.

Physical layer

Blockchain infrastructure is an unalterable, decentralized peer-to-peer (P2P) ledger distributed across computing devices (i.e., computers, servers, IoT devices), known as a node. These nodes make up the physical layer and are usually equipotent, meaning they are equally privileged participants in the network.

Transaction in a blockchain network requires a lot of computing resources. That’s why the physical layer consists of nodes that share their processing power to, for example, validate transactions. Having many nodes helps deal with sizeable blockchain hardware requirements.

The physical layer makes blockchain technology much more crisis-resistant than traditional financial systems. Each node maintains an independent copy of the entire blockchain ledger. This way, you can quickly restore your entire network if something happens to your database. 

Data layer

The data layer regulates how the network stores, processes, and hashes the transactions in a network. It consists of two components:

  • Data blocks. These data structures combine and distribute sets of validated transactions across nodes.
  • Merkle trees (binary hash trees). This technology groups transactions into pairs and encodes them with a cryptographic hash. One transaction in the pair (the leaf node) contains a data block hash, and the second one (the branch node) has a fragment of the previous node’s hash.

In simple terms, data blocks and Merkle trees apply digital fingerprints to groups of transactions. This helps users verify operations in a data block without downloading the whole blockchain network (which can measure in the hundreds of gigabytes).

Network layer

This layer regulates access and interaction with information in the blockchain: how nodes connect to the blockchain, transmit data, and verify transactions. The available network types include the following.

  • Centralized networks use a single point of contact for storing and processing information. Having a single contact point slows access to resources and reduces the resiliency of the blockchain because the network owner maintains all copies of the database.
  • Decentralized, non-distributed networks allow multiple owners to have a copy of the resources. However, parts of the blockchain are still stored in one physical location, so speed and resiliency are not optimized.
  • Distributed networks collocate the whole infrastructure across multiple computing devices.

Non-distributed networks have clearly defined command chains and authorization levels, simplifying deployments and maintenance. But it’s the distributed network that’s primarily associated with blockchain, as it provides the most flexibility, best performance, and highest protection against data loss.

Consensus layer

Consensus mechanisms ensure that all blockchain nodes and transactions follow the same rules. This helps the network maintain uniformity and mitigates the risk of fraudulent activity; it’s almost impossible to tamper with information if it’s identical across multiple nodes.

You can use different consensus models based on your blockchain infrastructure requirements. Here are the most common ones:

  • Proof of work (PoW). In this consensus protocol, participating nodes validate transactions by solving cryptographic (hashing) puzzles using their computing power. It’s widely popular for cryptocurrency mining, as the nodes are rewarded proportionally to their input. On the downside, PoW requires enormous computational resources and energy, which must increase as new nodes join the blockchain.
  • Proof of stake (PoS). Node owners stake cryptocurrency to validate transactions, and those with larger positions (more coins) have higher odds of winning. It doesn’t require solving complex computational tasks and, therefore, is much less resource intensive. However, node owners must have significant capital to become validators, and smaller blockchains are more susceptible to a 51% attack.
  • Proof of burn (PoB). Users validate nodes by sending their cryptocurrency to an inaccessible address. PoB promotes regular activity in the network and consumes few resources. Still, this option requires long-term commitment, as node owners must sacrifice their short-term wealth for long-term profit.
  • Proof of authority (PoA). Users validate transactions personally, putting their reputation on the line. PoA is one of the least costly options with minimal computational requirements, which makes it an excellent option for private blockchain infrastructures.

There are many more consensus protocols, with new and evolving algorithms emerging as the technology matures. Therefore, you should weigh the advantages and shortcomings of each mechanism before you set up a blockchain infrastructure.

Contract layer

A smart contract is a self-executing algorithm that controls, documents, and executes activity in the network. This component of blockchain architecture allows conducting transactions without a central authority or other external enforcement mechanisms.

Smart contract algorithms help users trade and exchange cryptocurrencies in real-time or can act as independent custodians by releasing digital assets from storage based on customizable criteria. Smart contracts can also be programmed to only perform actions under specific conditions (like trying to validate data integrity when critical issues occur).

Application layer

The application layer has tools and software that let your application communicate with a blockchain network (or with multiple networks). The components of this layer include:

  • A user interface for your application’s end-users
  • Security measures (such as firewalls, network logging tools, and intrusion prevention systems)
  • An application server to host your business logic and optimize the application’s performance
  • An application programming interface (API) for third-party services integration

And here’s something exciting: Developers can build their software on the application and contract layers, and then connect it to existing blockchain networks. This option lets you get around the most challenging part of blockchain development.

Key challenges of blockchain infrastructure development

Blockchain technology has many aspects that make development much more complicated and costly than the development of traditional financial systems. Here are some factors to consider as you plan your project.

Blockchain security

Despite its resiliency, blockchain technology is vulnerable to hack attacks and exploits. As noted in Deloitte’s 2021 Global Blockchain Survey, 68% of companies surveyed consider data security and privacy as the biggest obstacles to blockchain adoption.

Your blockchain is only as protected as the smart contracts underlying it. What’s more, you can’t modify your smart contract algorithms after releasing them to the blockchain. As a result, any bugs or vulnerabilities in the contract layer can be exploited to disrupt your network or steal your users’ data or cryptocurrency.

An experienced team can help you build bug-free and secure algorithms for your blockchain solution. You also need to introduce additional safeguards, such as a multi-signature scheme for executing administrative functions on smart contracts and timelocks to restrict operations if necessary.

Interoperability problems

The choice of programming language and framework is a vital part of blockchain infrastructure development. Your smart contract’s code may not be compatible with all networks. In addition, the more layers you have, the more complex it becomes to implement your solution with other blockchains.

One remedy would be to use a flexible tech stack that works with the most popular blockchains. For example, many projects are built on the Ethereum Virtual Machine framework and Solidity to integrate with the Ethereum-based networks. 

You can benefit from less resource-intensive options, like Polkadot or Solana. Another alternative is to use a Hyperledger Fabric framework for advanced supply chain tracking, incentives, and financial asset management.

Governance and compliance

Distributed P2P transactions and cryptocurrencies are still largely unregulated, making them prone to infrastructural mishaps. According to Deloitte’s 2021 survey, 57% of companies struggle with industry-specific regulations (like FDA, GLBA, and HIPAA), while 48% are concerned about complying with regional laws (the US Patriot Act and GDPR in the EU).

Compliance and transparency are vital requirements of your blockchain infrastructure. You should implement tools that log blockchain-related activities and access attempts. You should also set up security policies and procedures that alert your IT team and risk managers about system anomalies.

Complex infrastructure management

Blockchain applications depend on real-time processing and hashing requests. Therefore, a critical stability issue or sudden server unavailability may interrupt a critical cryptographic process.

You should apply effective infrastructure management practices to maximize your network’s uptime. Leading companies apply DevOps practices to infrastructure provisioning, like database load balancing, maintenance automation, and configuration management.

Additionally, you can segment blockchain pilots on dedicated racks designed for specific purposes. This lets you test network behavior and configurations on different applications without disrupting the system.

High blockchain infrastructure costs

Commercial ledgers that don’t use the PoW consensus model might not require as much computing power as cryptocurrency blockchain. But establishing uniformity and trust in your network still requires significant resources if you’re developing several layers of your blockchain (including the data, network, and consensus layers). At the same time, your database and infrastructure maintenance costs grow as you add nodes to your network.

That’s why you need to factor in many costs as you plan your development, including:

  • Computing resources, input/output, and OPEX costs (like floor space, cooling equipment, and energy)
  • Storage capability and increasing load on your network
  • Processing capacity and extra network expenses required to integrate your enterprise applications with the blockchain
  • Ownership and license costs for monitoring, logging, and troubleshooting software

Considering all these blockchain requirements, creating an entirely new network may be prohibitively expensive for many businesses. But there’s a less costly and equally reliable option.

Setting up blockchain infrastructure with Unicsoft

Most companies don’t need an entirely new blockchain infrastructure, which would require way too many resources and too much time. Instead, these companies can opt for an application that communicates with existing networks.

Composability is a massive advantage of blockchain technology. Composability means you develop an application layer (front-end), develop a contract layer, and then enhance it with publicly available services via APIs. This way, you get an immutable and risk-tolerant database without spending a small fortune on expensive components like hardware, a network of nodes, and sophisticated consensus algorithms.

So, how can we help you? Unicsoft focuses on blockchain projects of varying complexity, from application-level solutions to private networks. Our team was recognized as a top blockchain developer by TopDevelopers, Gartner, and Goodfirms. 

Take our AlphaWallet project — a crypto wallet for digital asset management. Our team made sure the application supported the TokenScrip standard to create customized interfaces for different tokens. We then integrated the app with popular decentralized crypto exchanges. Finally, AlphaWallet works with a wide variety of Ethereum networks and cryptocurrencies, and non-fungible tokens (NFTs). 

We made a development roadmap for the NFT marketplace. This required us to compose the system architecture and ensure everything followed legal requirements. The platform was designed to be integrated with Solana blockchain for its fast payouts and minimal fees. Our team also made sure it could integrate with proprietary digital wallets, price data providers, and NFTs created on other networks.

What’s next?

Blockchain isn’t a fail-proof solution to address all limitations of traditional financial systems. But it does have a highly resilient, immutable, and decentralized database. That’s why it’s a viable investment for organizations that want to increase their transaction efficiency and make their data resilient.It’s best to work with an experienced vendor to build a solution according to your blockchain infrastructure requirements. At Unicsoft, we can build cost-effective application-layer solutions, smart contract algorithms for existing blockchains, and custom private networks. If that’s something you’re interested in, don’t hesitate to get in touch.