7 Reasons Why This is the Best Way to Set up a Blockchain

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Everyone loves the idea of setting up a blockchain. That is until they actually do the numbers.

A recent report from Ernst & Young calculated the costs to set up a private blockchain and found that the initial build costs over $600,000. On top of that, an additional $150,000+ per year is typically required for on-going maintenance and node hosting. 

That’s not even the worst part. For all that investment, you still end up with a blockchain that is slow, expensive, lacks privacy options and/or is limited in its functionality. 

With such poor options, it’s difficult for businesses and individuals to justify such a large investment. 

Luckily, we finally have a solution that bridges the gap. One that makes blockchain development usable, accessible and financially feasible.

This solution comes from Horizen, which has just launched a scalable blockchain platform called Zendoo. 

This platform enables developers to much more easily launch their own blockchains or blockchain applications in whatever programming languages they choose. 

It is cheaper, more scalable and more decentralized and more secure than any other blockchain option out there. It gives you complete development freedom and there are even built-in ways to earn rewards by developing your own blockchain. 

Said best by one of Horizen’s community members, ZENturio:

“If Satoshi designed a bitcoin sidechain system, it would be the Horizen way. Permissionless, decentralized and privacy enabled.”

Sounds incredible, doesn’t it? Learn how Horizen’s platform makes it more attractive than ever to set up a blockchain.

Zendoo: The Horizen sidechain ecosystem

What makes Zendoo so unique is that it’s based on a decentralized sidechain ecosystem. 

Sidechains are blockchains connected to a primary blockchain through a cross-chain protocol. This enables developers to set up a completely new blockchain with its own rules and consensus protocols. Meanwhile, it takes advantage of the security of the main blockchain (mainchain), and the economies of scale of being part of a public ecosystem instead of a standalone closed system. 

This provides a number of advantages for developers, from speed to security to flexibility, and makes it incredibly easy to get started.

This is to blockchain what WordPress is to website development. For the first time, developers can set up a new blockchain with ease. From the start, all the essentials are included and it even comes with a 37,000+ built-in node hosting ecosystem. Similarly, there will be access to pre-built add-on features and a large community of existing developers and users.

Best of all, unlike other platforms, developers can play with the code to create whatever they want. Full development freedom, or as Horizen calls it, “fully generalizable.”

A far more powerful platform, at a fraction of the time and cost it takes to set up a private blockchain from scratch.

Read on for 7 reasons why this is the best way to set up a blockchain. 

1. Decentralized by default

Decentralization might not be the most exciting feature for corporate types, but developers know that this is one of the greatest strengths of any blockchain. 

The trouble is that most private blockchain solutions, like Hyperledger, are not genuinely decentralized.

Hyperledger blockchains use what is called a permissioned system, which allows only those who are invited to participate in the network to join it. 

While this supposedly provides privacy and security benefits (we will discuss the truth behind this below), this selective and limited participation leads to a centralization or concentration of decision making power. 

This is a problem for a number of reasons. The first is that without an open decentralized consensus mechanism, there is no guarantee that a ledger cannot be edited or that transactions cannot be undone.

The second is that, since there are a limited number of nodes supporting these private networks, this makes the whole blockchain much more vulnerable to a malicious attack. 

The only way to safeguard against both of these potential threats is to thoroughly vet and monitor every participant to ensure that they are and remain good actors. 

But if you have to do this, you don’t have a real blockchain. Just a slightly less centralized (and slower and more expensive) server.

Alternatively, with Zendoo, all of the sidechains are completely decentralized by default. Each new sidechain can bid for support from Horizen’s nearly 40,000 secure and supernodes, the largest system of nodes of any blockchain to date. 

This enables developers to take full advantage of the power of a decentralized distributed ledger and node network to create the most secure and powerful projects possible.

2. Cost-effective

Thanks to open-source code, anyone can fork the software of an existing project, but having the funds to deploy and maintain it is another issue altogether. As mentioned in the introduction, this is one of the biggest obstacles to starting new blockchain projects. 

When setting up a private blockchain it is very costly to run one’s own nodes, so most projects that are built on the Hyperledger framework hire IBM or other private companies to manage their nodes for them. According to IBM’s pricing examples, which seem intentionally opaque and hard to discern, a tiny network with just 2 peers and 1 worker node costs $868.70 per month to run! 

With Zendoo, the economics of supporting the sidechain node infrastructure are subsidized by the mainchain’s block reward system. In the overall Horizen ecosystem, node operators automatically receive a proportion of the block reward. This provides a built-in incentive for node operators, which is the reason why the Horizen blockchain has such a large node network. 

For sidechain developers, this means having access to a large network of nodes without having to set up any of your own dedicated nodes and bearing the cost in full of that infrastructure. The only cost to get up and running is the marginal cost of adding a sidechain, which is negligible.

3. 100% Uptime

When it comes to node networks, the truth is, size does matter. The bigger the network, the more secure it will be and the better uptime the blockchain will have.

We saw how essential this is when Stellar’s entire network was brought down for two hours last year after a critical mass of its nodes went offline. 

Stellar had only 110 nodes supporting its blockchain. So it didn’t take much to take the system down.

The worst part is, nearly all private blockchain projects have even fewer nodes than Stellar. (Not surprising given the cost!) This means that their blockchains are extremely vulnerable to downtime. 

As a result, developers can enjoy 100% uptime when building their applications on Zendoo.

This level of uptime is impossible with centralized servers. This is why SaaS companies aim for the gold standard of what they call “four nines availability”, meaning 99.99% uptime or just 52 minutes of downtime in a year. 

This may not seem like much, but just an hour of downtime can cost a company anywhere from $140,000 to $540,000. What company doesn’t want to make those kinds of savings each year?

4. Full Development Freedom

For developers, it’s essential to be able to customize a blockchain to fit the needs of your particular application. If you can afford the high prices of Hyperledger, this is doable. But, if you’re using a decentralized solution, like Ethereum, this will prove challenging. If not impossible.

Why? Because as a developer, you don’t have the ability to change the Ethereum mainchain roadmap. Thus, you’re constrained by whatever Ethereum decides to do and you can’t really make any meaningful changes to the blockchain itself. 

This is like a web developer building a website on Blogger. It’s easy to get started and to create content, but there is so little that can be customized that in the end, no matter what development skills they have, they won’t be able to create more than a blog. 

Instead, Zendoo gives developers total control over their blockchains. As long as the developers abide by the rules of the cross-chain protocol, they can do whatever they want. 

In theory, Horizen’s sidechains don’t even need to be used as blockchains at all. They can be made into any application that a developer can imagine. This goes to show just how flexible the use cases can be.

5. Speedier and Cheaper Transactions

The next major drawback to other public blockchain solutions like Ethereum, where developers can build directly on the mainchain, is that all transactions are processed through the same mechanisms. 

Remember the Crypto Kitties fiasco a few years back? When the game became popular, it led to huge congestion on the whole Ethereum network and made transaction costs prohibitively expensive for all ETH users. 

This isn’t an issue for projects built on Zendoo. This is because all transactions are processed within the individual sidechain and are not competing for bandwidth from other projects.

Also by using a Proof of Stake consensus for its pre-built sidechains, Horizen sidechains are much faster and less expensive by default than blockchains using a Proof of Work consensus. This is done without sacrificing the security of Proof of Work, since the Horizen mainchain validates certificates from the sidechains. Developers and users get the best of both worlds: PoW security with the speed and lower cost of PoS. 

6. Built-in Privacy Tools

One of the most unique advantages of Zendoo is that it comes with privacy already built into the blockchain. 

If you set up a blockchain application on Ethereum or other popular platforms, there is no way to shield data.

Instead, Horizen and Zendoo come with a suite of zero-knowledge cryptographic tools. This means that developers can natively preserve data privacy for their applications. 

This is particularly of interest to enterprises in the healthcare and consumer data industries, where regulated data privacy is a must. 

On top of that, since developers can customize their sidechains freely, they can extend privacy protocols even further, choosing whatever method of encryption they feel best suits their application’s needs.

7. Incentives for Developers

One of the core principles of the Horizen blockchain is the idea that all stakeholders ought to be rewarded for their contributions. 

So far this has meant that blockchain system subsidies have gone not only to miners but also to node operators and a Treasury. The only thing missing was a way to directly incentivize developers to build applications on the blockchain. Until now. 

Now with Zendoo, developers have full control over the economics of their sidechain. Just as if they were setting up their own blockchain from scratch, developers are able to determine how fees and subsidies are split. The system default is that developers earn directly from transaction volume on their sidechains. 

This provides an incentive directly to developers for their work. Something unheard of on any other blockchain. Together with the lower barriers to entry, this results in a much faster route to creating a profitable blockchain application.

What does this mean for Crypto Law Insiders?

Horizen’s sidechain ecosystem is what businesses and developers have been waiting for. It finally makes setting up a blockchain worth the investment.

Horizen sidechains are far more decentralized, cost-effective and secure than private blockchains built on Hyperledger. 

They also give greater flexibility to developers, come with greater privacy options, and lead to cheaper transaction fees for users than projects built on other public blockchains. 

On top of it all, Zendoo even has built-in features that enable developers to get paid for their work. This means that developers can turn their projects from passion projects into real income streams more easily than ever.

Want to try it out for yourself? Click here to get access to the beta.

This article was written in collaboration with Dean Steinbeck and Rob Viglione.

Rob Viglione and Dean Steinbeck in Milan 2020
Dean Steinbeck

Dean Steinbeck

Dean Steinbeck, Managing Director of Crypto Law Insider, is the leading authority on legal issues related to cryptocurrency and blockchain technologies.