Where to Start Implementing Blockchain

If you have already learned about the benefits of blockchain and decided to start your blockchain project, you are probably wondering now how to do it right. Blockchain is still a fairly new technology, so not many people have a full understanding and sufficient expertise to work with it. And it’s okay. We all have to learn. To succeed, you need to build a clear and understandable development process. We have prepared a guide on how to successfully launch a blockchain project to help you get started with this technology. Here are 6 main steps. 

Table of contents:

  1. Set clear project goals
  2. Choose the right blockchain
  3. Develop the proof of concept (PoC)
  4. Think about regulation
  5. Find an experienced development team
  6. Scale and improve

Step 1. Set clear project goals

According to Statista, global spending on blockchain solutions in 2023 is expected to reach $15.9 bln. Blockchain can solve many business problems, the main ones of which are ensuring the transparency, security, and cost-efficiency of the system. However, you need to clearly understand what tasks you want to solve with this technology to be sure that you have chosen the right one. There is no rush and you should consider alternatives, compare options to find out whether the blockchain is the only right solution.

Start with these 3 questions that will help you finalize your decision.

  1. Do I need data storage and how it should work? Blockchain is primarily a data warehouse that provides distributed access to information. If your database needs centralized management, you don’t need blockchain, and vice versa, if you need to provide secure access to multiple operators, use blockchain. This is an important question to be answered.
  2. Do you want to involve third parties in your work? If you have profitable contracts with counterparties, you trust them and want to continue working with them, then blockchain will be useless for you. This technology aims to build a system without intermediaries, where a blockchain itself is the main regulator.
  3. Are you ready to build a transparent business system? If you have trust issues in your company, then blockchain will help solve them. Thanks to the properties of transparency and traceability, all blockchain participants will be able to see what is happening in the system. If you are not ready for such openness and want to keep your business data in secret, choose another technology.

Now if you have answered ‘yes’ to most of the questions, then you can go to the next step. If most of the answers are ‘no’, consider other software solutions. Our team will be happy to help you with this.

Contact_us

Step 2. Choose the right blockchain

Different blockchain platforms provide different capabilities and are suitable for different tasks. Once you have decided on the goals of the project, you can make an informed decision about what type of blockchain you need. Before moving on to choosing a platform, decide on whether you will use a public or private blockchain. Let’s take a look at the main difference between the two.

  • A private blockchain is a permitted blockchain, which has restrictions on who is allowed to participate in the network to perform actions and transactions. This option is for you if you need to know who is a member of your blockchain network. A set of rules for accessing and working with data is defined for each participant. The most known private blockchain platforms are Corda and Hyperledger Fabric.
  • A public blockchain is a network accessible to all users, which means that everyone can write, read, and participate in it. This type of blockchain doesn’t have access or rights control but is more secure since it has more nodes on which information is stored. Examples of public blockchains include Bitcoin and Ethereum.
CriterionPublic BlockchainPrivate Blockchain
Access levelAnyoneAllowed Users
ParticipationPermissionless and anonymousPermissioned and identified
SpeedSlowerFaster
SecurityConsensus mechanisms (proof of work, proof of stake)Pre-approved participants and multi-party consensus
NetworkDecentralizedPartially Decentralized
AssetNative assetAny asset
Energy consumptionLargeLow
PlatformsBitcoin, Ethereum, NEO, StellarCorda, Hyperledger Fabric
Comparison of public and private blockchains

The final decision on choosing the type of blockchain depends on your goals and the required functions, as well as the degree of openness of the system you want to build. The choice of a platform largely depends on your business processes. Pay attention to the criteria privacy, cost-effectiveness, speed of implementation, and bandwidth. Most often, the difference in these properties is crucial.

Step 3. Develop the proof of concept (PoC)

Proof of Concept is an important step for every new project. This allows you to prove the feasibility of your solution under real-world conditions. In software development, proof of concept will show whether your business idea is technically feasible and financially viable. After that, you will come up with a complete understanding of whether this project is worth investing in or needs to be improved. If you are dealing with blockchain for the first time, then testing your idea is crucial to your success, because you need to be sure that you have chosen the right technology and are moving in the right direction. 

Here are some of the benefits of creating proof of concept:

  • You will know whether your product can solve your business problems.
  • You will choose the right technology stack for your project.
  • You can get feedback from the target audience at the early stages of product development.
  • You can save time and money without wasting it on a failed idea.
  • You can find out potential issues and ways to avoid them. 

So, where to start? PoC development starts with defining a minimum viable product (MVP), a set of core features for your product that is sufficient for a first release. However, you don’t necessarily need to design an MVP to prove that your business idea will work out, you just need to make the list of core features to build a prototype or model of your future product and test it on a limited number of users. Then collect feedback, make conclusions, and draw up final requirements for your project. These actions will help you find out possible pitfalls and areas for improvement before you start the project.

Step 4. Think about regulation

One of the difficulties of working with blockchain is the lack of government regulation in many countries around the world. But this is constantly changing. More and more states are recognizing the importance of cryptocurrency and introducing new laws to regulate blockchain operations. Therefore, we advise you to follow the updates of the regulatory framework, as well as assess the need for the execution of any documents and interaction with traditional institutions. For example, you might need help evaluating assets before tokenizing them. It’s better to think ahead about the strategy for operating and regulating your network.

Read our recent article What is Asset Tokenization on Blockchain

According to the latest study of Comply Advantage, cryptocurrency regulations around the world looks like that.

CountryCryptocurrencyExchanges
USANot considered legal tenderLegal, regulation varies by state
CanadaNot legal tenderLegal
Latin AmericaLaws vary by countryLaws vary by country
AustraliaLegalLegal
JapanLegalLegal
ChinaNot legal tenderIllegal
IndiaNot legal tenderIllegal
UKNot legal tenderLegal
SwitzerlandLegalLegal
EULegalRegulations vary by member-state
Source: Comply Advantage

Step 5. Find an experienced development team

Once you are done with the preparatory part, it’s time to find a development team for your project. The blockchain market is developing rapidly, but there are not many experienced specialists working with this technology yet. Many providers prefer old proven technologies and don’t strive for innovation. Therefore, pay special attention to the experience of the developers with whom you are going to work, learn more about the delivered projects. You need specialists who are well versed in technology and will be able to build the right architecture for your project and take all the advantages of blockchain.

If you’d like to save money on development and get a high-quality product, turn to outsource software development companies. According to the Skill Value report, based on +550 technical assessments, the top 5 countries with the best developers of the world includes specialists from Slovakia, Mexico, Poland, Hungary, and Ukraine. These countries win regarding price and quality. Learn more about company projects, reviews, and work approaches to select professionals who will help bring your business idea to life.

Clutch_badge_TOP_B2B

We are delighted to be featured in the Top Emerging Tech Companies in Ukraine for 2020 across fields such as AR/VR and blockchain by Clutch. IdeaSoft is actively developing the blockchain direction and provides high-quality software solutions for innovative companies around the world.

Based on deep expertise and experience, confirmed by more than 200 successfully delivered projects, we can help you launch a blockchain product of any complexity. Contact us to discuss your idea. Let’s make progress together!

Step 6. Scale and improve

Working with an experienced development team will let you build a clear and effective interaction process and soon your product will be finished and ready to launch. You need to constantly improve and keep your product up to date to make it interesting to users. Experts advise to draw up short-term and long-term development plans that help to achieve the set results. Also, partnering with the development team will allow you to have a range of experts to suggest something or help you implement a new feature when you need it.

Blockchain is an excellent and promising technology for those who are not afraid to experiment and strive for market leadership. Follow these 6 initial steps of blockchain implementation and make your business grow. According to Deloitte, 84% of business executives believe that blockchain technology will eventually become mainstream. Now you have the opportunity to be one of the pioneers who will become the creators of blockchain history. Don’t miss this!

Our designers have also prepared for you infographics on the launch of a blockchain project so you can go through all the steps once again and save the instructions for yourself. Don’t hesitate to contact us in case you need a consultation. Good luck with your project!

Infographics_6_steps_to_start_implementing_blockchain

What is Asset Tokenization on Blockchain

If you haven’t heard of asset tokenization yet, it’s time to fix it. And if you have, then you probably know that tokenization is a prerequisite for the full use of all the advantages of blockchain technology. More than a trend but not yet a universal solution. Read in this article what asset tokenization is and why you might need it.

Table of contents:

  1. What is an asset tokenization
  2. How it works
  3. Advantages of asset tokenization
  4. Challenges of asset tokenization
  5. Where to start asset tokenization

What is an asset tokenization

Tokenization is the conversion of the right to an asset into a digital token. In other words, asset tokenization is a digital representation of a real asset. Digitally, an asset is recorded on the blockchain as a token. A “token” is a unit designed to represent a certain value within a particular ecosystem. It looks like a unique code. The value of tokens corresponds to the value of a specific asset underlying them. 

Tokenized assets are managed by smart contracts that enable the purchase and sale of digital assets. Asset tokenization is used in various industries as a method of making payments that don’t require the transfer of any confidential information and personal data, which makes it safe and transparent at the same time. You can find use cases of asset tokenization in finance, real estate, healthcare, sports, and other industries.

How it works

Let’s imagine you have a real estate worth $500,000, turning them into 500,000 tokens will allow you to sell them on exchanges using smart contracts. Your tokens can be divided among several owners: someone will buy 100, someone 50, respectively, each will own a certain share of your asset. This approach increases liquidity by making it possible to divide property rights among several people at once. Through tokenization, businesses can raise capital by selling partial ownership of illiquid assets to investors who find it easier to access valuable assets digitally than if they were sold in full physical form.

Asset_tokenization_process_

The tokenization process starts with evaluating an asset. If your asset belongs to existing markets (like gold, silver) where the sale of tokenized assets is already taking place, this won’t be so difficult. If you are tokenizing an asset that hasn’t yet had an existing market, you need to contact an accounting firm to determine the value of the token. 

There are several types of tokens that help you tokenize different types of assets. They were proposed by the Ethereum community. This separation lets the tokens of the same standard share some common smart contracts and store common data. The token standard consists of a set of predefined functions. Among the main common tokens are the following:

Types_of_tokens
Source: Tokenization of Assets

Tokens are recorded on blockchain where their regulation can be carried out using self-executing contracts called smart contracts. Smart contracts allow you to put in the system the terms of an agreement in the “if / then” format, which will be executed automatically. The blockchain provides an immutable record of data, which means once an asset purchase transaction is recorded on the blockchain, no one can remove or change your rights to the asset. 

Advantages of asset tokenization

Benefits_of_tokenization

Asset tokenization has many benefits, which makes the topic so popular. Blockchain offers a new level of asset management that is faster, more reliable, and more cost-effective. Among the main advantages of tokenizing assets on the blockchain are the following:

  • Globalized access. The blockchain has no geographic boundaries. Any of the network’s participants can take part in transactions, which opens up access to the new global market. Ethereum co-founder Joseph Lubin said at SXSW conferences in 2019 that thanks to the introduction of blockchain, the global economy will grow 10 times over the next 10-20 years.
  • Cost efficiency. Tokenization provides a faster and smoother transfer of assets across accounts without the involvement of centralized intermediaries. Besides, within the blockchain, you get lower commissions, and in some cases, there may be no commission at all. Therefore, companies conducting transactions using tokenized assets get a more streamlined process for lower prices.
  • Increased asset liquidity. As mentioned, tokenization is a great solution for asset owners with poor liquidity. All thanks to partial ownership of assets, which lets the seller complete the transaction faster with minimal spending. Analysts at the Cisco technology corporation believe that in 8 years, 10% of global GDP will be stored on the blockchain.
  • Transparency. The blockchain distributed ledger system makes the technology safe and open for supervision. The parties can see any transaction, which increases the level of trust and prevents any fraudulent activity.
  • Reliable proof of ownership. Blockchain is an immutable and highly traceable system. Each block of information refers to the previous one, so no transaction can simply be changed or deleted, and its path easily leaves a trace. If a transaction of buying or selling your asset was recorded on the blockchain, it will remain on the blockchain and you can always verify your ownership.
  • Lack of intermediaries. When you don’t need intermediaries who take a certain time of the transaction, the process is faster and cheaper. On the blockchain, you create a contract in the form of a code, which sets the conditions for their automatic execution. Smart contracts are very reliable; they can even contain fines for non-compliance with the terms of the agreement. Such a contract cannot be deleted.
  • Fast execution of the transaction. Since all transactions take place automatically when certain events occur (receiving payment – sending a token), the whole process is fast. Smart contracts, through which the movement of assets is carried out, requires a minimum of human presence.
  • Reducing the barrier to entry for investors. Dividing the asset into tokens and the ability to own the asset partially opens up the market for new investors. Now you don’t need to have a lot of money to overcome the barrier to entry into the investment market, you can buy several tokens and receive deviants.

Challenges of asset tokenization

Of course, asset tokenization has not yet received widespread use because the technology is new and business is only working on cases of successful tokenization. What stops asset owners from tokenization and is it possible to somehow deal with shortcomings? First, let’s take a look at the main tokenization challenges.

  • Lack of uniform standards and regulation. One of the main problems of asset tokenization is the lack of government regulation of this process in the vast majority of countries. This leads to the need for additional registration of the same operation, both ‘on-chain’ and ‘off-chain’. In fact, you are forced to involve third parties to prove the ownership of the asset or estimate its value before tokenization. Or you act according to the blockchain rules without legally confirming contracts.
  • An emerging market. The market for tokenized assets has not yet formed, although experts predict its constant growth. The lack of a unified legal regulation and infrastructure makes it hard to use all the advantages of blockchain and requires building a specific model for each specific project.

Also, tokenization problems include the fact that as the barrier to entry into the investment market decreases, the quality of investors decreases too. Unlimited access to assets and the simplicity of registering and closing accounts can lead to chaos. Therefore, market participants should be responsible when looking for partners within the blockchain. 

Where to start asset tokenization

As you can see asset tokenization is a progressive and promising approach to asset management that just needs additional regulation. But having experience of working with blockchain, you can easily minimize risks and optimize the advantages of technology. IdeaSoft can help you to tokenize your assets and get started with smart contracts. Entrust this task to blockchain experts and get benefits from working with blockchain technology. Let’s discuss now!

What Are Smart Contracts and How Do They Work

Blockchain technology has opened up many new opportunities for us. Following peer-to-peer payment systems, which undermined the reputation of the traditional financial system, new technology has emerged that has threatened the work of lawyers, brokers, and auditors. And it’s all about smart contracts. Maybe, it’s another trend to look out for or the future that awaits us tomorrow. Anyway, you should find out more about it.

Table of contents:

  1. What is a smart contract
  2. How do smart contracts work
  3. Advantages and disadvantages of smart contracts
  4. Smart contract market and potential
  5. As a final point

What is a smart contract

A smart contract is a self-executing transaction protocol that helps regulate the relations of the parties (for example, the seller and the buyer) without involving third parties. This type of contract is intended to automatically execute which means that the system itself registers the events determined by the parties to the contract. For example, the client received the goods, and the system automatically transferred the payment in cryptocurrency to the seller. All conditions of the contract, agreement, and possible penalties for their failures are registered in the form of a code that is placed into the blockchain. 

Smart_contracts_example
Smart contract code example Source: www.ethereum.org/token

The idea of ​​smart contracts appeared in the early 1990s, but practical implementation became possible with the advent of the blockchain in 2008. Blockchain made it possible to get rid of the involvement of third parties and build a transparent and reliable system for creating automated contracts. Thanks to a decentralized blockchain system, the code can’t be arbitrarily changed or prevented from being executed without interfering with the entire network. So, a smart contract is managed only by the rules laid down in it.

How do smart contracts work

Like someone said, in smart contracts code is a law. You don’t need to hire a lawyer to create a contract that must comply with some rules to be considered legal. Smart contracts work on the basis of if/then. If the buyer transfers the payment, then the seller transfers the rights to the property. As soon as the condition is met, the system independently conducts the transaction, which guarantees compliance with the rules laid down in the agreement.

The process of implementing a smart contract consists of several stages:

how_smart_contracts_work
  • The parties draw up a contract in the form of a code in which the subject of the contract and the conditions are prescribed. Keep in mind that the object of the contract can only be an object that is on the blockchain, that is, first you need to tokenize your assets, translate the rights to them into a digital form. 
  • The logic of fulfilling the terms of the agreement is described, using the code, and the contract is recorded on the blockchain. 
  • Parties sign a contract using cryptographic methods. Smart contracts can only exist inside an environment that has unhindered access by executable code to objects of a smart contract. 
  • Having access to the objects of the contract, the smart contract monitors the achievement or violation of points according to the specified conditions and makes independent decisions.
  • All information about the contract is stored on the blockchain and the parties can follow the stages of the implementation of the agreement.

Advantages and disadvantages of smart contracts

Compared to traditional contracts, smart contracts have many advantages, and the most important of them is independence. Smart contracts are concluded by two parties, no third parties, and the blockchain ensures the implementation of the agreement. You don’t have to spend money on the services of a lawyer or notary. Also, you can be sure that no one will deceive you and the terms of the contract will be fulfilled.

Another advantage is speed. In smart contracts, all stages are as automated as possible and require the presence of a person only at the initial stages of creation. This significantly saves the parties time and speeds up the processing of documents.

Smart contracts are reliable, as is the blockchain itself. The data recorded in the blockchain can’t be changed or destroyed, which imposes obligations on the parties. If one party didn’t fulfill its obligations, the other party would be protected by the terms of the contract anyway.

Cost reduction is what makes blockchain so attractive. Using smart contracts you save on involving additional specialists (lawyers, notaries, brokers), as well as on operating expenses. Such savings enable the parties to conclude an agreement on more favorable terms.

CriterionTraditional ContractsSmart Contracts
FormatPaper version of the documentDigital version of the document
RegulationLawBlockchain
CurrencyRegular moneyCryptocurrency
RemittanceManualAutomatic
SetupDaysMinutes
Lawyer servicesMostly necessaryMostly not necessary
CostHighLow
Comparison of Traditional Contracts and Smart Contracts

Despite all the prospects, smart contracts have some disadvantages.

  • Lack of legal regulation. If the legal force of a contract is more important for you than blockchain security, then smart contracts will not live up to your expectations. In most countries, there is no regulation of blockchain, smart contracts, and cryptocurrencies.
  • The complexity of the implementation. A smart contract consists of conditions and the more complicated the process of interaction between the parties, the more difficult it’s to prescribe all possible scenarios in the code. Also, smart contracts only work with objects within the blockchain, so it’s impossible to work with real-world objects, only their digital option.
  • Lack of flexibility. Smart contracts are suitable for areas with clear and constant terms of interaction, because a smart contract can’t be changed if additional factors suddenly appear or you want to conclude an additional agreement.

Smart contract market and potential

According to the Market Research Future, the global smart contracts market is expected to reach approximately 300 USD Million by the end of 2023. The same research shows that Europe is the market leader for smart contracts. However, in the forecast period, North America is showing significant growth. This has greatly expanded the use of digital technology in countries such as the United States, China, Britain, and Japan.

Smart_Contracts_market
Smart Contract Market Growth Forecasts 2020-2023

The potential for using smart contracts is huge. They can be used in the fields of finance, insurance, real estate, trade, logistics, medicine. The simplest example of the implementation of a smart contract is a purchase in an online store: you buy a product or service, and the seller receives the money only after the event of receiving the goods has been registered. 

In the financial sector, smart contracts can automate payments, as well as reduce uncertainty and credit risks. Also, smart contracts can greatly simplify the internal operations of financial institutions.

In logistics, smart contracts allow you to control the entire supply chain of goods: from shipment by the manufacturer to receipt by the final consumer. All information on the movement of goods is stored on the blockchain, and smart contracts monitor compliance with all delivery conditions.

As a final point

Smart contracts is a rather promising technology, which has its pros and cons. The more blockchain develops, the more smart contracts enter into circulation. And who knows, maybe in the next 5 years smart contracts will become an everyday occurrence. If you want to discuss the development of smart contracts or get expert advice, contact us. IdeaSoft experts have great experience in Blockchain development.