Hybrid Blockchain — Case Study + Evaluation process
In this article I wanted to share with you my experiences I gained, when I was designing the architecture for my project. I am not going to write any generalized terms, since the application of blockchain technology varies by use case and there is no general solution for every problem. If there was a takeaway for you from this post, please let me know, if not maybe you got an insight from a different perspective. Let’s get to it.
Hybrid Blockchain — Evaluation process
“The hybrid blockchain is the mix of both the worlds, both private and public blockchain. This gives the organizations better control on what they want to achieve rather than change their plans on the limitation of the technology.”
In the beginning the plan was to create the entire wallet system based on Stellar. It has a pretty easy codebase, not touring complete (eg. you won’t get into infinite loops, which is important as you make one mistake and the whole system crashes), so it seemed like the right choice. After designing a simulation on how the network and the transactions would work at scale, I realized something about transaction costs, which have shaped the entire business model. On the platform I planned to work with micro transactions (each token’s value would be about $0.001-$1), but after evaluating various blockchains, I noticed that it would be economically unfeasible to use a system where the cost of transaction is higher than the transferred value itself. The transaction costs had to be subsidized and this is where the idea of creating a Hybrid solution came in the picture.
CHALLENGE — Transactional Cost of Value Transfer
To have a better understanding of the issue I created a visualized version of the challenge
Each user interaction (eg. When a user gets paid) triggers a payment, which divides the total value of a transaction (tx 100%) into 3 different parts, according to the business plan, which is then sent to 3 different wallets, meaning that even a $0.01 transaction further divides to less than a cent pieces, which if transacted on a public blockchain (eth for example), generates loss in revenue.
With a Hybrid solution, the transaction costs would be pre-defined, a business specific validating system can be built and the value transfer between the private and public blockchain can be solved as well as internally, through the tokens and smart contracts. In this scenario a smart contract is the code that divides the value of an interaction into pre-defined pieces and generates the transaction from wallet A to B,C and D. Value can be transferred to a public blockchain via smart contracts.
3 Types of Hybrid Blockchains sorted by Infrastructure (this is regarding to the internal platform, not the entire solution)
- Fully Hybrid Blockchain
- Semi Hybrid Blockchain (Publicly visible ledger)
- Private Blockchain
When the high level architecture was created, It turned out that even a Hybrid blockchain can be further “Hybridized”. To follow up on the the previous post it is possible to create a hybrid environment within a hybrid blockchain, by allowing the validating nodes/servers to be run by individuals, Blockchain Infrastructure Providers (Azure’s Blockchain Platform, Oracle’s Blockchain Platform) or run it on the Company’s own servers. Through my own example I will demonstrate the three different types I recognized:
Fully Hybrid Infrastructure:
ADME will use a Fully Hybrid Solution, where the Validator nodes are provided by individuals. When the blocks are created it appears on the internal ledger, which will be shared with the public to provide full transparency. Even though the infrastructure will be run on a private blockchain and the option to join in for mining will be restricted, all the transactions will be publicly available and the servers will be owned by individuals, who were allowed to join the network to validate transactions. The advantage of this solution is the infrastructure costs can be kept on zero as the servers are ran by individuals and it can be called semi-decentralized as well as the ledger is fully visible.
Semi Hybrid Infrastructure:
If a company runs their nodes on an infrastructure that is provided by a 3rd party (various chains, Azure, Oracle) can be called a Semi Hybrid infrastructure. It comes with the benefits of reliability, the disadvantage of this solution is the fee that the provider charges for running the blockchain on their infrastructure. This would be a centralized blockchain, where the visibility of the ledger is optional.
Private Blockchain Infrastructure:
The infrastructure is provided by the company itself, no need for a 3rd party to be run on. This gives the most freedom, and a costs can vary on the number of server. If scalabilty is not important, this would be the best choice for any organization that wants to run a blockchain, but not going to work with millions of transactions on a daily basis. Also good for keeping the transactions safe and invisible to the public.