Digital Currency

What are the warnings and recommendations in practically creating & scaling BLOCKCHAIN applications?

Rob Pilz CFO in Residence, Financial and Business Creative to CEOs making a difference

September 4th, 2016

For those who have read books like the Blockchain Revolution it is clear there are massive benefits and many issues to resolve on micro and macro levels in the application of blockchain technology. I have more than one pre-launch client planning to use blockchain to facilitate development of unique decentralized dynamic marketplaces including use of digital tokens / currencies.  What are the warnings, roadblocks, recommendations people have in practically creating and scaling blockchain applications?  Please share any stories, examples, and illustrations that show how people are resolving issues. 

Paul Goldstein Founder at

September 5th, 2016

The first thing to think about really is the trust model that the particular application needs. The blockchain and more broadly 'distributed consensus' was created largely to solve the problem of trust and to eliminate trusting central authorities. 

The trust model is important because if not properly considered you can create a solution that solves part of a problem (like letting multiple parties have a shared database or ledger), but does not solve other problems: censorship resistance, double spends, immutable ledger.

Most private blockchains will not be based on proof of work or proof of stake like all public blockchains are. Instead they will likely be based on some ring signature scheme or round robin signing. As such already some aspects of the Blockchain are lost because we immediately have a set of authorities that have been granted keys to create blocks on the blockchain. This might be fine for the particular application, but it opens the application up to certain attacks and threats. 

Some specific questions to ask and understand:
  • What method will be used to determine block validity (because it is probably not PoW or PoS).
  • Is transaction ordering in the block important?
  • What happens when block signers refuse to include certain transactions (censorship)?
  • What happens when block signers collude? Can they change the immutable ledger?
  • What happens when someone else gains access to a block signers key?
  • Do block signers have proper financial incentives in the chain's validity and immutability?
Blockchain technology is an important new field but it was originally done as a distributed public ledger. When creating private blockchain applications there are some differences as discussed above. So keeping these differences at the forefront of thought during development will be key in making sure the resulting application is useful and results in a blockchain that has all the desired properties the parties are looking for.

Steven Kingsley Principal Partner, Hashema Int'l Partners, HIP Brands, HIP Gastroplex, Newmedia Publishing

September 5th, 2016

As I understand it, a major application of blockchain technology is thought to be transaction management amongst billions of IoT devices for resource sharing, data management, etc. With this capability built into every appliance and device, Metcalfe's Law is "automatically" met.  

Barry Vial Chairman, Liquid Markets

September 5th, 2016

Exactly, Steven. And further, I believe that B2B is the imminent beneficiary. Think supply chain and fulfillment. 

Trevor Oakley

January 31st, 2017

Security is the biggest issue.

Joanan Hernandez CEO & Founder at Mollejuo

September 5th, 2016


My opinion: Any blockchain endeavour depends on the Metcalfe's Law. Regardless of the technical hurdles, the big challenge is to attract enough people to be a part of the network, as blockchain is a P2P network. It can be a great idea, but if nobody uses it, then it doesn't take of. The last sentence applies to anything. However, -the way I see it-, in blockchain, is Metcalfe's law is far more relevant than in other endeavours.

Best of lucks!

Steven Kingsley Principal Partner, Hashema Int'l Partners, HIP Brands, HIP Gastroplex, Newmedia Publishing

September 5th, 2016

Thank you Barry - I agree that B2B will also be a major beneficiary, as long as:

1. System design/development takes into account the points raised by Paul Goldstein above.

2. The parties cannot "balkanize" the ecosystem for their own gain.

3.  "Weakest point in the chain" events, like the $60 million heist of Ethers can be monitored and thwarted at the moment they are initiated.

Van Bui Entrepreneur

October 5th, 2017

Curious if you ended up helping your client with anything in this space since this post.