Blockchain technology is best known for its application in cryptocurrency, where it is used to create secure and decentralized currencies such as Bitcoin. However, blockchain is a powerful tool that has applications ranging far beyond financial systems, and in the past few years, the adoption of blockchain has grown to a range of use cases. Applications built on blockchain technology have unique requirements for their infrastructure, and in this post, we’ll outline some of the challenges that arise in building a blockchain-based application, and how a cloud provider like DigitalOcean can help blockchain businesses succeed.

What is blockchain?

A blockchain is essentially a database system that uses “blocks” to store data in a decentralized way. These blocks of data are stored on thousands of distributed nodes, which run on servers or other machines with computing power. Blocks are linked together in a “chain”, with new blocks being built on top of the old blocks, forming an extremely secure and traceable data system. Because a blockchain is built on a decentralized network, no individual computer has power over the entire blockchain, and previous data blocks cannot be modified. This means that blockchain provides an unmodifiable record of ownership or information that goes back to when the chain was first created.

Organizations now are using blockchain to securely store data of all types, from medical data to supply chain information related to critical goods such as food and minerals. Blockchain technology is used by many enterprise organizations already, and more startups are emerging each year that leverage blockchain technology to meet the needs of their specific sectors–in the second quarter of 2021, CB Insights reported that blockchain startups raised over $4 billion dollars in funding, the largest amount ever.

Blockchain’s cloud needs

Those looking to start a blockchain-related business have to overcome unique challenges around their technology stack and cloud infrastructure. Because blockchains are built on thousands of nodes and new nodes are constantly being added to a chain, they require a huge amount of aggregate computer power to support. Blockchains also must be able to quickly add more computing power to their network as the chain grows, so need to create systems that automatically scale up as needed.

Buying and managing on-premises servers to support a blockchain network can be time-consuming and inefficient, so blockchain businesses often leverage cloud computing companies to host their networks but require a specific type of cloud infrastructure to be successful. Cost is an important factor in choosing a cloud provider for blockchain companies, as computing power is often one of the biggest costs they experience. The ease and speed with which developers can add computing power to the network is also critical for blockchains. Because blockchains rely on being online to generate revenue and continue operations, they require a reliable cloud provider with minimal downtime. Finally, as blockchains are distributed, they require a globally distributed cloud infrastructure so that they can spread nodes across regions, data centers, and even multiple cloud providers in order to have redundancy in their setup.