Launch Your Own Blockchain

Introduction

During the 2017 cryptocurrency boom, there was an influx of new blockchains. Soon after, token prices fell, and with them, the funding for the ongoing demands of building a sustainable ecosystem. There was then a phase of consolidation, as developers and users gravitated towards ecosystems with superior tooling, user experiences, and liquidity. In 2023, we began to see a resurgence in new blockchain launches.

This renewed interest is driven largely by advances in reusable blockchain technology stacks, particularly from the foundations behind Optimism, ZK Sync, and Arbitrum. These frameworks facilitate integration with existing developer tools and are committed to building a shared liquidity layer within their ecosystems. As a result, creating a custom blockchain has become more accessible and attractive than ever before, opening up new possibilities for tailored blockchain solutions.

This guide is designed to navigate you through the complexities of launching your own blockchain. Whether you're a developer exploring blockchain for the first time, or a product manager tasked with leveraging blockchain technology for competitive advantage, this guide will provide you with the knowledge and strategic framework necessary to launch a competitive offering. 

Why Launch Your Own Blockchain?

Launching a blockchain offers tailored control over technical and financial aspects, opens new revenue streams, and helps build a dedicated user community. 

• Tailored Solution: Your own blockchain allows the customization of rules for processing transactions (e.g., fees, transaction times) and user participation, aligning with your business strategies. You can also define exactly how tokens are used and distributed within your ecosystem.

• Revenue Opportunity: Operating a blockchain can significantly enhance your revenue potential, predominantly by capturing Sequencer fees. For instance, Coinbase regularly earns over $200,000 in fees each day, with a record day of over $3.4 million. 

• Build an Ecosystem: Launching a blockchain enables you to incentivize users and partners with tokens, fostering a strong community around your services. This increases both the utility and attractiveness of your platform.

However, launching a blockchain isn't for everyone. A successful chain launch involves significant challenges, such as navigating complex regulatory landscapes, requiring extensive resources, potentially complicating user experiences, and standing out in a saturated blockchain landscape. Unless you're confident you can convert a substantial user base to your chain, you may be better off launching a decentralized application (dApp) on a shared chain where you'll have access to an existing user base, liquidity, and partner ecosystem.

Before You Build

Identify Your Niche

Successful blockchain projects start with a clear understanding of the unique value they bring to the table. Consider these key aspects:

• Unique Value Proposition: Start by defining what unique skills, technology, insights, or access to resources you have that others might not. This could include specialized knowledge in a particular industry, advanced technological capabilities, innovative approaches to blockchain applications, or access to a significant user base or established partner ecosystem.

• Alignment with Market Needs: Once you’ve identified your strengths, consider how these can address specific needs or gaps in the market. This ensures your blockchain isn’t just innovative but also relevant and sought after by potential users.

• Target Audience: Understanding who will benefit most from your blockchain helps tailor your offerings to meet their specific requirements. This alignment is crucial for driving adoption and ensuring long-term viability.

Consider Your Levers 

Understanding and deciding on key operational and economic levers will define your blockchain's functionality and market appeal. Consider how each lever relates directly to the niche you've identified:

• Fees: Decide how transaction fees will be structured. This should attract and retain users while ensuring sustainability. Tailor this structure to the preferences and expectations of your target niche.

• Finality: Determine the desired speed at which transactions are confirmed. Faster finality can enhance the user experience, especially if your niche values quick transaction times.

• Tokenomics: Consider the role tokens will play within your ecosystem. Think about distribution methods, usage, and incentives, always aligning with your niche's specific needs and behaviors.

• Liquidity: Plan to ensure sufficient liquidity to enable your target users. This is particularly important if your target niche operates in high-volume trading environments. This includes making it as easy as possible for participants to get value onto your chain through fiat on-ramps and cross-chain transfer tools, known as bridges.

• Interoperability: Evaluate whether your blockchain should interact with other chains. Interoperability can be a significant advantage if your niche benefits from cross-chain interactions.

Define Your Architecture

The architecture of your blockchain should be a direct reflection of the niche you aim to serve and the operational levers you've set. For most, the preferred path is to leverage the abundant tooling and partner support within the Ethereum ecosystem while finding a path to lower the costs for participants and increase the scalability of the chain. To do so, we’ll consider the modular blockchain architecture. 

At a high level, a modular blockchain separates concerns across environments, much like a modular or microservice architecture in traditional software development. Most commonly, we see this achieved by layering one blockchain atop another, carrying out computation and data storage in lower-cost environments. Looking at an example, Base blockchain was deployed as a Layer 2 chain on top of Ethereum, acting as Layer 1. Base operates as an “execution” layer for user-facing interaction like submitting transactions and interacting with decentralized applications while offloading other concerns like Settlement, Consensus, and Data Availability to Ethereum.

If you want to dive deeper, consider this Modular Blockchain explainer from Thirdweb.

The modular blockchain trend came into popularity with the launches of Layer 2 (L2) chains like Optimism and Arbitrum. Their contributors pioneered an Ethereum scaling solution known as Rollups, where transactions are executed on the L2 chain and "rolled up" into as few transactions as possible on the Layer 1 (L1). Think of it like buying as many of your Christmas gifts as possible at the same time, from a single website so that you minimize how many times you have to pay for shipping. Instead of saving on shipping costs, Rollups were designed to save money on L1 transaction fees.

Since the launch of the original Rollup chains in 2021, variations of their architecture have been deployed. These variations leverage two main levers that can be used to decrease fees and increase throughput, though they are typically at the cost of reducing decentralization and security guarantees.

1. Storing L2 transaction data (also known as Data Availability) outside the L1. This results in the need for an additional data availability solution, one that is typically more centralized than Ethereum.

2. Off-loading the costs (and processing time) of verifying transactions by posting to the L1 “optimistically”. As a result, the time for a transaction to become final, known as “finality," is delayed to allow those validating the transactions to identify and report fraud. This impacts users who attempt to withdraw funds from an L2 bridge back to the L1. To better understand the impact of finality on bridge withdrawal times, read more here. Suffice to say, if you choose an Optimistic chain, you should ensure there are Liquidity Providers in your ecosystem to expedite withdrawals.

The above tradeoffs lead us to the following matrix of the 4 main EVM scaling options:

For this guide, we will focus on the four most common implementations of Modular Blockchains. If you’re looking to dive deeper into additional blockchain architectures, consider exploring Volitions or Sovereign Rollups. For a more technical deep dive on Rollups, refer to Vitalik Buterin’s An Incomplete Guide to Rollups.

The result of the tradeoffs we’ve outlined leads us to the following rankings for core metrics:

Some practical examples that may help in selecting which is best for you:

• Centralized gaming chain: For a large gaming studio looking to bring some of their players’ assets on-chain, they may select an Optimium. Theoretically, their main concern could be the chain’s ability to handle their scale, while they intend to have full control over the infrastructure that writes proofs to the L1 (sequencer) and will maintain the data availability within their in-house off-chain architecture. 

• Decentralized DeFi chain: When extreme trustlessness is required, such as high-value financial transactions, a ZK Rollup may be chosen. In such a scenario, users are often willing to pay slightly higher transaction fees for security. High-value transactions are less frequent, so sacrificing throughput is also a fair tradeoff.

• General purpose chain: General purpose chains typically look to have a key value proposition like low transaction costs while minimizing compromises. Optimistic Rollups are frequently deployed in this scenario, where transaction data remains on the L1 ensuring ease of access yet fees can be lower than other rollup architectures. 

• High-frequency trading chain: When building a chain focused on a large number of transactions with a lower individual transact value, a Validium should be considered. Not only do you get low fees and high throughput, but your ability to quickly move funds back to the L1 chain over the native bridge may be critical to capitalize on your marginal per-trade earnings.

Looking for personalized guidance on which architecture is best for you? Ask our experts

Evergreen Activities

Launching a successful blockchain goes beyond just deploying the infrastructure; it requires continuous effort from your technical team to keep your ecosystem attractive to participants. Investing in ongoing technical advancements ensures your platform remains cutting-edge. To avoid tarnishing your brand with a security incident, these advancements should be validated by reputable security auditors, and a robust bug bounty program should be managed. Additionally, simplifying the onboarding experience with exceptional educational resources and strong developer relations initiatives can significantly boost acquisition and engagement.

Technical activities alone will only get you so far. The standout blockchains with longevity also execute comprehensive marketing and ecosystem activities. Establish a strong brand that resonates with your niche, one where participants are eager to promote their collaboration. Provide participants with the tools they need through open and clear lines of communication. The most successful chains offer various forms of funding (e.g., grants, airdrops), promotion, and partner network discounts. Remember that the success of your ecosystem participants represents the success of your blockchain.

Build vs. Buy

When launching a blockchain, you’ll need to decide which pieces you will build and which you will get off the shelf. Some off-the-shelf solutions are open source, but there’s always a cost and degree of lock-in. You’ll want to consider not only the blockchain infrastructure itself but your ecosystem services as well. 

Chain Framework

Deploying your own modular blockchain has become easier than ever with chain frameworks like OP Stack from Optimism or ZK Stack from zkSync. In almost all cases, we would recommend using an off-the-shelf solution here.

These frameworks ensure rapid speed to market, are low cost to deploy as they are standard for most node providers, and ensure you will continue to get upgrades by their reputable providers. Further, most of the frameworks are working toward a shared liquidity layer between chains leveraging their technology, helping you jumpstart activity within your ecosystem.

Ecosystem Services

The decision to build or buy extends beyond the blockchain itself to its surrounding ecosystem. Here, the considerations involve whether to manage or partner for key components such as: node infrastructure, blockchain explorers, decentralized exchanges (DEX), and oracles. The choice between building and buying should balance the need for customization and control against the benefits of speed, and maintenance simplicity. 

An example of bringing an ecosystem service in-house is Berachain, who looks to differentiate itself in the DeFi space. To do so, they’ve built their own DEX, making it native within their protocol. Only in such cases like this, when a service is critical for you to capitalize on your niche, do we recommend building it yourself.

Rollups as a Service (RaaS)

For your chain launch, you may first want to consider a Rollup as a Service provider. Not only do these providers make it as easy as possible to deploy the blockchain infrastructure with the chain framework of your choice, in the configuration of your choice, but many also provide access to the most reputable ecosystem services in the space. Their access to the ecosystem partner networks will make the difference in getting from zero to one in weeks instead of months.

When evaluating partners, we suggest considering how much you value the uptime and reliability of your chain. Uptime SLAs are promises that infrastructure providers strive to meet, but they are by no means guaranteed. Look at the history, ethos, and other proof points to build confidence around your expected outcomes. 

Several established players in the blockchain space offer RaaS solutions. These include: