How Much Does It Cost to Build a Blockchain Project?

Cryptocurrency markets are volatile, therefore, most market-watchers could be focusing on that. However, the underlying blockchain technology has come off its‘ own now. The global market for the blockchain technology will amount to US $ 2.3 billion in 2021, as this Statista report states.

Blockchain use cases now span across multiple industries. For e.g., banks and financial services institutions are using it to improve efficiency. Identity verification, land registry, supply chain assurance, energy trading, simplifying ’Bill of Lading‘ in container shipping, countering digital ad fraud, fighting illegal fishing, etc. are just a few examples. Read “50+ examples of how blockchains are taking over the world” for examples of more use case.

Are you planning to launch a blockchain platform for any of these or another use case? You might be wondering how much it costs to build a blockchain project. This is what I will explain that in this article.

Contents

The various kinds of blockchain projects
What are the cost elements for a public blockchain-based project?
Blockchain developer cost
What about “permissioned” blockchains?
Hyperledger Fabric: The easier option to build enterprise blockchain
Conclusion: Estimation is key to determine the blockchain app development cost

The various kinds of blockchain projects

The cost of blockchain projects varies depending on what you want to achieve. Broadly, there can be two kinds of blockchain projects, as follows:

  • Building a ’Distributed App‘ (DApp) using a public blockchain network;
  • Building an enterprise blockchain for your company.

If you are building a decentralized business model where you will enable ’Peer to peer‘ (P2P) transactions using cryptocurrencies, you will most likely build a DApp. I have earlier explained a few such use cases, as follows:

You might be creating a decentralized game using collectibles. This will also require a DApp using cryptocurrencies.

On the other hand, you might be an IT leader in an enterprise. You might be planning to implement blockchain to improve efficiency, otherwise, you are likely eyeing blockchain for a ’Business to business‘ (B2B) platform. Such systems require data privacy, due to regulatory requirements.

They also require scalability, therefore, public blockchains aren‘t appropriate. You might opt for enterprise blockchain for such systems. I have explained public vs private (permissioned) blockchain comparison in an earlier article, and you can refer to it.

The two approaches are entirely different. Your project outline will be different, and you will incur different kinds of costs.

What are the cost elements for a public blockchain-based project?

When you a build a blockchain project for a decentralized business/game, you are basically developing a DApp. Most developers use the Ethereum blockchain network. They use the ’Ethereum Virtual Machine‘ (EVM). Read more about EVM in “Ethereum virtual machine explained”. Your team needs to code smart contracts using the Solidity language.

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They develop a crypto token for their DApp. Programmers also design and develop the DApp front-end. Note that you aren‘t deploying a large new infrastructure here. Whether you use Ethereum, NEO, or EOS, you are using an existing blockchain network.

You might use a blockchain application platform like Lisk. Even then, you will utilize an existing infrastructure. Another key aspect of this project is that the required tools like web3.js, Truffle, etc. are open-source.

You will need to buy the native cryptocurrency of the platform to deploy your DApp. For e.g., if you are developing on the Ethereum platform, you will need to buy Ether. Here again, web wallets like eth-lightwallet are free.

You will need to secure your cryptocurrencies when you aren‘t using them. A hardware wallet is a good investment, and you can buy Ledger Nano S. It‘s a one-time cost, furthermore, it‘s not expensive.

There may be a need for you to make your DApp scalable. I have earlier explained how to scale an Ethereum DApp, and you can consult this guide. The tools you use for this, for e.g., the “Loom Network” DappChain SDKs, are also open-source. Your main cost element in this approach is the cost of developers.

Blockchain developer cost

This brings us to a key question: how much does it cost to hire a blockchain developer? Note that blockchain development skills are niche, i.e., there is a premium for these skills. Market observers reported in Q3-2017 that blockchain is the 2nd fastest growing skill. Read “Blockchain jobs and salaries 2018 report” for more details.

Take, for example, Ethereum DApp development. Developers need to know how to develop using the Ethereum platform. They need to code smart contracts using the Solidity language, there, they should learn it.

The job market can‘t yet meet the demand for these skills with an adequate supply. While there are varied estimates of the demand, most observers concede that it‘s high! Some have noticed a 115% increase in blockchain job posting in 2017, whereas others have seen a 207% increase.

Some industry-watchers have seen an increase of 700% in blockchain job-posting between January 2017 and January 2018! That‘s truly phenomenal! Read more about these estimates in “Blockchain developer salaries – 2018 report”. The demand-supply gap has a significant impact on the blockchain developer manpower cost.

Different market analysts have cited different salary levels for blockchain developers. An average blockchain developer can earn $95k per annum in the US, as paysa.com finds. Glassdoor puts the number lower, i.e., at $80k per annum.

However, the rates vary greatly between regions in the US. For e.g., blockchain developers command over U$100k salary per annum in San Francisco and New York. Read more about these findings in “How much does it cost to hire a blockchain developer in 2018? Salary overview and hiring trends”.

On the other hand, Computerworld has a different estimate. They estimate that the median income of a blockchain developer in the US is $140k per annum. They find that this goes up to $150k in New York, whereas they can earn $163k in San Francisco. Read their report in “Blockchain moves into top spot for hottest job skills”.

The annual salary increases in Switzerland. It‘s $120k to  $180k per annum for blockchain developers there. In the US, freelance blockchain professionals might charge $150 or more. This rate will vary significantly in countries such as China, India, and others.

What about “permissioned” blockchains?

What if you aren‘t building a DApp on a public blockchain like Ethereum? A blockchain solution for efficiency gain in the enterprise, or enterprises trying to build a consortium blockchain solution for trading can‘t use public blockchains due to data privacy and scalability requirements. You must build a private, permissioned blockchain.

Well, you can choose to do it from scratch! You need to address all of the following:

  • Infrastructure;
  • Storage space;
  • Network speed;
  • P2P network;
  • Encryption;
  • Smart contracts;
  • Front-end.

For infrastructure, network, and storage, I suggest you engage reputed cloud “Infrastructure as a Service” (IaaS) providers. IaaS is a cloud computing model where providers address infrastructure, network, etc.

AWS is a reputed IaaS provider with very credible cloud capabilities. IBM Cloud IaaS is another credible option. There are more IaaS providers, moreover, they display their price points on their websites.

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However, you now have some work at hand! You need to build a P2P network and use modern data encryption techniques. While you can get guidance in “Code your own blockchain in less than 200 lines of Go!”, you still need to hire P2P networking engineers and cryptography specialists.

You can avail some more guidance in “Code a simple P2P blockchain in Go!”, and “Part 2: Networking — Code your own blockchain in less than 200 lines of Go!”. I assume you already have front-end developers in your team, therefore, I will go on to describe the other steps.

As a next step, you need to build the consensus algorithm. There are guides for developing these in the Go (Golang) programming language. You can consult “Code your own blockchain mining algorithm in Go!” for the ’Proof of Work‘ (POW) algorithm. On the other hand, if you want to build a ’Proof of Stake‘ (PoS) algorithm, consult “Code your own Proof of Stake blockchain in Go!”.

POW and PoS both have their pros and cons. For e.g., POW provides the highest level of decentralized security, however, it‘s highly energy-hungry. On the other hands, PoS consumes less energy, although it presumes that the transaction validators will do the right thing. Read our comparison guide “Proof of Work vs Proof of Stake comparison” for more information.

Depending on your use case, you might need to allow file-sharing in your blockchain. You will then need to use ’Interplanetary File System‘ (IPFS), i.e., a P2P file-sharing protocol. Read “Learn to securely share files on the blockchain with IPFS!” to learn more.

This is a complex approach. You will need to hire P2P networking specialists, encryption specialists, blockchain engineers, and Golang developers. Golang senior software engineers command up to $75k salary per annum in matured markets like the USA and Europe.

P2P networking engineers might charge a daily rate upwards of GBP 500 in matured markets. Data encryption engineers have an average salary of $96k per annum in the matured markets, moreover, you might need penetration testers, whose yearly salary can be $86k.

You will certainly need a project manager with blockchain experience, moreover, the PM should know the PM best practices. Our guide “Project management: 10 best practices” is a great place to start. Experienced blockchain PMs earn over $111k per annum.

Hyperledger Fabric: The easier option to build enterprise blockchain

I will now explain an easier option to build a blockchain project for enterprise use cases. Hyperledger Fabric is an increasingly popular enterprise blockchain platform. Hyperledger Consortium is led by The Linux Foundation, and it‘s a collaboration effort.

Giants across multiple industries have joined hands in this project to develop enterprise blockchain platforms, tools, methodologies, processes, and solutions. IBM, Intel, Accenture, Cisco, SAP, American Express, Daimler, JP Morgan are just a few of the member organizations. Prestigious universities such as Yale, UCLA, and Cambridge are also members of this consortium.

While the consortium has several projects like Hyperledger Indy, Hyperledger Sawtooth, industry-watchers find that Fabric is the most advanced. I have earlier explained the pros and cons of Hyperledger Fabric for blockchain networks. Refer to it for more information.

The cost of setting up a blockchain using Hyperledger Fabric broadly includes two elements: the infrastructure, and the development cost. This approach is easier since cloud computing market leaders already provide Hyperledger Fabric infrastructure.

You can skip the infrastructure, storage, and networking aspects. Moreover, you are using a readymade blockchain platform, therefore, you don’t need to focus on file sharing, encryption, consensus algorithm, and P2P network. Hyperledger Fabric has a modular architecture, and it provides pluggable consensus algorithms.

IBM provides its‘ IBM blockchain platform, which is based on Hyperledger Fabric. You can review their pricing details, which includes a starter plan and an Enterprise plan.

AWS, another cloud computing giant provides Hyperledger Fabric. They have a price calculator for Fabric on their AWS Marketplace.

SAP continues to enhance their cloud capabilities, and they are becoming an important player in the enterprise blockchain space as well. They provide Hyperledger Fabric on the SAP cloud platform, and their website contains the pricing plans.

Microsoft Azure continues to be a powerful cloud computing platform. They are making important progress on the blockchain technology as well, and they offer Hyperledger Fabric on Azure.

You now need to add the cost of Hyperledger Fabric developmers. An experienced Hyperledger developer can cost you upwards of $700 per day.

Conclusion: Estimation is key to determine the blockchain app development cost

In previous articles on this blog, I have covered cost elements like infrastructure, wallets, network engineer manpower cost, blockchain developer manpower cost, etc.

The cost of setting up a blockchain, i.e., the entire project cost requires a thorough estimation. The use case, project complexities, and the approach will all affect the price.

If you decide that you need professional help, consult our guide “How to find the best software development company?”.

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