How Much Blockchain Cost for Software Development?

Are you wondering how much does blockchain cost to build software projects?

Since blockchain development is still something of a niche skill and covers a huge range of industries and functions, we will do our best to answer that question in a way that gives you a good degree of insight.

Keep in mind that your project will have its own unique final cost due to its specific requirements and how you choose to develop it. Hopefully, this article will help you determine a good estimate of exactly how much yours will cost.

The importance of estimating the blockchain cost for Software Development

Blockchain is growing in popularity, however, what about the ROI? Blockchain has lots of promising use cases. Industry experts expect investments in blockchain to grow significantly for the foreseeable future. For example, this Grand View Research report estimates the global blockchain technology market to grow to $394.60 billion by 2028. The report projects a CAGR of 82.4% between 2021 and 2028.

This shows just how much growth there is for savvy new startups who are successfully adopting blockchain.

Let’s get one thing straight: Estimation is important in any project, as all projects have investors! However, estimation assumes a different dimension of importance in the case of blockchain implementation.

When you have difficulties calculating return on investment, how do you get the corporate funding approval to build and implement a blockchain?

Read “Assessing the Return on Investment (ROI) of Blockchain applications” to learn more about this challenge. In a scenario like this, what would the senior leadership in your organization ask for?

Well, you will probably have quite a bit of deliberation to arrive at the RoI. However, you will need to come up with an estimate that embodies a reasonable degree of confidence that it be accurate.

However, it is likely to be your head on the chopping block if the costs are not estimated to a reasonable degree of accuracy. Inversely, it is likely that you will be one of the stars of the show if the project comes in bang on a budget! 

This makes the estimation of your blockchain project doubly important!

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, these are as follows:

• Building “Decentralized Applications” (DApps) using a public blockchain network;
• Building an enterprise blockchain for your company.

Are you building a decentralized business model? You will likely offer “peer-to-peer” (P2P) transactions using cryptographic tokens. You will likely build a DApp. I have already explained a few such use cases in other articles, they are as follows:

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• “How to build a real estate platform on a blockchain?”;
• “How to create a blockchain-based social media platform for bloggers?”;
• “How to build an online marketplace on blockchain like OpenBazaar?”.

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

On the other hand, you might be a software development leader in an enterprise business who is planning to implement blockchain to improve efficiency. Alternatively, you will build a “business-to-business” (B2B) platform using blockchain. 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. Read our public vs private (permissioned) blockchain comparison for more details.

The two approaches are entirely different. Your project planning and implementation will differ. You will incur different kinds of associated costs including the blockchain app development cost.

What are the Infrastructure and tools cost elements for building blockchain solutions on a public blockchain network?

When you build a blockchain project for a decentralized business or 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.

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 your 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 implementing blockchain 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.

A brief description of the ecosystem of key Ethereum development tools

You will typically use the following tools to build DApps on Ethereum:

• Ganache: It’s a blockchain client, and it’s easy to use.
• Web3.js: It’s a popular JavaScript-based API to communicate with Ethereum.
• Truffle: Truffle helps with organizing, compiling, testing, and deploying Ethereum smart contracts.
• MetaMask: It’s a browser extension. MetaMask is also one of the well-known Ethereum wallets.
• Remix: Developers can code Ethereum smart contracts in Solidity using the Remix IDE.
• Ropsten: Ropsten is a test network for Ethereum. Programmers can test smart contracts on Ropsten. They don’t need real Ether for this, they can use dummy Ether.

There may be a need for you to make your DApp scalable. I explain how to do this in how to scale an Ethereum DApp, so you can consult this guide to learn more.

You might need to use the scalability solutions provided by the Loom Network. You need to buy LOOM tokens for this.

A brief note about Ethereum development tutorials

Relatively inexperienced developers might need Ethereum development tutorials. The website of the Ethereum project offers development tutorials.

Narayan Prusty is a full-stack developer, consultant, and author. Prusty has written “Building Blockchain Projects”, a comprehensive book about blockchain development. You can find it on Packt.

What if you develop applications on the Bitcoin network?

Ethereum offers many real-world use cases. However, it’s not that blockchain developers only develop on Ethereum.

The Bitcoin network offers many of the features of Ethereum too. These include the distributed ledger, the POW consensus algorithm, the P2P network, etc. Many developers create applications on the Bitcoin network.

You don’t need a different infrastructure in this case either. You need Bitcoin developers. An experienced Bitcoin developer might earn as high as $172k per annum in the USA.

Bitcoin developers can access many resources, e.g.:

• Bitcoin developer guides;
• Bitcoin developer network.

What if you develop applications on the Ripple network?

Ethereum and Bitcoin are permission-less blockchain networks. What if you want to develop an application on the Ripple network, which is permissioned?

Ripple is a decentralized network blockchain. A private company owns it, which is different from truly public blockchain networks.

Ripple has made its name in the cross-border payment space. It’s not just a digital currency. The company offers a solution for real-time cross-border payment without depending on intermediaries.

You need to hire software developers experienced in the Ripple network. That’s a niche skill even within the family of blockchain skills. Developers can find comprehensive development resources on the RippleX open developer platform.

You incur limited costs for infrastructure and tools for public blockchain-based application development. That brings us to developer costs.

Blockchain developer cost

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.

A Staffing Industry Analysis report states that the demand for blockchain technology skills is growing fast. A Simplilearn report states that the average salary of a blockchain developer in the USA is over $96,000. Beginners might earn slightly less, while experts earn more.

Take, for example, Ethereum DApp development. Developers need to know how to develop using the Ethereum platform. They need to code smart contracts in Solidity. That’s a niche skill. This contributes to the high salary of blockchain programmers.

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The job market can’t yet meet the demand for these skills by providing an adequate supply of experienced software developers. While there are varied estimates of the demand, most observers concede that it’s high. A Forbes report identifies blockchain as one of the topmost skills in demand.

The job market continues to witness significant growth in blockchain and cryptocurrency job listings. A recent Business Insider report states that paid job postings grew by 1,500% in the past year.

Industry associations like Blockchain Council acknowledge the growing demand-supply gap vis-à-vis blockchain skills. This gap contributes to the high salaries of blockchain developers.

The job location influences the salary of blockchain developers. A Glassdoor report states that the average salary of a blockchain developer in New York is over $100,000 per annum. That’s higher than the national average.

So, it is not an exaggeration to say that it can be expensive, not to mention complex, to hire blockchain developers. And given that your entire project depends on how skilled your developers are, it’s important to make sure that you carefully conduct the interviewing process.

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 an enterprise company, or enterprises trying to build a consortium blockchain solution for trading purposes can’t use public blockchains due to data privacy, data storage, and scalability requirements. You must build a private, permissioned blockchain.

Building blockchain projects for enterprises from scratch

What if you develop a private blockchain from scratch? You need to address all of the following:

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

Arranging the IT infrastructure, storage, and network

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. This helps start-ups since they can avoid massive investments in data centers and tools, etc.

AWS is a reputed IaaS provider with very credible cloud capabilities. IBM Cloud IaaS is another credible option. There are more IaaS providers and they display their prices and benefits clearly on their websites.

Building a P2P network from scratch

The next step involves building a P2P network.

However, you now have some work at hand. You need to build a P2P network and use modern data encryption techniques. You can consult blockchain development guides for more information. To go this route, you will need to hire P2P networking engineers and cryptography specialists.

You can find 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!” since we don’t have time to cover that here.

I assume you already have front-end developers in your team, therefore, I will go on to describe the other steps.

Building the consensus algorithm

For the 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.

Or do you want to build a “Proof of Stake” (PoS) algorithm? Read “Code your own Proof of Stake blockchain in Go!”.

POW and PoS both have their pros and cons. POS provides the highest level of decentralized security. However, it’s energy-intensive.

PoS isn’t energy-intensive, however, it does have its drawbacks. Read our comparison guide “Proof of Work vs Proof of Stake comparison” for more information.

Integrate a file-sharing solution

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

You need to look for blockchain developers with experience in IPFS. This could increase the hiring lead time, which will increase your project costs. You might even need to hire blockchain developers that will learn IPFS. Thankfully, they can refer to the IPFS documentation on GitHub.

The cost of developers for building blockchain projects from scratch

This is a complex approach. You will need to hire P2P networking specialists, encryption specialists, blockchain engineers, and Golang developers. A Talent.com report states that the average salary of a Golang developer in the USA is $131,844 per annum.

A Salary.com report indicates that the average salary of a network engineer in the USA is $72,107.

You need security engineers with encryption skills. In the USA, they earn $105k per annum on average. You also need penetration testers. Reports indicate that their average salary in the USA is $86k per annum.

You need a project manager (PM) with blockchain experience. The PM should know the project management best practices. Reports state that such a PM earns $101k per annum in the USA.

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 a popular open-source enterprise blockchain framework.

It’s from Hyperledger Consortium. Hyperledger Consortium is led by The Linux Foundation and is a collaboration effort. Giants across multiple industries have joined hands in this project to develop enterprise blockchain platforms, tools, methodologies, processes, and solutions.

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IBM, Intel, Accenture, Cisco, SAP, American Express, Daimler, and 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 and Hyperledger Sawtooth, industry-watchers find that Fabric is the most advanced. I have explained the pros and cons of Hyperledger Fabric for blockchain networks in this article. Read 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.

Infrastructure costs for using Hyperledger Fabric

With Hyperledger Fabric, you don’t have to code everything from scratch. E.g., you don’t have to develop encryption software and consensus algorithm.

You need to use a “Blockchain-as-a-Service” (BaaS) offering from a reputed cloud provider. BaaS platforms manage the IT infrastructure, network connectivity, etc. We have described the following options in our guide to blockchain network hosts:

IBM Blockchain Platform

IBM uses its cloud and blockchain capabilities to offer the IBM Blockchain Platform. It includes Hyperledger Fabric.

Blockchain on AWS

Blockchain on AWS is a comprehensive BaaS platform. You can use Hyperledger Fabric here.

SAP blockchain services

SAP has integrated its blockchain services into the SAP Business Technology Platform. Its blockchain services include Hyperledger Fabric.

Azure Blockchain

Microsoft offers its blockchain platform as a part of Azure. Azure Blockchain includes Hyperledger Fabric.

The cost of Hyperledger Fabric developers

Hyperledger Fabric is a premium skill even within the family of blockchain skills. You can expect to pay more than average for Hyperledger Fabric developers.

Estimating the code audit effort

We have so far talked about the infrastructure and development-related manpower costs. Blockchain projects involve another cost element though, and that’s the cost of a code audit.

Let’s understand its significance first. Smart contracts differ from other software programs. You can’t modify them after you deploy them, and this increases your risks.

If you code smart contracts that have bugs, then the impact could be serious. You will find it very hard to recover from such a situation. The Ethereum DAO hack was an example, and you can read about it in “The DAO hack explained: Unfortunate take-off of smart contracts”.

You need to implement smart contracts that don’t have bugs. Naturally, you need to test them thoroughly. However, testing can never identify all the bugs!

You need a thorough review of your smart contracts. Only highly experienced blockchain developers can do such reviews, and they can be expensive. You need to budget for this effort.

A blockchain code audit encompasses the following:

• Reviewing the project documentation;
• Preliminary code review;
• Static code analysis;
• Auditing smart contracts to find vulnerabilities like reentrancy, shadowing of variables, vulnerable storage pointers, overflows, under-flows, etc.;
• Functionality analysts;
• Reporting and closure of defects.

Wondering how to do a blockchain code audit? The good news is that you have help at hand. DevTeam.Space has considerable expertise in blockchain code audit, and you can judge this by reading “Undertaking a Blockchain code audit and its importance”.

Conclusion: Estimation of the Blockchain Development Cost for Software Projects is key 

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 requires a thorough estimation. The use case, project complexities, and 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?”.

If you find you are short of the skills and expertise that you need to build your blockchain project then why not take a moment to tell us about your project requirements via this link and a DevTeam.Space account manager will get back to you to see how we can help.

Good luck with your project.

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