While blockchain was officially introduced in 2009 powering the launch of Bitcoin, the term came into the public eye in 2017/2018, as the price of Bitcoin skyrocketed. For many people, blockchain is synonymous with Bitcoin and cryptocurrency, but it is an important technology in its own right, with a wide range of applications.
When integrated with cloud hosting, the benefits of blockchain technology are amplified. We’re taking a look at what it is, how it works, and how a managed cloud hosting solution can support your business to make the most of blockchain.
What is blockchain?
Blockchain is a secure and transparent method of recording and sharing data within a network. Records, known as blocks, are listed in a continuously growing chain, forming a distributed database. The chain cannot be deleted or modified without notifying the network, meaning blockchain technology creates an ‘immutable’ ledger of data.
This immutable nature brings significant benefits for many industries. Blockchain technology was brought into the public eye through its use in cryptocurrency, where it is used to create a digital ledger of transactions which are secure against hackers. Blockchain is also frequently used across the fintech sector more broadly, streamlining operational processes, payment services, and for Central Bank Digital Currencies (CBDCs). Other common use cases include identity and data verification, recording ownership history and provenance of high-value items for insurance, tracking supply chains, and decentralizing healthcare records.
Blockchain can be either public, private, or hybrid, combining elements of both private and public.
A public blockchain has no restrictions to access, with all members having equal rights to contribute to and view the data. The control and decision making relies on a distributed network, rather than a centralized entity. This improves transparency and trust in the data. Examples of public blockchains include cryptocurrencies, such as Bitcoin and Ethereum.
A private blockchain, also known as a managed blockchain, operates slightly differently to a public blockchain, as there is a single authority in control, determining access. While public blockchain is fully decentralized, private blockchain is considered partially decentralized, as it has access restrictions limiting who can be a participant in the network. A private blockchain will be most commonly used by businesses where the data needs to be protected, so access to the network cannot be public.
A hybrid blockchain network takes a middle ground, where private and public systems are run in tandem. Access to specific data can be controlled through the private element, and the rest of the data can be publicly available.
How does blockchain work?
The process can be simplified to four steps.
- Transaction initiation – A transaction is initiated by a user in the network, which is digitally signed using the sender’s private key to ensure authenticity.
- Transaction verification – A network of computers, known as nodes, receive the broadcast transaction, and validate it using algorithms to ensure it is legitimate and follows protocol rules.
- Block formation – The transaction is bundled with other validated transactions into a block, containing a list of transactions, a timestamp, a reference to the previous block, and a cryptographic ‘hash’ – a unique identifier. The hash provides a way to monitor for data changes, as if the contents of the block are altered, the hash value changes.
- Blockchain update – A consensus mechanism is used to ensure the majority of the network participants agree on the validity of the recorded transactions in the new block. Each blockchain system will have its own rules for consent. Once consensus is achieved, the new block is permanently added into the blockchain. Each block contains the unique hash of the previous block, ensuring data integrity. After the hash has been applied, it is distributed across all nodes in the network for transparency and security.
What are the benefits of integrating blockchain with managed cloud hosting
Cloud hosting pools computing resources from a network of physical and virtual servers forming an interconnected infrastructure. For full details on how this works, read our insight ‘What is cloud hosting?’. There are several different cloud hosting models, which each have their own use cases. The most commonly used models are public cloud, private cloud, enterprise cloud, and dedicated servers.
Cloud hosting services are offered by providers such as Hyve, and can be managed or unmanaged. Managed cloud, where the provider offers a layer of ongoing management and support on top of your cloud platform, has particular benefits for businesses working with blockchain.
Scalability
Blockchain businesses can struggle with scalability – the ever-growing nature of blockchain means that resources may need to be increased rapidly to process and store data. Cloud hosting solutions are easily scalable by nature – virtualization means that additional Virtual Machines (VMs) can be created from physical servers, extending their capacity. These new VMs are integrated in the cloud infrastructure, working together with existing resources. In-house management of a growing network can be time and resource intensive, requiring expert employees. A managed service provider (MSP) can support this management, monitoring capacity, creating new VMs, and ensuring fast and reliable communication between all elements of the infrastructure.
Cost-efficiency
Blockchain can be resource intensive, needing high bandwidth for data transfer and validation between nodes, and sufficient storage. If businesses are not careful, the cost of these resources can spiral, leading to higher bills than expected. Cloud hosting can be a cost effective alternative to on-premise infrastructure, as instead of having to pay for costly hardware yourself, you can effectively rent the hardware from your cloud provider. The virtualization possible with cloud allows you to benefit from a wide reaching network, which would be cost-prohibitive with only physical servers.
Managed cloud provides further cost savings, allowing you to benefit from a team of experts acting as an extension of your business, without the recruitment and salary costs of hiring in-house. The right managed cloud provider will take a consultative approach, working with you to analyse your business needs, and design and deploy a solution which optimizes your resources and makes the most of your budget. Your provider can also monitor your infrastructure, strategically scaling your resources as needed and making sure your costs do not spiral.
Global reach and availability
As blockchain uses a distributed network of nodes, it is ideally paired with cloud hosting, where your infrastructure can also be distributed across multiple locations. When operating with users globally, it is vital to ensure latency is minimized. Working with a global cloud provider gives you access to a network of data centers, meaning wherever your users are you can operate nearby. This optimizes performance across your infrastructure, delivering the best experience for your users.
Distributing copies of the blockchain across multiple nodes ensures redundancy, meaning there is no central point that can be shut down or impacted by a disaster. The reliability and availability of the blockchain is therefore high.
Security
Cryptography (the practice of encoding information) is central to blockchain. The cryptographic hashing used when creating the blocks encrypts the information contained, and can only be accessed with the user’s key. The decentralization and principle of consensus in blockchain also ensure its security, as it is incredibly difficult for one attacker or group to infiltrate the network or tamper with the data.
While blockchain technology is incredibly secure, and it is nearly impossible to hack into the blockchain itself, there can be weaknesses in the surrounding infrastructure. For example, if you are running a private or hybrid blockchain network containing sensitive transactions and data, this information is visible to anyone in the network. A hacker could exploit one user’s vulnerabilities, for example a lack of multi-factor authentication, or weak antivirus protection, and gain access to the network, and the data it contains.
With a managed cloud solution, your infrastructure can be protected with a full security stack across the whole network. Implementing a comprehensive security solution, which can include encryption, firewalls, VPNs, access management protocols, and more, protects your blockchain infrastructure. A managed provider can also provide advanced monitoring services, which will predict and detect any potential threats, allowing you to defend your infrastructure.
Why choose Hyve for your blockchain hosting needs?
Whether your company solely focuses on blockchain, or you are incorporating the technology into your processes, our managed cloud hosting is the ideal choice for companies seeking a tailored and scalable solution.
With a global footprint of secure data centers, we can deploy infrastructure worldwide, making sure you are always near your users. Our cloud experts design bespoke platforms to meet your requirements, with 24/7/365 support and management allowing us to become an extension of your business. You can find full details of our solutions for blockchain on our blockchain hosting page, or alternatively, for an initial consultation, fill out our contact form and one of our experts will be in touch.
