Why is Blockchain programming expensive?

Blockchain technology has burst into various sectors, from finance to supply chain and beyond. This decentralized and secure technology has caught the attention of businesses and individuals looking to leverage its advantages to drive transparency, efficiency, and trust in their operations. However, one of the aspects that often comes up when considering blockchain implementation is the cost associated with its programming.

Here are some of the factors that contribute to the high cost of blockchain programming:

1. Technical Complexity: Blockchain programming requires specialized and in-depth knowledge of the underlying technology. Developers must understand the basics of cryptography, distributed networks, consensus algorithms, and the specific data structures of the blockchain. This level of expertise and specialized knowledge can be expensive to acquire and maintain.
2. Talent Shortage: The field of blockchain programming is relatively new and still evolving. The demand for blockchain developers exceeds the current supply, leading to a talent shortage in the field. This scarcity of qualified developers increases hiring costs, making blockchain programmers more expensive.
3. Risks and Security: Blockchain programming involves a high level of security and responsibility. Blockchain applications and smart contracts handle financial assets and sensitive data, so any mistake or vulnerability could have serious consequences. Blockchain developers must have a rigorous focus on security and be prepared to assume responsibility in case of issues. This can increase the costs associated with blockchain programming.
4. Infrastructure and Resources: In addition to programming itself, blockchain projects require additional infrastructure and resources. This includes deploying and maintaining blockchain nodes, setting up decentralized networks, managing smart contracts, and monitoring security. These additional costs also add to the overall cost of blockchain programming.

It is essential to note that there are two main approaches in developing blockchain-related applications: developing the blockchain itself and developing applications using an existing blockchain.

In some cases, organizations may choose to develop their blockchain from scratch to meet their specific needs. This involves designing and building a custom blockchain with its data structure, consensus algorithms, and specific rules. In this approach, the proportion of blockchain technology in the application would be significant since the blockchain is the main and central component of the application. Here, implementing the blockchain and its specific functionality would require the intervention of blockchain specialists, and the percentage of work related to blockchain technology would be higher.

Another common approach is to develop applications using an existing blockchain, such as Ethereum or Hyperledger, rather than creating a new blockchain. In this case, the proportion of blockchain technology in the application can vary depending on the required functionality. For instance, if a blockchain is used to record transactions or execute smart contracts, a significant part of the application will be linked to blockchain technology. In this scenario, the intervention of blockchain specialists would also be required to effectively implement and leverage the blockchain’s features and capabilities.

As a general and average range, we might consider that a typical application using blockchain technology as part of its operation could contain about 20% to 60% blockchain-based implementation.

At the lower end of the range, we have applications that may have limited blockchain integration, using the technology mainly for specific functions, such as data verification or product traceability. In these cases, the proportion of blockchain technology in the application might be around 20% or less.

At the upper end of the range, we find decentralized applications (DApps) or distributed ledger systems that use blockchain as a central component. These applications might heavily rely on blockchain technology, with smart contracts and transaction records stored on the blockchain. In these cases, the proportion of blockchain technology in the application might be close to 60% or even higher.

In the realm of blockchain application development, the question arises of how to set fees and billing. Some companies may opt for a high flat fee for the complete development of a blockchain application, instead of differentiating fees between blockchain specialists and non-blockchain developers. Here are some key considerations:

1. Simplifying the Billing Process: Setting a flat fee simplifies the billing process for both the company and the client. Instead of breaking down fees based on the percentage of work done by blockchain specialists and non-blockchain developers, a fixed cost is set for the entire project. This can streamline billing administration and avoid confusion in cost allocation.
2. Difficulty in Differentiating Tasks: In some blockchain application development projects, it may be challenging to clearly separate tasks performed by blockchain specialists and non-blockchain developers. Especially in projects where tasks are highly integrated or interdependent, the distinction between the skills and specific work of each type of developer can become blurred. In these cases, setting a single fee for all development might be a practical way to address this complexity.
3. Recognition of Added Value: Some companies believe that using blockchain technology in an application adds significant value, regardless of the proportion of work done by blockchain specialists and non-blockchain developers. Implementing a blockchain can enhance the application’s transparency, security, and trust, which is highly valued by clients. Therefore, setting a higher fee to reflect this added value and the investment in specialized knowledge might be a justified practice.

It is important to highlight that this high flat fee approach might not be common in all cases and can vary depending on the company and specific project. Each company might have its pricing structure and approach to billing blockchain-related projects. It’s recommended to discuss and clarify the fee details with the software development company before starting such a project.