...by Daniel Szego
"Simplicity is the ultimate sophistication."
Leonardo da Vinci

Friday, July 13, 2018

Blockchain solutions and operational cost structure

At designing a solution on the top of the blockchain requires always special considerations regarding costs, because of the transaction cost of most of the DLT platforms. The classical use-case is always the fully decentralized model, where the end-users communicating with the platform pay the transaction cost explicitly on their own. However there are sometimes requirements that would differ from this classical situation: 
- One way can be that a company or provider would like to offer services on the blockchain and want to take over the transaction fee of the end-user. In this use-case, the easiest way is to add the customer accounts to a pool of customers and monitor have a certain budget which can be stored in a smart contract for certain operation to be paid automatically. If this budget will reach a certain level because of too much expenditure, it has to be renewed. 
-   Another model is to innate some kind of a transaction autocratically, certainly, it is not possible directly from a third party, however there is a chance to initiate such a behavior from a trusted or semi-trusted third party. However, in this scenario as well, the accumulated transaction fee must be paid by the semi trusted-third party, so appears as a kind of operational cost. 

The aggregated transaction fee can be estimated in these situations as the average number of transactions to be executed times the average transition fee and appears as an operational cost of the system. The use-cases must be carefully analyzed as the operational cost in certain situations can enormous.