file: ./content/docs/index.mdx meta: { "title": "Welcome to SettleMint developer documentation", "icon": "house" } import Link from "next/link";
![Settlemint](../img/settlemint-logo/SM_logo_icon_ORGNL.png)

Development guides

Explore EVM and Hyperledger Fabric specific developer guides. Get started here.

Platform components

Learn about SettleMint Platform components and their role in application development journey.

Deployment options

Learn how you can deploy SettleMint platform in cloud environment or on-prem data center of your choice.

Knowledge bank

Understand fundamentals of blockchain, use-cases, latest news and stay current with the technology.
![SettleMint Platform](../img/platform.png) ## Building on SettleMint
EVM chains development guide
Create An Application Add Network And Nodes Add Private Keys
Setup Code Studio Deploy Smart Contracts Setup smart contract portal
Setup Graph Middleware Setup Offchain Database Setup Storage
Deploy Custom Services Integration Studio Attestation Indexer
Audit Logs
Hyperledger fabric development guide
Create An Application Add Network And Nodes Setup Code Studio
Deploy Chain Code Setup Fabconnect Middleware Setup Offchain Database
Setup Storage Deploy Custom Services Integration Studio
Audit Logs

Platform components

SettleMint offers the most complete and easiest-to-use blockchain development platform, purpose-built to accelerate enterprise adoption. Its modular architecture covers every layer of the stack, from infrastructure and blockchain networks to smart contract development, data indexing, API generation, and integration tooling.
Each platform component is designed for rapid deployment, seamless scalability, and full lifecycle management. Developers benefit from well tested tools, built-in IDE, SDKs, and pre-built application kits, while IT teams get robust governance, observability, and DevOps automation.
![Settlemint Stack Diagram](../img/mushroom.png)
Blockchain Infrastructure
Network Manager Blockchain Nodes Consortium Manager
Transaction Signer Load Balancer Insights
Health Monitoring Tools Resource Usage
Dev Tools, Middlewares and APIs
Code Studio AI code Assistant SDK
CLI MCP
Graph Middleware Smart contract portal Attestation Indexer
Fabconnect
Storage, Database, Security and Auth
Hasura Backend As A Service IPFS Storage S3 Storage
Private Keys User Wallets Personal Access Tokens
Application Access Tokens
## Learning material
Knowledge Bank
Blockchain Introduction Public Blockchains Private Blockchains
Blockchain App Design Smart Contracts Solidity
Subgraphs Chaincode Keys And Security
BFSI Usecases Public Sector Usecases Industrial Usecases
## Application kits
![Settlemint Stack Diagram](../img/application-kits/cover-kits.webp)
SettleMint Application Kits are designed to dramatically accelerate the development of enterprise blockchain applications by providing pre-packaged, full-stack solutions inlculding both - smart contrcats and the dAPP UI for common use cases. Read more - [Aplication kits](/application-kits/introduction)
file: ./content/docs/about-settlemint/introduction.mdx meta: { "title": "Platform overview", "icon": "House" } ## The SettleMint platform: what it is and what it does SettleMint is a full-stack blockchain infrastructure and application development platform designed to accelerate the creation, deployment, and management of enterprise-grade decentralized applications. It streamlines blockchain adoption by combining essential infrastructure services, such as network setup, node configuration, smart contract development, middleware, off-chain integrations, and front-end deployments, into a unified environment. SettleMint supports both **permissioned networks** (Hyperledger Besu, Quorum, and Hyperledger Fabric) and **public networks** (Ethereum, Polygon, Optimism, Arbitrum, Fantom, Soneium and Hedera Hashgraph), significantly reducing complexity and accelerating your time-to-market. Acting as a Swiss Army knife for blockchain developers, SettleMint provides comprehensive, pre-configured tooling to simplify every stage of your blockchain development journey. The platform includes built-in IDEs for smart contract development, automatically generated REST and GraphQL APIs, real-time data indexing middleware, enterprise-grade integrations, and secure off-chain storage and database options. Whether deploying applications via a Managed SaaS or Self-Managed (on-premises) model, SettleMint's integrated approach ensures robust security, seamless scalability, and simplified operational management for enterprise-grade decentralized applications. ![SettleMint Platform](../../img/platform.png) *** # Settlemint components SettleMint's platform encompasses a **comprehensive ecosystem** of services that can be configured for diverse blockchain scenarios. Below is a **high-level summary table**, followed by **detailed component descriptions** (including specifics about private permissioned networks, Layer 1 and Layer 2 public blockchains, participant management, node configuration, transaction signing, off-chain integrations, and more). ## Components overview | **Category** | **Component** | **Usage & Ecosystem Fit** | **Docs** | | ----------------------------------------- | -------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | | **1. Blockchain Infrastructure** | **Blockchain Network Manager** | Launch and manage both public and private networks. Configure nodes, choose consensus mechanisms, and handle chain settings to lay the foundation of your application. | [Network Management](/platform-components/blockchain-infrastructure/network-manager) | | | **Consortium Manager** | Oversee participant onboarding and permissioning in private or consortium-based blockchains, enforcing governance rules in multi-organization projects. | [Consortium Setup](/platform-components/blockchain-infrastructure/consortium-manager) | | | **Blockchain Nodes** | Deploy validating or non-validating nodes on EVM networks. Validating nodes participate in consensus, while non-validating nodes manage load distribution and serve read requests. On Fabric, deploy peers and orderers to respectively validate transactions and order them into blocks. | [Node Management](/platform-components/blockchain-infrastructure/blockchain-nodes) | | | **Blockchain Load Balancer** | On EVM networks, distribute transaction requests across multiple nodes, improving throughput, fault tolerance, and overall network resilience. | [Load Balancer](/platform-components/blockchain-infrastructure/load-balancer) | | | **Transaction Signer** | Provides a secure environment for signing transactions before they are broadcast to the network, minimizing the exposure of private keys at the application layer. | [Transaction Signer](/platform-components/blockchain-infrastructure/transaction-signer) | | | **Blockchain Explorer** | Inspect transactions, blocks, and contracts through a graphical interface or API. This is essential for diagnostics and confirming on-chain activity. | [Blockchain Explorer](/platform-components/blockchain-infrastructure/insights) | | **2. Smart Contract Development** | **Code Studio (IDE)** | A web-based IDE for writing, compiling, and deploying smart contracts (e.g., in Solidity for EVM networks or Typescript or Go for Fabric). It integrates with the rest of the platform for a seamless dev experience. | [Code Studio Guide](/platform-components/dev-tools/code-studio) | | | **SDK** | A software development kit for programmatically interacting with your blockchain workflows directly from your codebase or CI/CD pipeline. | [SDK Guide](/platform-components/dev-tools/sdk) | | | **CLI** | A command-line toolkit that supports automated workflows, including contract compilation, deployment, and versioning, all from within your terminal or CI/CD pipeline. | [CLI Guide](/platform-components/dev-tools/cli) | | **3. Middleware & API Layer** | **Smart Contract API Portal** | Automatically generates REST or GraphQL endpoints for your deployed contracts, eliminating manual integration code and simplifying front-end or third-party access. Available for EVM networks only. | [Smart Contract API Portal](/platform-components/middleware-and-api-layer/smart-contract-api-portal) | | | **Graph Middleware** | Indexes on-chain events so you can query them in real time using GraphQL. Suited for analytics, marketplace applications, or any scenario involving data-intensive queries. Available for EVM networks only. | [Graph Middleware](platform-components/middleware-and-api-layer/graph-middleware) | | | **Ethereum Attestation Indexer** | Focused on indexing attestations from the Ethereum Attestation Service (EAS), facilitating credential management, compliance checks, and advanced auditing. Available for EVM networks only. | [Attestation Indexer](/platform-components/middleware-and-api-layer/attestation-indexer) | | | **Blockchain Explorer API** | Grants programmatic access to the data shown in the Explorer, which is useful for automated monitoring, scripting, or custom analytics integrations. | [Blockchain Explorer API](/platform-components/blockchain-infrastructure/insights) | | | **Integration Studio** | A drag-and-drop interface for building workflows that connect on-chain events to external systems (e.g., ERP, CRM, HR). Reduces custom coding for routine integrations. | [Integration Studio](/platform-components/middleware-and-api-layer/integration-studio) | | | **Firefly Fabconnect** | FireFly FabConnect is an API middleware that enables seamless integration between enterprise systems and Fabric networks for secure and scalable digital asset and workflow automation. | [Firefly Fabconnect](/platform-components/middleware-and-api-layer/fabconnect) | | **4. Database, Storage & App Deployment** | **S3 Storage (MinIO)** | An S3-compatible object storage ideal for large files and logs that don't require on-chain immutability. Can be used for user-generated content or enterprise documents. | [S3 Storage](/platform-components/database-and-storage/s3-storage) | | | **IPFS Storage** | Decentralized and tamper-proof file storage for documents, certificates, and other sensitive data. Ideal for publicly verifiable artifacts like NFT metadata. | [IPFS Storage](/platform-components/database-and-storage/ipfs-storage) | | | **Hasura GraphQL Engine** | A real-time GraphQL API atop a PostgreSQL database for off-chain data. Simplifies data handling by providing instant schema-based queries and updates. | [Hasura GraphQL](/platform-components/database-and-storage/hasura-backend-as-a-service) | | | **Custom Deployments** | Containerize and deploy both front-end and back-end components. This approach makes it straightforward to scale each component independently and roll out updates efficiently. | [Custom Deployments](/platform-components/custom-deployments/custom-deployment) | | **5. Security & Authentication** | **Private Key Management** | Various options, from software-based storage to Hardware Security Modules (HSMs), for safeguarding cryptographic keys and ensuring secure transactions. | [Key Management](/platform-components/security-and-authentication/private-keys) | | | **Access Tokens (PAT/AAT)** | Control access to the platform and its APIs using token-based authentication. Enables role-based permissions for both user and machine (app) identities. | [Access Tokens](/platform-components/security-and-authentication/personal-access-tokens) | | **7. Application Kits** | **Asset Tokenization Kit** | A full-stack accelerator for tokenizing assets, including prebuilt smart contracts and a ready-to-use dApp codebase to jump-start tokenization projects. | [Asset Tokenization Kit](/application-kits/introduction) | *** ## Platform components: Below is an **in-depth** look at each major component. We have seamlessly **incorporated** the details on private permissioned networks (Hyperledger Besu, Quorum, Hyperledger Fabric), Layer 1 and Layer 2 public blockchains, participant management, node configuration, transaction signing, code development, and more. All content is retained to ensure you have the **full context** needed for enterprise blockchain projects. ## **Private permissioned networks** * **Hyperledger Besu** A highly popular permissioned blockchain framework offering enterprise-grade security, private transactions, and governance control with QBFT consensus. * **Quorum** A private Ethereum fork incorporating encrypted transactions and privacy features. Suitable for enterprises that want Ethereum smart contract compatibility without exposing sensitive data. * **Hyperledger Fabric** A modular blockchain allowing pluggable consensus. Widely used in business settings that require robust security, customizable endorsement policies, and efficient performance. **Consortium Manager & Participant Permissions** In SettleMint, the **Consortium Manager** helps you manage participants for private networks. Each participant can have **granular permissions** (e.g., ability to add validating nodes, invite members, or manage governance), ensuring enterprise-class security and **decentralized decision-making**. **Network Manager: Genesis Files & External Nodes** The **Network Manager** allows you to create or join external blockchain networks by configuring genesis files (defining chain parameters) and specifying bootnodes. This fosters **interoperability** and **consortium formation**, letting you align all nodes under a shared initial state while securely integrating additional participants. ## **Layer 1 (L1) public networks** * **Ethereum** A decentralized blockchain that transitioned to Proof of Stake (PoS), known for its extensive developer community and smart contract capabilities. * **Avalanche** High-speed chain with subnet support and a PoS approach, delivering low-cost and near-instant finality. * **Hedera Hashgraph** A scalable public ledger offering enterprise-level security and low fees, relying on asynchronous Byzantine Fault Tolerance. * **Sonic** Sonic, originally launched as Fantom, is a high-performance public blockchain network which leverages a unique consensus mechanism called Lachesis. By selecting an L1 network within the **Network Manager**, you can deploy and manage nodes, handle load balancing, and integrate with SettleMint's transaction signing, making it easier to develop or migrate dApps onto top-tier public blockchains. ## **Layer 2 (L2) public networks** * **Polygon PoS** A sidechain for Ethereum that offers faster transactions and lower fees, connected to mainnet for added security. * **Polygon zkEVM** A zero-knowledge rollup solution providing even greater efficiency, bundling transactions off-chain while preserving Ethereum's security. * **Optimism** Uses optimistic rollups to group off-chain transactions into batches verified on Ethereum. * **Arbitrum** Another leading optimistic rollup-based approach to improve Ethereum's scalability and reduce fees. * **Soneium** Soneium operates as a layer 2 solution built atop Ethereum, emphasizing high throughput, and seamless cross-chain connectivity.. Layer 2s are favored for high-volume applications, as they ease congestion on mainnet Ethereum while retaining EVM compatibility. Through SettleMint, you can deploy or connect to these networks, benefiting from the platform's end-to-end infrastructure and dev tooling. ## **Blockchain nodes** The **Nodes** panel in SettleMint's Network Manager provides a holistic view of the network, whether it's private or public. You can: * **Add Validating Nodes:** Nodes that participate in consensus, securing the network. * **Add Non-Validating Nodes:** Handle data queries and reduce validator load. * **Configure Load Balancers:** Improve performance by routing requests across multiple nodes. * **Add Peers:** On Fabric, peers are responsible for maintaining the ledger and executing chaincode. You can add or configure peers to support transaction endorsement and data consistency. * **Add Orderers:** On Fabric, orderers handle transaction ordering and ensure consistent block creation across the network. Configure orderers to maintain consensus and streamline block propagation. * **Check Live Logs:** Monitor node statuses in real time, tracking identity, enode URLs, and configuration details. This granular management ensures your **network remains stable** and **scalable**, even under heavy workloads. ## **Transaction signer** The **Transaction Signer** is a critical piece in SettleMint that securely signs and broadcasts transactions. By integrating with nodes via JSON-RPC or WebSockets, it provides: * **Key Management Services:** Including HSM support, ensuring sensitive private keys remain protected. * **API Access & Audit Logging:** Allowing you to monitor transaction flows and enforce role-based control. * **Automated Transaction Execution:** Suitable for workflows requiring consistent, programmatic on-chain updates. ## **Blockchain load balancer** To maintain **high availability** and resource efficiency, SettleMint includes a dedicated load balancer. It distributes JSON-RPC calls, GraphQL queries, and transaction submissions across multiple nodes, minimizing downtime if one node fails and preventing any single node from becoming a bottleneck. This is especially vital for enterprise-scale applications with large user bases or transaction volumes. ## **Blockchain explorer** The **Blockchain Explorer** offers real-time insights into: * **Transactions:** See if they've been mined or validated. * **Blocks:** Examine block production, verifying chain integrity. * **Smart Contracts:** Inspect states, method calls, and event logs. * **Network Participants:** Track node identities and governance roles in private networks. It relies on fast JSON-RPC and GraphQL queries, making it a cornerstone for auditing, diagnostic checks, and compliance reporting. ## **Code studio IDE** A **browser-based IDE** that streamlines contract development for various networks: * **Foundry/Hardhat Integration:** Preconfigured setups to compile, test, and deploy Solidity contracts for EVM-based chains like Hyperledger Besu or Quorum. * **Chaincode Support:** For Hyperledger Fabric networks, enabling enterprise-grade business logic. * **Templates & Custom Libraries:** Jump-start new projects or adapt existing ERC20, ERC721 and ERC1155 standards easily. * **Terminal & GitHub Integration:** Enables collaboration, version control, and quick dependency management. Because it's fully hosted in SettleMint, you don't need a local environment—resulting in a frictionless dev experience. ## **Smart contract api portal** After deployment, the **Smart Contract API Portal** translates your contract ABIs into **REST** and **GraphQL** endpoints—often termed "write middleware" because they allow writing data on-chain through these automatically generated APIs. It includes: * **OpenAPI Documentation:** So you can test endpoints directly in the browser. * **Interactive Interface:** Easily check function parameters and event outputs. * **Hundreds of Endpoints per Contract:** Eliminating the need to manually code them. This shortens the time from contract deployment to integration with front ends or third-party services. ## **Graph middleware** **Graph Middleware** accelerates read operations by indexing specified on-chain data in real time. Developers define subgraphs that specify which events, transactions, and states to monitor, enabling quick data retrieval via GraphQL. Popular for: * **DeFi Dashboards** * **NFT Marketplaces** * **Real-time Analytics** By removing the need to scan entire blockchains manually, Graph Middleware makes complex queries simple and efficient. ## **Ethereum attestation indexer** Enterprise solutions often require **verifiable credentials** (e.g., identity attestations or compliance confirmations). The **Ethereum Attestation Indexer** monitors and indexes data produced by the **Ethereum Attestation Service (EAS)**. It then presents these attestations through a GraphQL API, allowing: * **Identity Verification** * **Reputation Systems** * **Regulatory Tracking** This specialized middleware simplifies trust-based interactions, reducing custom code for indexing or auditing attestations. ## **Integration studio** The **Integration Studio** is a **low-code, Node-RED-based** environment for orchestrating cross-system workflows: * **4,000+ Pre-Built Connectors:** Link blockchains to ERP, CRM, HR, AI/ML, and other external systems. * **Event-Driven Processes:** React to on-chain activities by triggering off-chain actions, such as sending emails or updating databases. * **API Management:** Expose blockchain functions as RESTful endpoints or incorporate external APIs into on-chain processes. This reduces the need for heavy custom coding when bridging decentralized and centralized systems. ## **Hasura graphql engine** **Hasura** seamlessly manages **off-chain** data—often user details, authentication, or large volumes of records that don't need to reside on-chain. Paired with a PostgreSQL database, Hasura automatically generates a **real-time GraphQL schema**, offering: * **Instant Queries & Mutations** * **Role-Based Access Control** * **Real-Time Updates** for dashboards and front ends By decoupling large or frequently changing data from blockchain storage, you optimize both performance and cost while retaining cryptographic proof references on-chain as needed. ## **S3 storage (minio)** For storing large files, such as logs, digital certificates, transaction receipts, SettleMint offers an **S3-compatible MinIO** service. You can: * **Upload & Retrieve Files via Standard S3 APIs** * **Control Access Permissions** * **Benefit from High-Performance Object Storage** It's ideal for data that doesn't require on-chain immutability or public distribution (unlike IPFS). Typical use cases include operational logs, user-generated content, and archives that must remain accessible and secure. ## **Ipfs storage** SettleMint integrates **IPFS** for **decentralized**, **tamper-proof** file storage. A unique hash (CID) identifies each file, enabling: * **Verified Authenticity:** Hash-based references confirm file content hasn't changed. * **Permanent Distribution:** Files remain online as long as peers host them, removing dependency on a single provider. * **Ideal for NFTs, Public Certificates, and Audit Logs** that require trustless verification. By offloading large files to IPFS and storing only the hash on-chain, you can preserve blockchain efficiency while retaining provable data integrity. ## **Private key management** Depending on risk, compliance requirements, and scale, SettleMint supports multiple approaches: * **Accessible ECDSA P-256:** Straightforward software-based storage. * **Hierarchical Deterministic (HD) ECDSA P-256:** Generate multiple child keys from a master seed for structured backups. * **Hardware Security Modules (HSMs):** Tamper-resistant devices ensuring maximum security for enterprise or regulated use cases. Each approach integrates with the **Transaction Signer**, guaranteeing seamless and secure execution of on-chain operations. ## **Access tokens (pat/aat)** Two forms of token-based authentication and authorization: * **Personal Access Tokens (PATs):** Tied to individual users for tasks like contract deployment, node setup, or platform configuration. * **Application Access Tokens (AATs):** For machine-to-machine interactions, often used by microservices or scripts that require secure blockchain access. Admins can create, rotate, or revoke tokens, applying granular role-based controls to ensure only authorized entities interact with the network. ## **Custom deployments** SettleMint enables developers to containerize custom applications, front-end dashboards, specialized microservices, or custom oracles, and host them within the platform. You can: * **Define Container Images & Environments** * **Configure Domains & SSL** * **Scale Resources** based on user traffic This integrated approach eliminates the need for separate hosting services, simplifying operational overhead and unifying observability. ## **Asset tokenization kit** The Asset Tokenization Kit is a **full-stack accelerator** designed to simplify and speed up the development of tokenized asset platforms. It provides **pre-built smart contracts and a ready-to-use dApp UI**, enabling businesses to launch tokenized assets quickly and efficiently. * **Pre-configured Smart Contracts:** Based on ERC20 standard for various asset types, including stablecoins, bonds, equity, funds, and more. * **Meta Transactions & Account Abstraction:** Enables gasless transactions and wallet abstraction for a seamless user experience. * **Compliance & Access Control:** User management, KYC, whitelisting, and role-based access control for better governance. This plug-and-play solution accelerates blockchain adoption, allowing enterprises to tokenize assets securely while ensuring flexibility and scalability. *** file: ./content/docs/application-kits/introduction.mdx meta: { "title": "Introduction" } ![Application Kits](../../img/application-kits/cover-kits.webp) ## SettleMint Application Kits SettleMint Application Kits are designed to dramatically accelerate the development of enterprise blockchain applications by providing pre-packaged, full-stack solutions for common use cases. These kits bundle essential components such as smart contract templates, pre-built decentralized application (dApp) UIs, integration tools, and deployment configurations into ready-to-use modules that can be launched in minutes and customized to fit specific business needs.
Each Application Kit addresses a particular industry requirement or blockchain pattern, such as asset tokenization, NFT issuance, supply chain traceability, or secure data exchange. With built-in support for smart contract deployment, on-chain/off-chain data flows, and secure API integrations, these kits reduce the complexity of blockchain development while ensuring compliance, scalability, and performance.
Developers benefit from low-code tooling, customizable open-source templates, and real-time dashboards, while business users gain access to robust governance features, analytics, and user management capabilities. Whether deployed in cloud environments or on self-managed infrastructure, SettleMint’s Application Kits offer a seamless path from idea to production, empowering teams to focus on business innovation rather than technical implementation.
Read more about Asset Tokenization Kit here - [Asset Tokenization Kit](/application-kits/asset-tokenization/introduction) file: ./content/docs/blockchain-and-ai/ai-code-assistant.mdx meta: { "title": "AI code assistant", "description": "RooCode Assistant" } ## AI code assistant RooCode is an AI-powered coding assistant integrated into SettleMint's Code Studio, replacing the former "AI Genie". It enhances Code Studio by introducing a more versatile and powerful AI engine directly in your development environment. With RooCode, you can generate and improve code using natural language, leverage multiple AI models for different tasks, and even integrate custom or local AI instances to meet your project's needs. This guide will walk you through what RooCode is, how to set it up, and how to make the most of its features. ![SettleMint Blockchain RooCode AI](../../img/platfrom-components/roocode.png) ### What is roocode and how does it enhance code studio? RooCode is a next-generation AI assistant that lives in your Code Studio editor. Think of it as your intelligent pair programmer: you can ask it to write code, explain code, suggest improvements, or even create new project files – all through simple prompts. Unlike the previous AI Genie (which was tied to a single AI model), RooCode is built to be provider-agnostic and highly extensible. This means it can connect to a range of AI models and services: • Multiple AI Providers: Out of the box, RooCode supports popular AI providers like OpenAI (GPT models), Anthropic (Claude), Google Vertex AI, AWS Bedrock, and more. You're not limited to one AI engine; you can choose the model that best fits your task for better results. * Advanced Context Awareness: RooCode can handle larger context windows and smarter context management than before. It "remembers" more of your codebase and conversation history, which helps it generate responses that consider your entire project scope. In practice, you'll notice more coherent help even as your files grow or you switch between different parts of your project. * Extensibility via MCP: RooCode supports the Model Context Protocol (MCP) , a framework that lets the AI assistant use external tools and services, including the [SettleMint MCP server](/platform-components/dev-tools/mcp). This is a big enhancement for Code Studio – it means the AI can potentially perform complex operations like looking up information in a knowledge base, running test suites, or controlling a web browser for web-related tasks, all from within the coding session. (By default, you'll only use these features if you choose to enable or add them, so the environment stays straightforward unless you need the extra power.) * Seamless Code Studio Integration: RooCode is fully embedded in SettleMint's Code Studio interface. You can access it through the familiar chat or prompt interface. You can access it through the familiar chat or prompt panel. It works alongside your code in real-time – for example, you can highlight a piece of code and ask RooCode to explain or refactor it, and it will provide the answer or suggestion in seconds. This tight integration means your development workflow is smoother and more efficient, with AI help always at your fingertips. In summary, RooCode enhances Code Studio by making the AI assistance more powerful, flexible, and context-aware. Whether you're a developer looking for quick code generation or an enterprise user needing compliance-friendly AI, RooCode adapts to provide the best experience. ### Step-by-step setup and configuration Getting started with RooCode in Code Studio is straightforward. Here's how to set up and configure it for your needs: 1. Open Code Studio: Log in to the SettleMint Console and open your Code Studio environment. Ensure you have the latest version of the Code Studio where RooCode is available (if SettleMint releases updates, make sure your environment is updated). You should notice references to RooCode or AI Assistant in the IDE interface. 2. Access RooCode Settings: In Code Studio, locate the RooCode settings panel. This is accessible via an rocket icon the Code Studio toolbar. Click on that to open the configuration settings. 3. Choose an AI Provider: In the RooCode settings, you'll see an option to select your AI provider or model. RooCode supports many providers; common options include OpenAI, Anthropic, Google Vertex AI, AWS Bedrock, etc. Decide which AI service you want to use for generating suggestions. For instance, if you have an OpenAI API key and want to use GPT-4, select "OpenAI." If you prefer Anthropic's Claude, choose "Anthropic" from the dropdown. (You can change this later or even set up multiple profiles for different providers.) 4. Enter API Keys/Credentials: After selecting a provider, you'll need to provide the API key or credentials for that service: * For cloud providers like OpenAI or Anthropic: Enter your API key in the provided field. You might also need to specify any additional info (for example, an OpenAI Organization ID if applicable, or select the model variant from a list). RooCode's Anthropic integration, for example, will have a field for the Anthropic API Key and a dropdown to pick which Claude model to use. * If you choose OpenAI Compatible or custom endpoints (for instance, via a service like OpenRouter or Requesty that aggregates models), input the base URL or choose the service name, and then provide the corresponding API key. * For Azure OpenAI or enterprise-specific endpoints: you'll typically enter an endpoint URL and an API key (and possibly a deployment name) as required by that service. RooCode allows configuring a custom base URL for providers like Anthropic or OpenAI if needed, which is useful for enterprise proxies or Azure endpoints. 4. Configure Model and Settings: Once your key is in place, select the exact model or version you want to use. For example, choose "GPT-4" or a specific Claude variant from the model dropdown. You can also adjust any optional settings here: * Context Limit or Mode Settings: Some providers/models allow adjusting the maximum tokens or response length. RooCode might expose these or just manage them automatically. (By default, it optimizes context usage for you.) * MCP and Tools: If you plan to use advanced features, ensure that MCP servers are enabled in settings (this might be on by default). There may be an option like "Enable MCP Tools" or similar. If you don't need these, you can leave it as is. (Advanced users can add specific MCP server configurations later, this is optional and not required for basic usage.) * Profiles (Optional): RooCode supports multiple configuration profiles. You might see an option to create or switch "API Profiles." This is useful if you want to quickly switch between different providers or keys (say one profile for OpenAI, another for a local model). For now, using the default or a single profile is fine. 5. Save and Test: Save your settings (there might be a "Save" button or it may apply changes immediately). Now test RooCode to confirm it's working: * Look for the RooCode chat panel or command input in Code Studio. It might be a sidebar or bottom panel where you can type a prompt. * Try a simple prompt like: "Hello RooCode" or ask it to write a snippet, e.g., "// Prompt: write a Solidity function to add two numbers". * RooCode should respond with a code suggestion or answer. If it prompts for any permissions (like file access, since RooCode can write to files), approve it to allow the AI to assist with coding tasks. * If you get an error (e.g., unauthorized or no response), double-check your API key and internet connectivity, or see if the provider might have usage limits. Adjust keys or settings as needed. * With setup complete, you can now fully leverage RooCode in your development workflow. Use natural language to ask for code, explanations, or improvements. For example: * "Create a unit test for the above function." – RooCode will generate test code. * "I'm getting a validation error in this contract, can you help find the bug?" – RooCode can analyze your code and point out potential issues. * "Document this function." – RooCode will write documentation comments explaining the code. * You can interact with it as you code, and it will utilize the configured AI model to assist you. Feel free to adjust the provider or model as you see what works best for your project. ## Roo Code Interface Components of the Chat Interface​ The chat interface consists of the following main elements: 1. Chat History: This area displays the conversation history between you and Roo Code. It shows your requests, Roo Code's responses, and any actions taken (like file edits or command executions). 2. Input Field: This is where you type your tasks and questions for Roo Code. You can use plain English to communicate. 3. Action Buttons: These buttons appear below the input field and allow you to approve or reject Roo Code's proposed actions. The available buttons change depending on the context. 4. Send Button: This looks like a small plane and it's located to the far right of the input field. This sends messages to Roo after you've typed them. 5. Plus Button: The plus button is located at the top in the header, and it resets the current session. 6. Settings Button: The settings button is a gear, and it's used for opening the settings to customize features or behavior. 7. Mode Selector: The mode selector is a dropdown located to the left of the chat input field. It is used for selecting which mode Roo should use for your tasks. ![RooCode interface](../../img/blockchain-and-ai/roo-code-components.png) ### Key features and benefits of roocode RooCode brings a rich set of features to improve your development experience in Code Studio. Here are some of the highlights: * Multiple AI Models & Providers: Connect RooCode to various AI backends. You're not locked into one AI engine – choose from OpenAI's GPT series, Anthropic's Claude, Google's PaLM/Gemini (via Vertex AI), or even open-source models through services like Ollama or LM Studio. This flexibility means you can leverage the strengths of different models (e.g., one might be better at Ollama or LM Studio. This flexibility means you can leverage the strengths of different models (e.g., one might be better at code completion, another at explaining concepts) as needed. * 📚 Advanced Context Management: RooCode is designed to handle large codebases and lengthy conversations more gracefully. It uses intelligent context management to include relevant parts of your project when generating answers. For you, this means less time spent copy-pasting code to show the AI – RooCode will automatically consider the files you're working on and recent interactions. The result is more informed suggestions that truly understand your project's context. * 🤖 MCP (Model Context Protocol) Support: One of the standout advanced features is RooCode's ability to use MCP. This allows the AI assistant to interface with external tools and services in a standardized way . For example, with an appropriate MCP server configured, RooCode could perform a task like searching your company's knowledge base, querying a database for a value, or running a custom script – all triggered by an AI command. This extends what the AI can do beyond text generation, turning it into a mini agent that can act on your behalf. (This is an optional power-user feature; you can use Code Studio and RooCode fully without ever touching MCP, but it's there for those who need to integrate with other systems.) * 🛠 In-Editor Tools & Actions: RooCode comes with a variety of built-in capabilities accessible directly in the editor. It can read from and write to files in your project (with your permission), meaning it can create new code files or modify existing ones when you accept its suggestions. It can execute terminal commands in the Code Studio environment – useful for running tests or compiling code to verify solutions. It even has the ability to control a browser or other tools via MCP, as mentioned. These actions help automate routine tasks: imagine generating code and then automatically running your test suite to verify it, all through AI assistance. * 🔒 Customization & Control: Despite its power, RooCode gives you control over the AI's behavior. You can set custom instructions (for example, telling the AI about project-specific guidelines or coding style preferences). You can also adjust approval settings – e.g., require manual approval every time RooCode tries to write to a file or run a command, or relax this for trusted actions to speed up your workflow. For enterprise scenarios, features like disabling MCP entirely or restricting certain actions are available for compliance (administrators can centrally manage these policies). This balance ensures you get helpful automation without sacrificing oversight. * 🚀 Continuous Improvement: RooCode is regularly updated with performance improvements and new features. Being a part of the SettleMint platform means it's tested for our specific use cases (like blockchain and smart contract development) and tuned for reliability. Expect faster responses and new capabilities over time – for instance, support for the latest AI models as they become available, improved prompt handling, and more. All these benefits come to you automatically through platform updates. Together, these features make RooCode a robust AI co-developer. You'll find that repetitive tasks get easier, complex tasks become more approachable with AI guidance, and your team's overall development speed and quality can increase. ### Integrating personal api keys and enterprise/local instances One of the great advantages of RooCode is its flexibility in how it connects to AI models. Depending on your needs, you can either use personal API keys for public AI services, or leverage local/enterprise instances for more control. Here's how to manage those scenarios: * Using Your Own API Keys: If you have your own accounts with AI providers (such as an OpenAI API subscription or access to Anthropic's Claude), you can plug those credentials into RooCode. In the RooCode settings profile, select the provider and enter your API key (as described in the setup steps). This will make Code Studio use your allotment of that AI service for all AI completions and chats. The benefit is that you can tailor which model and version you use (and often get the newest models immediately), and you have full visibility into your usage via the provider's dashboard. For instance, you might use your OpenAI key to get GPT-4's latest features. RooCode will respect any rate limits or quotas on your key, and you'll be billed by the provider according to your plan with them (if applicable). This approach is ideal for individual power users or teams who want the best models and are okay managing their own API costs. * Enterprise API Integrations: Enterprises often have special arrangements or requirements for AI usage – such as using Azure OpenAI Service, deploying models via AWS Bedrock, or using a private endpoint hosted in a secure environment. RooCode supports these cases. You can configure a custom base URL and API key to point RooCode to your enterprise's AI endpoint. For example, if your company uses Azure OpenAI, you'd select "OpenAI Compatible" and provide the Azure endpoint URI and key. Similarly, for AWS Bedrock, choose the Bedrock option and enter the necessary credentials. By doing so, all AI requests from Code Studio will route through those enterprise channels, ensuring compliance with your org's data policies (no data leaves your approved environment). This is crucial for sectors with strict data governance – you get the convenience of AI coding assistance while keeping data management in line with internal rules. * Local Instances (Offline/On-Premises Use): RooCode can also work with local AI models running on your own hardware. This is a powerful feature if you need full offline capability or extra privacy. Using a tool like Ollama or LM Studio via AWS Bedrock, or using a private endpoint hosted in a secure environment. RooCode supports these cases. You can configure a custom base URL and API key to point RooCode to your enterprise's AI endpoint. For example, if your company uses Azure OpenAI, you'd select "OpenAI Compatible" and provide the Azure endpoint URI and key. Similarly, for AWS Bedrock, choose the Bedrock option and enter the necessary credentials. By doing so, all AI requests from Code Studio will route through those enterprise channels, ensuring compliance with your org's data policies (no data leaves your approved environment). This is crucial for sectors with strict data governance – you get the convenience of AI coding assistance while keeping data management in line with internal rules. * Local Instances (Offline/On-Premises Use): RooCode can also work with local AI models running on your own hardware. This is a powerful feature if you need full offline capability or extra privacy. Using a tool like Ollama or LM Studio , you can host language models on a local server that mimics the OpenAI API. In RooCode's settings, you would choose a "Local" provider option (for instance, LM Studio appears as an option) and set the base URL to your local server (often something like [http://localhost:PORT](http://localhost:PORT) with no API key needed or a token if the local server requires one). Once configured, RooCode will send all requests to the local model, meaning your code and queries never leave your machine. Keep in mind, running local models may require a powerful computer, and the AI's performance depends on the model you use (some open-source models are smaller than the big cloud ones). Still, this option is fantastic for experimentation, working offline, or ensuring absolute confidentiality for sensitive code. * Switching and Managing Configurations: Through RooCode's configuration profiles feature , you can maintain multiple setups. For instance, you might have one profile called "Personal-OpenAI" with your OpenAI key and GPT-4, another called "Enterprise-Internal" for your company's endpoint, and a third called "Local-LLM" for a model on your machine. In Code Studio, you can quickly switch between these depending on the project or context. This flexibility means you're never locked in – you can always choose the best route for AI assistance on a case-by-case basis. > Tip: Always ensure that when using external API keys or services, you follow > the provider's usage policies and secure your keys. Never commit API keys into > your code repositories. Set them via the Code Studio interface or environment > variables if supported. SettleMint's platform will store any keys you enter in > a secure way, but it's good practice to manage and rotate keys periodically. > For enterprise setups, work with your system administrators to obtain the > correct endpoints and credentials. By integrating your own keys or instances with RooCode, you essentially bring your preferred AI brain into SettleMint's Code Studio. This empowers you to use the AI on your terms – whether prioritizing cost, performance, or compliance. It's all about giving you the choice. ### Conclusion and next steps RooCode dramatically expands the AI capabilities of SettleMint Code Studio, making it a versatile assistant for blockchain development and beyond. We've covered what RooCode is, how to get it up and running, its key features, and how to tailor it to your environment. As you start using RooCode, you may discover new ways it can help in your daily coding tasks – don't hesitate to explore features like custom modes or ask RooCode itself for tips on how it can assist you best! For more detailed technical information, troubleshooting, and advanced tips, check out the (official RooCode documentation)\[[https://docs.roocode.com](https://docs.roocode.com)]. The RooCode community is also active – you can find resources like FAQ pages or community forums (e.g., RooCode's Discord or subreddit) via the documentation site if you're interested in deep dives or sharing experiences. file: ./content/docs/blockchain-and-ai/blockchain-and-ai.mdx meta: { "title": "Blockchain and AI", "description": "Using the Model Context Protocol (MCP) to connect LLM to blockchain" } ## Blockchain and AI: Convergence and Complementarity ## Introduction Blockchain and Artificial Intelligence (AI) are two transformative technologies that, when combined, promise more than the sum of their parts. Blockchain provides a decentralized, tamper-proof ledger for recording transactions or data, while AI offers intelligent algorithms capable of learning from data and automating complex decisions. Industry leaders, executives, and developers are increasingly interested in how these technologies can reinforce each other. ## Blockchain as a Foundation for AI Blockchain technology can act as a foundational layer for AI systems by ensuring the integrity, security, and availability of the data and processes that AI relies on. Key characteristics of blockchains – immutability, distributed trust, and smart contracts – directly address several challenges faced in AI deployment. Below, we examine how blockchain supports AI in terms of data integrity, access control, auditability, and decentralization- ### Data Integrity and Provenance AI algorithms are only as reliable as the data they consume. Blockchain's immutable ledger guarantees that once data is recorded, it cannot be tampered with or altered without detection. This assures AI models of consistent, trustworthy input data. By leveraging blockchain as an immutable record-keeping system, AI decision-making can be tied to verifiable data lineage, improving overall trust in the system. For example, in a supply chain scenario, sensor readings (e-g. temperature, location) can be logged to a blockchain at each step. This creates a permanent data provenance trail that an AI model can later use to trace back anomalies or confirm the origin and quality of training data- Blockchain's digital records thus provide insight into the provenance of data used by AI, addressing one aspect of the AI "black box" problem and improving confidence in AI driven recommendations. In essence, blockchain ensures data integrity for AI – the data feeding AI models remains accurate, untampered, and traceable ### Secure Access Control and Privacy Blockchains, especially permissioned or consortium blockchains, include mechanisms for access control through cryptographic keys and smart contracts- This means AI systems built on such a blockchain can enforce fine-grained data access policies: only authorized parties (nodes or users with the correct keys/permissions) can read or contribute certain data. Such decentralized access control is managed by code rather than by a central administrator, reducing single points of failure. For instance, patient healthcare data could be stored on a blockchain in encrypted form; only hospitals or AI diagnostic agents with the proper cryptographic credentials can access the data, and every access is recorded on-chain. Smart contracts can automate the enforcement of consent and usage policies, giving data providers and users real-time control over data access with a transparent log of who accessed what. This not only secures sensitive data for AI applications but also builds trust that privacy is preserved. Moreover, because the ledger is distributed, there is no central database vulnerable to breaches – data remains distributed across nodes, aligning with principles of secure multi-party data sharing and helping to preserve privacy. ### Auditability and Transparency One of the biggest challenges with advanced AI models (especially deep learning systems) is the lack of transparency in their decision-making. Blockchain can help alleviate this by providing an audit trail for AI processes. Every input fed into an AI model, every model update, or even every key decision or prediction made by an AI could be logged as a transaction on the blockchain- This creates an immutable history that auditors or stakeholders can later review to understand how a conclusion was reached. In regulated industries, such an audit trail is invaluable for compliance and accountability. Blockchain's transparent and tamper-evident log of events makes AI operations more interpretable and trustworthy to outsiders. For example, consider an AI system in finance that approves loans: each step (input data attributes, intermediate risk scores, final decision) can be hashed or recorded on-chain. Later, if a decision is contested, the bank can prove exactly what data the AI saw and how the decision was derived, thanks to the verifiable on-chain record. Researchers have noted that blockchain's decentralized, immutable, and transparent characteristics present a promising solution to enhance AI transparency and auditability. By improving decision traceability, data provenance, and model accountability, blockchain can make AI's "black-box" decisions more open to scrutiny. In summary, blockchain adds a layer of auditability to AI systems: all transactions and decisions are chronologically recorded and cannot be hidden or tampered with, thus fostering greater trust and explainability- ### Decentralization and Resilience Decentralization is at the core of blockchain's design. For AI, decentralization means an AI system or application can be run collaboratively by many parties without requiring a single, controlling authority. This has several benefits- First, it increases resilience: with blockchain, the AI ecosystem has no single point of failure. If one node or participant in the network goes offline or attempts malicious behavior, the overall system can continue functioning correctly based on consensus from other nodes. This is crucial for mission-critical AI applications (e-g. autonomous vehicles or smart grids) that cannot rely on one central server. Second, decentralization enables multi-stakeholder collaboration in AI. Multiple organizations can contribute data or algorithms to a shared AI model via blockchain, knowing that the rules of interaction are enforced by the protocol rather than by one party's goodwill- Blockchain's consensus mechanisms and distributed trust allow untrusted participants to cooperate in AI tasks securely without a central broker. For instance, in a decentralized medical research effort, different hospitals might each analyze local patient data with AI and then share only the model insights or updates via blockchain. No single hospital "owns" the process, but the blockchain ensures each contribution is recorded and the overall model evolves reliably. Additionally, the immutable history and consensus help detect and reject any corrupted inputs, thereby defending the distributed AI system against data poisoning or unauthorized interventions. Overall, blockchain's decentralization aligns well with emerging AI paradigms that require distributed computing and collaboration, enabling robust and democratic AI systems rather than siloed, centralized ones- ## AI Enhancing Blockchain Capabilities Just as blockchain strengthens AI's foundation, AI can significantly enhance blockchain networks and applications. Blockchains generate and rely on vast amounts of data and complex operations, and here AI's strengths in pattern recognition, prediction, and automation can be leveraged. We discuss several dimensions of how AI augments blockchain: through intelligent automation of processes, anomaly detection for security, data analysis and classification for insight, and smart contract management for more robust autonomous code- ### Intelligent Automation in Blockchain Workflows Blockchains often underpin multi-party business processes (for example, supply chain workflows or inter-bank settlements). While smart contracts can automate simple if-then logic, integrating AI allows more complex, adaptive automation- AI systems can be embedded alongside smart contracts to make on-chain workflows smarter and more responsive. For instance, an AI model could be used to monitor real-time data (from IoT sensors or external feeds) and then trigger on-chain actions through smart contracts based on learned patterns or predictions. IBM researchers describe scenarios where AI models are integrated into smart contracts on a blockchain to automate decision-making across a business network – recalling expired products, reordering inventory, executing payments, resolving disputes, or selecting optimal logistics – all without manual intervention. In a food supply chain context, imagine a blockchain that tracks shipments and storage conditions. An AI embedded in this system could predict if a certain batch of food is likely to spoil based on temperature readings. Upon a high-risk prediction, the AI could automatically invoke a smart contract to initiate a product recall or reroute the shipment, with all parties immediately notified via the blockchain. Such AI-driven automation adds a layer of intelligence to the autonomous execution already offered by smart contracts. It helps blockchain systems move from static rule execution to dynamic decision-making, greatly increasing efficiency in processes that involve uncertainty or large data inputs. The net effect is a streamlining of multi-party workflows – removing friction and delay – as AI makes quick complex judgments and the blockchain enforces those judgments transparently- ### Anomaly Detection and Security Enhancement Blockchain networks, especially public ones, must contend with security issues like fraudulent transactions, cyber-attacks, or network anomalies. AI excels at analyzing patterns and can detect outliers far more effectively than manual monitoring or simple static rules. By applying machine learning models to blockchain data (e-g. transaction histories, user behavior patterns, network traffic), one can identify suspicious activities or inefficiencies in real-time- Anomaly detection AI agents can run either on-chain (if lightweight) or off-chain in blockchain analytics systems, flagging issues for further action- For example, in cryptocurrency networks an AI might analyze transaction graph data to detect money laundering patterns or unusual spikes in activity that could indicate a theft or hack. Successfully detecting anomalies in blockchain transaction data is essential for bolstering trust in digital payment systems-, as noted by researchers. If an AI model flags a transaction as likely fraudulent or a smart contract as behaving abnormally, the blockchain network or validators could automatically put that transaction on hold or trigger an alert, preventing potential damage. Similarly, AI can help secure blockchain consensus itself – by predicting and mitigating DDoS attacks on nodes, optimizing node communications, or even adjusting consensus parameters based on network conditions. Beyond security, anomaly detection also means performance tuning: AI could spot congestion patterns and recommend protocol tuning or sharding to improve scalability. In summary, AI provides a form of intelligent surveillance over blockchain systems, enhancing security through continuous learning. It can adapt to new threat patterns (such as emerging fraud tactics) much faster than human-defined rules, thus protecting the integrity of blockchain networks in an automated way. ### Data Classification and Insight Extraction from Blockchain Data Every blockchain, by design, accumulates a growing ledger of transactions or records. In networks with rich data (for instance, blockchains that handle supply chain events, identity credentials, or IoT readings), there is a trove of information that could be mined for value. AI brings advanced analytics to this domain: it can parse through large volumes of on-chain and off-chain associated data to classify information, discover patterns, and extract actionable insights. For example, AI might categorize transactions into different types (normal, microtransactions, suspicious, etc-), or classify addresses/wallets by usage patterns (exchange, individual, smart contract, bot) which is useful for network analytics. Natural Language Processing (NLP) AI could even read unstructured data stored or referenced on blockchains (like contract source code or metadata in transactions) and classify or summarize it. One clear complementary pattern is using blockchain as the trusted data layer and AI as the analytical layer on top. Because blockchain ensures data reliability and consistency, AI analytics on that data can produce trustworthy insights for decision-makers. Conversely, by analyzing blockchain data, AI can help identify inefficiencies or opportunities in business processes, which can then be codified back into new smart contracts or governance rules. An industry example is advanced auditing: a blockchain might record every step in a financial audit trail, and an AI tool can sift through these records to identify anomalies, categorize expense types, or predict compliance issues. The AI effectively turns raw, immutable ledger data into higher-level knowledge. As one guide noted, by analyzing large amounts of blockchain data, AI can detect patterns and extract meaningful insights that would enable better decision-making and pattern recognition for businesses. In essence, AI unlocks the value in blockchain data, providing comprehension and foresight (through predictions or classifications) from what would otherwise be just extensive logs. This synergy transforms a passive ledger into an active intelligence source for organizations- ### AI for Smart Contract Development and Management Smart contracts are self-executing programs on the blockchain that enforce agreements. However, they come with challenges: they are hard to change once deployed, prone to bugs if not written carefully, and limited in their ability to handle complex logic or adapt over time. AI can assist at multiple stages of the smart contract lifecycle to overcome these limitations. During development, AI techniques (like program synthesis or code generation models) can help write or optimize smart contract code. Researchers have even proposed AI-powered blockchain frameworks that include auto-coding features for smart contracts – essentially creating "intelligent contracts" that can improve themselves. In practice, an AI assistant could suggest safer code patterns to a developer or even automatically generate parts of a contract based on high-level specifications, reducing human error. AI can also be used to verify and validate smart contracts. Machine learning models might learn from past vulnerabilities to predict if a new contract has a security flaw or inefficiency, complementing formal verification by quickly scanning for likely bug patterns. Once contracts are deployed, AI can help manage them by monitoring their performance and usage- For example, an AI system could monitor how often certain functions of a contract are called and dynamically suggest optimizations (or even autonomously trigger an upgrade via a governance mechanism if one exists). In terms of contract operations, AI can be integrated to handle exceptions or complex decision branches that are difficult to hard-code. For instance, an insurance smart contract might use an AI oracle to decide claim approvals (evaluating evidence like photos or sensor data) rather than a fixed rule – thus the contract "adapts" its behavior intelligently within allowed bounds. AI can also assist in predictive maintenance of blockchain networks, forecasting when a contract might run out of funds or when a network might congest, allowing preemptive actions (like raising gas limits or deploying a new instance). In summary, AI makes smart contracts more robust and user-friendly by automating code creation, improving security audits, and introducing adaptive logic. This convergence is steering us toward a future in which AI-driven smart contracts are a cornerstone of Web3, making decentralized applications more intelligent, secure, and efficient- ## Architectural Complementarities Beyond individual benefits, blockchain and AI can be woven together into unified system architectures that leverage the strengths of each. In such designs, blockchain often serves as the backbone for trust, data integrity, and coordination, while AI provides the brain for data processing, decision-making, and pattern recognition. We highlight a few key architectural complementarities and patterns that illustrate this symbiosis: * **Data Provenance on Blockchain, Analytics by AI**: Perhaps the most straightforward complementary architecture is to use blockchain for recording provenance of data and processes, and use AI to perform analytics on that data. In this pattern, all critical data events (e-g-, creation of a dataset, updates to a model, results of an AI inference) are time-stamped and stored on a blockchain. This yields an immutable timeline that is extremely useful for verifying where data came from and how it has been used. AI systems then operate on this verified data to generate insights. For example, consider a pharmaceutical supply chain: a blockchain logs each handoff of a drug shipment (maintaining provenance), and an AI model uses this log data to predict supply bottlenecks or detect counterfeit products by spotting irregularities in handoff patterns. The blockchain guarantees the AI is using authentic data, while the AI extracts meaning from the data. In practice, this addresses a critical issue for AI , the garbage in, garbage out problem , by ensuring the input data quality is high (thanks to blockchain integrity) and well-understood in origin. It also addresses trust: stakeholders are more likely to trust AI-driven insights or decisions if they can independently verify the underlying data trail on a public or consortium ledger. Thus, this architecture marries blockchain's strength in data fidelity with AI's strength in data interpretation- * **AI Oracles for Smart Contracts**: Blockchains are inherently self-contained and cannot directly fetch external information without oracles. AI can serve as an advanced kind of oracle that not only provides external data to smart contracts but also interprets it. In this complementary setup, an AI system sits off-chain, ingesting data from the outside world (such as market prices, weather reports, news feeds, sensor readings) and making sense of it. It could perform tasks like image recognition (e-g-, verify an insurance claim photo), NLP on news (e-g-, detect a relevant event), or aggregate and analyze IoT sensor streams. The AI then sends a distilled, verifiable piece of information or decision to the blockchain via a cryptographic proof or signed message. The blockchain's smart contract logic can trust this input because it comes from a known, authenticated AI oracle service. This pattern effectively extends smart contracts' capabilities – they can react to complex real-world situations by outsourcing interpretation to AI. For instance, a crop insurance contract on blockchain might rely on an AI oracle to analyze satellite images and weather data to determine if a drought occurred, then trigger payouts accordingly. The combination creates a closed-loop system: blockchain enforces rules and transactions, AI expands the scope of what those rules can cover by bringing in intelligent judgments from real-world data. Importantly, the blockchain can also record the input and output of the AI oracle for transparency and later auditing (so one could see which image was used and why the AI decided a drought happened). This architectural interplay ensures that even when AI is used for complex logic, the accountability and determinism of blockchain systems is not lost- * **On-Chain Governance and Off-Chain AI Computation**: Another complementary design splits heavy computation and governance between AI and blockchain- Training sophisticated AI models or performing large-scale data analytics is computationally intensive and not feasible directly on most blockchain platforms. Instead, these tasks are done off-chain (for example, in cloud servers or edge devices running AI), but orchestrated and verified via blockchain. One pattern is to use blockchain for coordinating a network of AI workers: imagine a decentralized network where many participants train parts of a model (or compute parts of a task). A smart contract can coordinate the assignment of tasks, aggregation of results, and reward distribution. The actual AI computation happens off-chain for efficiency, but whenever a result is produced, a hash or digital signature of the result is posted to the blockchain. The blockchain thus maintains end-to-end oversight: it knows which data was assigned, which model version was used, and it can even require multiple independent AI agents to submit results for cross-verification (majority vote, for instance) before accepting an outcome. This approach is used in some decentralized machine learning platforms where blockchain tracks contributions and ensures fairness, while AI does the heavy lifting externally. The result is an architecture where blockchain handles orchestration, trust, and reward mechanisms, and AI handles computation and learning. Both pieces work in lockstep: the blockchain never blindly trusts a result without consensus or validation, and the AI participants rely on the blockchain for fair coordination- * **Secure Data Exchange with Encryption and AI**: In scenarios where data privacy is paramount (such as multi-organization AI collaborations), blockchain and AI can be combined with cryptographic techniques to enable secure insight without data leakage. Here, blockchain can store encrypted data or model parameters, or even homomorphic encryption commitments, and only share them under certain conditions. AI models (like federated learning models or encrypted AI inference) operate on this data in encrypted form or distributed form. The blockchain might use smart contracts to enforce that, for example, only aggregates of data are revealed and not individual private data. One concrete architectural example is using secure multi-party computation (MPC) or federated learning (discussed in the next section) where each party's data stays local, but a blockchain smart contract coordinates the process of combining results. Blockchain provides an immutable log of the computation and a platform for agreement on results, while cryptographic AI techniques ensure the actual raw data is never exposed. In effect, blockchain contributes transparency to the process (everyone can see that steps X, Y, Z happened in sequence and who contributed) and AI/cryptography ensures confidentiality of the inputs. This complementary architecture is powerful for enterprises that want to collectively benefit from AI on shared data (for better models or insights) without compromising privacy or trust. It shows how blockchain's transparency and AI's privacy-preserving algorithms can be configured to work together, rather than being at odds. For instance, if banks want to jointly build an AI model for fraud detection across all their transaction data, they can employ MPC-based training and use a blockchain to record each training round's parameter updates. The blockchain acts as a neutral ground that all banks trust for logging updates and enforcing protocol (ensuring each bank followed the agreed process), while the sensitive customer data never leaves each bank's servers. This pattern exemplifies a secure and trustworthy AI workflow enabled by blockchain integration- ## Decentralized AI Networks and Collaborative Learning One of the frontier areas at the intersection of blockchain and AI is the creation of decentralized AI networks, where AI agents, models, or data are distributed across participants rather than centralized in one entity- Blockchain plays a critical role in enabling such networks by providing the trust, incentive, and coordination layer. Here we explore three important themes: decentralized AI agent networks, blockchain-based federated learning, and secure multi-party computation, all of which aim to harness multiple AI participants in a trustworthy manner- ### Blockchain for Decentralized AI Agents In a decentralized AI agent network, many autonomous agents (which could be AI software bots or intelligent IoT devices) interact and collaborate without a central server. These agents might trade services, share data, or jointly make decisions. Blockchain serves as the communication and agreement platform for these interactions. Each agent is typically associated with a blockchain identity (e-g-, an address or public key) and can execute smart contract transactions. By doing so, agents can enter into agreements, exchange value, or vote on decisions in a secure and transparent way. The blockchain ensures that all agents see a consistent view of the "world state" and that no single agent can manipulate shared facts to its advantage (thanks to consensus). This is crucial for trust among autonomous entities. For example, imagine a network of autonomous economic agents that manage power distribution in a smart grid. Each agent (perhaps controlling a home battery or an EV charger with AI that learns when to buy/sell power) uses the blockchain to post its offers and agreements. A smart contract could automatically match supply and demand between these AI agents. The blockchain records each transaction (energy bought, sold, at what price) immutably, preventing disputes. In this setup, blockchain provides the marketplace and arbitration layer, while the agents' AI handles local decision-making (like predicting when electricity prices will be high or when their device needs charging). Over time, agents could even adapt their strategies (reinforcement learning) based on the outcomes recorded on-chain- This concept extends to many domains: fleets of self-driving cars negotiating rights-of-way or traffic optimization via blockchain, AI bots in finance forming a decentralized exchange, or autonomous supply chain agents negotiating contracts. The decentralization of AI through blockchain leads to more democratic and robust systems, preventing any single party from having undue control over the AI ecosystem. It addresses concerns that today's AI is too centralized in the hands of a few tech giants by spreading computation and decision power across a community, anchored by a blockchain for transparency, security, and fairness- ### Federated Learning Coordination via Blockchain Federated Learning (FL) is a collaborative AI training approach where multiple parties (clients) train a shared model together without directly sharing their raw data. Traditionally, FL relies on a central server to coordinate rounds of training: the server sends the current model to clients, they train on local data and send updates back, and the server averages these updates into a new global model. Blockchain can decentralize this process, removing the need for a central server and adding more trust to the collaboration. In a blockchain-based federated learning system, a smart contract can take on the role of coordinator: it can store the current model parameters (or a hash of them) on-chain, solicit updates from participants, and even perform aggregation if the logic is simple or verify an off-chain aggregation. Each participant's update (e-g-, encrypted gradients or model weights) could be submitted as a transaction to the blockchain. This creates an immutable record of contributions, which is useful for auditing and also for incentive mechanisms (like rewarding participants for useful updates). More importantly, using blockchain in FL addresses key vulnerabilities: it allows untrusted or unknown participants to safely collaborate because the protocol rules are enforced by code-, and it can deter or detect malicious behavior. For example, a dishonest client might try to poison the model by submitting bad updates; on a blockchain, such an update could be spotted by outlier detection logic in a smart contract or by other clients validating updates. Researchers have proposed using smart contracts to identify and exclude unreliable or malicious contributors in federated learning, thereby defending against poisoning attacks and improving overall model quality- Blockchain also inherently provides an audit trail of all model updates, which enhances accountability – one can trace which participant contributed which update, and how the model evolved, which is valuable in sensitive applications (e-g-, a consortium of banks jointly training a fraud detection model needs to ensure no participant is sabotaging it). Another benefit is improved fault tolerance: if one participant or even several drop out, the others can continue the training round, and new participants can join by reading the latest model state from the blockchain, all without a central orchestrator. In short, blockchain empowers federated learning by providing distributed trust, security, and continuity. It transforms FL into a more open, yet secure, process – sometimes called Blockchain-Based Federated Learning (BFL). Studies have shown that integrating blockchain's decentralization and tamper-proof logging with FL can overcome single points of failure and even manage participant reputation in a decentralized manner to ensure high-quality contributions. This paves the way for large-scale AI model training across organizations that do not fully trust each other, using blockchain as the glue that binds their cooperation- ### Secure Multi-Party Computation with Blockchain Secure Multi-Party Computation (MPC) refers to techniques that allow multiple parties to jointly compute a function over their inputs while keeping those inputs private. It's highly relevant when several entities want to contribute data to an AI computation (training or inference) without revealing sensitive information to one another. MPC alone provides privacy, but it doesn't inherently provide a public record or easy way to enforce the correct sequence of steps beyond cryptographic proofs. Here, blockchain and MPC can work hand-in-hand to enable privacy-preserving yet transparent AI computations. In such an architecture, participants use MPC protocols (or related methods like homomorphic encryption) to do the actual AI computation (for instance, computing an aggregate statistic or a machine learning inference) such that no individual's data is exposed. The blockchain operates in parallel as a coordination and verification layer: it can outline the steps of the MPC (which all parties must follow), log commitments or hashes of intermediate results, and ultimately record the final output of the computation. Because all parties can inspect the blockchain, they gain confidence that everyone followed the agreed protocol (e-g-, certain commitments were posted before revealing a result, etc-), and any deviation would be caught. Blockchain provides MPC with an immutable timeline and audit trail, bringing transparency and order to an otherwise opaque joint computation. Conversely, MPC enhances blockchain-based systems by adding capabilities for handling private data that blockchain alone cannot process (since on-chain data is usually visible to all). A practical example could be a consortium of hospitals computing an AI prediction on combined patient data (like predicting outbreak risks) via MPC. The blockchain would record that each hospital provided an encrypted input (without revealing the data itself), then record the encrypted intermediate calculations, and finally store the AI prediction result once the MPC protocol finishes. All hospitals see the final result and the proof that the computation was done correctly, but none learns any other hospital's raw data. In finance, MPC is used for things like jointly training risk models or even managing shared crypto wallets; with blockchain, every MPC operation (like each signing step in a multi-signature wallet managed via MPC) can be logged for audit. In summary, blockchain + MPC yields systems that are both highly secure/privacy-preserving and transparent. The blockchain ensures an immutable representation of the MPC transactions and results-, which is key for trust, while MPC ensures sensitive inputs to AI computations remain confidential. Together, they allow multi-party AI-driven computations that no single party could trust to do alone, opening the door to broader cooperation (for example, competitors jointly benefiting from AI on combined data, without giving away business secrets). This synergy exemplifies the complementariness of blockchain and AI-driven cryptographic methods in creating new possibilities for secure, distributed intelligence- ## Towards Transparent, Secure, and Autonomous Systems at Scale As we have seen, blockchain and AI complement each other in fundamental ways: blockchain brings transparency, trust, and decentralization to AI systems, and AI brings automation, intelligence, and adaptability to blockchain systems- Together, they form the building blocks of next-generation digital platforms that can operate autonomously at scale while remaining secure and auditable- **Transparency**: By integrating blockchain, AI-driven processes can be made transparent and explainable to stakeholders. Every critical action taken by an AI , whether it's a data transformation, a decision output, or a model update , can be traced on an immutable ledger. This level of transparency helps overcome the lack of trust that often plagues AI ("why should we trust the algorithm?") because there is a verifiable record backing it. When AI models, data, and decisions are registered on a blockchain, we enable independent verification and explainability. For instance, an autonomous vehicle's decisions could be logged to a blockchain for later analysis in case of an accident, contributing to public trust in such AI systems. On the flip side, AI can enhance the transparency of blockchain by making sense of the vast data on-chain and presenting it in human-understandable forms (e-g-, anomaly reports, trend analyses), thereby illuminating what's happening inside decentralized systems- The outcome is systems that are not opaque black boxes, but glass boxes – open to inspection at multiple layers. **Security**: Both blockchain and AI offer unique security benefits, and together they cover more ground. Blockchain provides security through cryptography (signatures, hashes) and consensus, ensuring data integrity and resistance to tampering. AI enhances security by proactively monitoring and reacting to threats (like detecting fraud, intrusions, or system failures as discussed). Additionally, AI can manage the scale of security – as systems grow to millions of transactions or events, AI is necessary to filter signal from noise and prioritize threats. By building AI agents into blockchain networks (for tasks like fraud detection, network optimization, and user behavior analytics), the security of the overall system is markedly improved, as it becomes feasible to handle security events in real time and even predict them- Moreover, blockchain can secure AI models themselves: for example, a model's parameters or hashes might be stored on-chain to ensure they haven't been maliciously altered, and only authorized updates (with proper signatures or proofs) are accepted. This prevents attackers from subtly corrupting an AI model (a real concern in ML called model integrity attack) because any unauthorized change wouldn't match the chain record. Thus, the integrated design supports end-to-end security: from data input, to model, to decision output, every component is guarded either by blockchain's cryptographic guarantees or AI's vigilance, or both. **Autonomy**: The fusion of AI and blockchain is a key enabler of truly autonomous systems and organizations. Blockchains allow for decentralized governance – using smart contracts and consensus rules, one can create applications that run without human intervention (often termed decentralized autonomous organizations, or DAOs). However, traditional DAOs and smart contracts can only follow pre-defined rules; they lack the ability to adapt or improve themselves over time. By incorporating AI, these autonomous blockchain systems gain the ability to learn from experience, optimize strategies, and handle novel situations. The result is self-driving operations in a business or network. Consider an autonomous supply chain network: blockchain smart contracts handle the enforcement of rules and financial transactions between parties, while AI components handle demand forecasting, inventory optimization, and exception management. The combined system could run with minimal human input, automatically adjusting to supply shocks or demand changes and negotiating actions among participants. Importantly, such autonomy scales with the system – adding more AI agents or more nodes doesn't require a linear increase in central oversight, because coordination is handled algorithmically. The scalability of these systems comes from their decentralized nature (adding more nodes can even strengthen a blockchain network up to a point) and AI's capability to manage large amounts of data and decision complexity. As one analysis put it, decentralized AI systems leveraging blockchain can pave the way for a more inclusive and resilient digital future, democratizing access to AI and distributing its benefits across society. In large-scale scenarios (smart cities, global supply chains, planetary-scale sensor networks), a combination of blockchain for inter-entity coordination and AI for local intelligence is likely the only feasible way to achieve autonomy with reliability- In summary, the convergence of blockchain and AI supports the creation of systems that are at once transparent, secure, and autonomous, even at large scale. Blockchain ensures that as these systems scale to more users and more devices, the integrity and trust in the system does not degrade – everyone sees a single source of truth and can verify rules are followed. AI ensures that as complexity grows, the system can handle complexity intelligently – automating decisions and optimizing resources without constant human oversight. This powerful synergy is driving innovation toward infrastructures that operate with the trust of blockchain and the intelligence of AI- ## Integrated Design Patterns and Examples To concretize the interaction of blockchain and AI, we now present several integrated design patterns and example systems. These examples illustrate how the technologies interlock in practical scenarios, highlighting system interactions step by step- ### Pattern 1: Trusted Data Pipeline for AI Insights **Scenario**: A food supply chain involving farmers, distributors, retailers, and regulators wants to ensure product quality and predict issues like spoilage or contamination. They also want an audit trail for food safety compliance- **Design**: Every time food changes hands or conditions (e-g-, temperature, humidity) are measured, the event is logged to a consortium blockchain shared by all stakeholders. IoT sensors attached to shipments write data (temperature readings, location updates) to the blockchain via transactions, perhaps through gateway nodes. This establishes a trusted data pipeline – any data an AI will use is first committed to an immutable ledger where it's timestamped and signed by the source. On the analytics side, an AI system aggregates and analyzes this blockchain-recorded data. For instance, an AI model might continuously read the latest temperatures and logistics records from the blockchain and use them to predict if a given shipment is at risk of spoilage (perhaps using a predictive model trained on historical data). If the AI detects an anomaly (say a cooler malfunction leading to rising temperature), it flags it. Here's where integration tightens: upon a high-confidence prediction of spoilage, the AI (which could be running as a trusted oracle service) triggers a smart contract on the blockchain to execute a predefined action – for example, issuing a recall order for the affected batch or notifying all relevant parties. The smart contract might automatically release an insurance payout to the retailer for the spoiled goods and initiate an order for replacement stock. All these actions (the AI's alert, the contract's execution, notifications) are recorded on the blockchain as well. **Why Blockchain**: Blockchain guarantees the integrity of the supply data. No distributor can falsify the temperature logs (to hide negligence) because the data is secured once on-chain. Regulators auditing this system can always retrieve the full history and trust its accuracy. Also, the recall and payouts triggered are executed via smart contract, ensuring transparency and fairness (no delays or bias in who gets compensated). **Why AI**: AI provides the intelligent insight that something is wrong or needs attention – a role traditional rule-based monitoring might miss. It can consider multiple sensor streams and learn patterns (perhaps certain combinations of humidity and temperature spikes predict bacterial growth) that static thresholds would not catch. The AI essentially turns the raw data into a decision ("this batch is likely spoiled") which then the blockchain mechanisms act upon. **Outcome**: This pattern results in a secure, automated supply chain quality control system. It is autonomous in responding to issues (thanks to AI-driven contracts), transparent to all stakeholders (thanks to the blockchain log of data and actions), and trust-minimized (parties trust the system, not necessarily each other, since the blockchain mediates). It also scales across many products and shipments because adding more sensors or participants simply means more blockchain transactions and more data for the AI to learn from – which modern systems can handle with proper engineering. The example aligns with IBM's vision of combining AI and blockchain in supply chains to remove friction and respond swiftly to events (e-g-, recalling expired products via AI-triggered contracts)- ### Pattern 2: Decentralized Collaborative Learning **Scenario**: A group of hospitals wants to build a powerful AI model (say, for predicting disease outbreaks or assisting in diagnosis) using their combined patient data. Due to privacy laws and competitive concerns, they cannot pool all the raw data in one place. They need a way to collaborate without a central authority and without exposing sensitive data. **Design**: The hospitals employ a federated learning approach with blockchain coordination. Initially, a base AI model (which could be as simple as an initial guess at a neural network) is posted as a reference on the blockchain (perhaps stored on IPFS with the hash on-chain for integrity). Each hospital in each training round downloads the latest model state from the blockchain and then trains that model locally on its own patient data (e-g-, medical images, health records). Instead of sending their private data, they compute model weight updates (gradients) from their local training. They then submit these updates as transactions to a smart contract on the blockchain. Each update might be encrypted or signed to ensure authenticity. The smart contract collects updates from multiple hospitals. To combine them, either the smart contract performs a simple aggregation (like averaging the weights, if feasible on-chain through a solidity loop), or a designated round leader (which could be one of the hospitals or a consortium server) aggregates off-chain and submits the aggregated result back to the blockchain. The new global model parameters are then updated on the blockchain for the next round. The blockchain thus holds the canonial model state at all times. Importantly, the smart contract can include logic to evaluate contributions – for example, it might reject an update that is too far off from others (potentially malicious) or weigh updates by the size of the contributing dataset. It could also maintain a reputation score for each participant based on past contributions. If a hospital consistently submits outlier gradients (which could be an attempt to poison the model), the contract could flag or exclude those contributions in future rounds. All of this happens in a decentralized manner: no single hospital or central server is in charge; the blockchain's consensus ensures each step (posting model, collecting updates, updating model) is executed correctly and transparently- **Why Blockchain**: Blockchain removes the need for a trusted central aggregator in the federated learning setup – the coordination is handled by code that all hospitals trust to execute fairly. It ensures an immutable audit trail of the training process: later, anyone can verify what data (in aggregate) influenced the model by examining the sequence of updates on-chain, adding credibility to the model's integrity. It also can tokenize the process – for example, automatically reward hospitals (perhaps with cryptocurrency or just a reputation metric) for participating, based on the contributions recorded, incentivizing collaboration. And crucially, by having a shared ledger, new hospitals can join the effort by syncing the chain and don't have to trust a central authority to catch up with the model state- **Why AI**: Here, AI (specifically the federated learning algorithm) is the whole point of the exercise – the blockchain is supporting it. The AI model benefits from far more data (spread across institutions) than any single hospital alone could provide, leading to better accuracy. And by training in a distributed way, it preserves patient privacy (raw data stays in the hospital) which might make the difference between having a model or not (as otherwise data-sharing agreements would block it). Furthermore, the AI can be enhanced with techniques like differential privacy or secure MPC so that even the model updates reveal minimal information, and those techniques can dovetail with blockchain (e-g-, postings are encrypted). The intelligence gained (e-g-, an outbreak prediction model) is shared by all hospitals for the common good, illustrating how AI can be done collaboratively when bolstered by the right trust framework. **Outcome**: This pattern demonstrates a decentralized AI training system that is privacy-preserving, trustless, and robust. It turns what is normally a centralized workflow into a distributed one without sacrificing performance- Each hospital has confidence in the model because they can verify the training sequence. Patients' data privacy is respected, yet the whole network benefits from a more data-rich AI model. This example highlights blockchain's role in enabling multi-party AI projects that would otherwise be impossible due to trust barriers. It could be applied to other domains too – banks jointly training fraud detection, manufacturers jointly training predictive maintenance models – any case where data is siloed but insights are needed globally- ### Pattern 3: Autonomous Decentralized Agent Network **Scenario**: Consider a smart city deployment where hundreds of AI-powered devices and services – traffic lights, autonomous drones, public transport, ride-sharing cars, energy grids, and environmental sensors – need to coordinate actions for efficiency and safety. No single entity controls all devices; they belong to different organizations or stakeholders. The goal is to enable these disparate AI agents to cooperate and make real-time decisions (like traffic routing, energy distribution, emergency responses) in a reliable, leaderless way. **Design**: The city deploys a permissioned blockchain as an underlying coordination layer for all these systems. Every device or service runs an AI agent that makes local decisions (e-g-, a traffic light controller with AI that optimizes green/red times based on sensor input). These agents communicate and coordinate via posting transactions to the blockchain or reading data from it- For example, a self-driving car's AI might publish a transaction announcing it's about to enter a particular intersection. The traffic light's AI agent, seeing this on the blockchain, could adjust its schedule or negotiate right-of-way in a transparent, verifiable manner. Perhaps multiple cars and lights participate in a smart contract that fairly assigns crossing priority based on rules (emergency vehicles get highest priority, etc-). Because all events are on blockchain, malicious agents (or malfunctioning ones) cannot lie about the state (a car can't secretly claim priority without others seeing it). Additionally, the blockchain could hold shared global state that all agents use – for instance, an up-to-date city-wide traffic congestion map built from inputs of all sensors, or a ledger of energy credits for each building. AI agents use this shared data to make decisions that optimize overall system performance, not just local goals- They could also form ad-hoc contracts: e.g., a building's HVAC AI agent might buy excess solar power from a neighbor's AI agent via an on-chain auction if it predicts a cooling need, with the blockchain settling the micropayment instantly. The entire network operates autonomously: agents sense, decide (with AI), act (through blockchain transactions), and effect changes in the real world. **Why Blockchain**: Blockchain provides the common communication fabric in a trustless environment. It's crucial that all these devices and stakeholders have a shared source of truth for the city's state and a way to enforce agreements- Blockchain's immutable log and consensus ensure that if there's a dispute (say two cars claim the same right-of-way), there is a clear record of messages and timing to resolve it or assign fault. It also provides security – messages are signed, so a rogue device can't impersonate another. Smart contracts on the blockchain encode the rules of the city (like traffic protocols, energy trading rules, etc-) in a way that everyone must abide by, which prevents chaos. In short, blockchain is the city's decentralized control hub, without needing a central traffic control center or energy management center, thereby eliminating single failure points and giving each stakeholder equal footing in governance- **Why AI**: AI is necessary because the environment is complex and dynamic. No simple algorithm can optimize city traffic in real-time or balance a smart grid perfectly; these require learning from data, predicting future states, and handling uncertainties – which is AI's domain. Each agent uses AI to operate its device optimally (e-g-, a drone's AI to avoid collisions and plan routes, a traffic AI to reduce jams, a power grid AI to predict demand surges). They can also improve over time (learning from historical data which is also available via blockchain logs). In such a large system, AI acts as the distributed intelligence, making sense of local sensor inputs and deciding on best actions, while blockchain ensures those actions are coordinated and mutually consistent with others- **Outcome**: This pattern yields a secure autonomous multi-agent ecosystem. It is secure because blockchain and cryptography guard the interactions, and any misbehaving agent can be identified or overridden by consensus of others. It is autonomous because once set up, the network of AIs and smart contracts can manage city operations with minimal human intervention, adapting to conditions like accidents or power outages on the fly. And it is scalable: new devices or services can join the network (by getting appropriate credentials) and will immediately start cooperating by following on-chain protocols; the system's decentralized nature means it doesn't bottleneck easily, and AI helps in optimizing performance as the network grows. While this example is ambitious, we already see early forms of it in decentralized energy grids and transportation projects. It underscores how combining AI decision-makers with a blockchain coordination substrate can realize complex cyber-physical systems that are resilient and efficient at large scale- The convergence of blockchain and AI represents a paradigm shift toward building systems that are at once intelligent and trustworthy. Blockchain provides the qualities of integrity, transparency, and decentralized trust that AI systems need in order to be widely accepted in mission-critical roles. It acts as a foundational layer that ensures data and processes cannot be maliciously altered and that all actions are accountable. AI, on the other hand, injects adaptivity, learning, and automation into blockchain-based processes, overcoming the rigidity of predefined rules and handling complexity at scale. Specific complementarities , such as using blockchain for data provenance and using AI for extracting insights, or using blockchain to coordinate distributed agents and AI to optimize their behavior , demonstrate that each technology fills gaps in the other. Blockchain's strengths in providing an auditable shared truth directly bolster AI's weaknesses in explainability and trust, making AI decisions more traceable and verifiable. Conversely, AI's strengths in pattern recognition and decision-making address blockchain's challenges in automation and analysis, making blockchain networks more efficient and insightful- Crucially, this synthesis enables systems that can operate securely and autonomously at scale – from decentralized finance platforms using AI to detect fraud and manage risk in real-time, to smart manufacturing plants where blockchain logs every transaction and AI optimizes production without human input. Both technologies support a vision of autonomous agents and organizations that are self-governing yet accountable. A blockchain-backed AI agent is not a black box operating in isolation; it is an agent whose actions are recorded on an immutable ledger, providing confidence to users and regulators that it's functioning correctly. Meanwhile, a blockchain network infused with AI is not a passive ledger; it becomes an active, learning system that can adjust to new conditions and improve over time. It is important to note that realizing this convergent potential is not without challenges. Issues of scalability (blockchains can be slow or resource-intensive, and AI models can be large), integration complexity (making AI and smart contracts work together seamlessly), and computational overhead (e-g-, running heavy AI computations in a decentralized way) need continued innovation. Solutions are emerging: Layer-2 scaling and more efficient consensus algorithms for blockchains, model compression and federated learning for AI, and hybrid architectures (off-chain computing with on-chain verification) are helping bridge these gaps. As these challenges are addressed, we expect to see more patterns of blockchain-AI integration in real-world systems- file: ./content/docs/blockchain-and-ai/mcp.mdx meta: { "title": "MCP", "description": "Using the Model Context Protocol (MCP) to connect LLM to blockchain" } ## Introduction to model context protocol MCP The Model Context Protocol (MCP) is a framework designed to enhance the capabilities of AI agents and large language models (LLMs) by providing structured, contextual access to external data. It acts as a bridge between AI models and a variety of data sources such as blockchain networks, external APIs, databases, and developer environments. In essence, MCP allows an AI model to pull in relevant context from the outside world, enabling more informed reasoning and interaction. ![SettleMint Blockchain MCP](../../img/platfrom-components/mcp.png) MCP is not a single tool but a standardized protocol. This means it defines how an AI should request information and how external systems should respond. By following this standard, different tools and systems can communicate with AI agents in a consistent way. The result is that AI models can go beyond their trained knowledge and interact with live data and real-world applications seamlessly. ### Why does AI matter? Modern AI models are powerful but traditionally operate as closed systems - they generate responses based on patterns learned from training data, without awareness of the current state of external systems. This lack of live context can be a limitation. MCP matters because it bridges that gap, allowing AI to become context-aware and action-oriented in real time. Here are a few reasons MCP is important: * Dynamic Data Access: MCP allows AI models to interact seamlessly with external ecosystems (e.g., blockchain networks or web APIs). This means an AI agent can query a database or blockchain ledger at runtime to get the latest information, rather than relying solely on stale training data. * Real-Time Context: By providing structured, real-time access to data (such as smart contract states or application status), MCP ensures that the AI's decisions and responses are informed by the current state of the world. This contextual awareness leads to more accurate and relevant outcomes. * Extended Capabilities: With MCP, AI agents can execute actions, not just retrieve data. For example, an AI might use MCP to trigger a blockchain transaction or update a record. This enhances the agent's decision-making ability with precise, domain-specific context and the power to act on it. * Reduced Complexity: Developers benefit from MCP because it offers a unified interface to various data sources. Instead of writing custom integration code for each external system, an AI agent can use MCP as a single conduit for many sources. This streamlines development and reduces errors. Overall, MCP makes AI more aware, adaptable, and useful by connecting it to live data and enabling it to perform tasks in external systems. It's a significant step toward AI that can truly understand and interact with the world around it. ### Key features and benefits MCP introduces several key features that offer significant benefits to both AI developers and end-users: * Contextual Awareness: AI models gain the ability to access live information and context on demand. Instead of operating in isolation, an AI agent can ask for specific data (like "What's the latest block on the blockchain?" or "Fetch the user profile from the database") and use that context to tailor its responses. This results in more accurate and situationally appropriate outcomes. * Blockchain Integration: MCP provides a direct connection to on-chain data and smart contract functionality. An AI agent can query blockchain state (for example, checking a token balance or reading a contract's variable) and even invoke contract methods via MCP. This opens up possibilities for AI-managed blockchain operations, DeFi automation, and more, all through a standardized interface. * Automation Capabilities: With structured access to external systems, AI agents can not only read data but also take actions. For instance, an AI could automatically adjust parameters of a smart contract, initiate a transaction, or update a configuration file in a repository. These automation capabilities allow the creation of intelligent agents that manage infrastructure or applications autonomously, under specified guidelines. * Security and Control: MCP is designed with security in mind (covered in more detail later). It provides a controlled environment where access to external data and operations can be monitored and sandboxed. This ensures that an AI agent only performs allowed actions, and sensitive data can be protected through authentication and permissioning within the MCP framework. By combining these features, MCP greatly expands what AI agents can do. It transforms passive models into active participants that can sense and influence external systems - all in a safe, structured manner. ## How**MCP**works ### The core concept At its core, MCP acts as middleware between an AI model and external data sources. Rather than embedding all possible knowledge and tools inside the AI, MCP keeps the AI model lean and offloads the data fetching and execution tasks to external services. The AI and the MCP communicate through a defined protocol: 1. AI Agent (Client): The AI agent (e.g., an LLM or any AI-driven application) formulates a request for information or an action. This request is expressed in a standard format understood by MCP. For example, the AI might ask, "Get the value of variable X from smart contract Y on blockchain Z," or "Fetch the contents of file ABC from the project directory." 2. MCP Server (Mediator): The MCP server receives the request and interprets it. It acts as a mediator that knows how to connect to various external systems. The server will determine which external source is needed for the request (blockchain, API, file system, etc.) and use the appropriate connector or handler to fulfill the query. 3. External Data Source: This can be a blockchain node, an API endpoint, a database, or even a local development environment. The MCP server communicates with the external source, for example by making an API call, querying a blockchain node, or reading a file from disk. 4. Contextual Response: The external source returns the requested data (or the result of an action). The MCP server then formats this information into a structured response that the AI agent can easily understand. This might involve converting raw data into a simpler JSON structure or text format. 5. Return to AI: The MCP server sends the formatted data back to the AI agent. The AI can then incorporate this data into its reasoning or continue its workflow with this new context. From the perspective of the AI model, it's as if it just extended its knowledge or took an external action successfully. The beauty of MCP is that it abstracts away the differences between various data sources. The AI agent doesn't need to know how to call a blockchain or how to query a database; it simply makes a generic request and MCP handles the rest. This modular approach means new connectors can be added to MCP for additional data sources without changing how the AI formulates requests. ### Technical workflow Let's walk through a typical technical workflow with MCP step by step: 1. AI Makes a Request: The AI agent uses an MCP SDK or API to send a request. For example, in code it might call something like mcp.fetch("settlemint", "getContractState", params) - where "settlemint" could specify a target MCP server or context. 2. MCP Parses the Request: The MCP server (in this case, perhaps the SettleMint MCP server) receives the request. The request will include an identifier of the desired operation and any necessary parameters (like which blockchain network, contract address, or file path is needed). 3. Connector Activation: Based on the request type, MCP selects the appropriate connector or module. For a blockchain query, it might use a blockchain connector configured with network access and credentials. For a file system query, it would use a file connector with the specified path. 4. Data Retrieval/Action Execution: MCP executes the action. If it's a data retrieval, it fetches the data: e.g., calls a blockchain node's API to get contract state, or reads from a local file. If it's an action (like executing a transaction or writing to a file), it will perform that operation using the credentials and context it has. 5. Data Formatting: The raw result is often in a format specific to the source (JSON from a web API, binary from a file, etc.). MCP will format or serialize this result into a standard format (commonly JSON or a text representation) that can be easily consumed by the AI model. It may also include metadata, like timestamps or success/failure status. 6. Response to AI: MCP sends the formatted response back to the AI agent. In practice, this could be a return value from an SDK function call or a message sent over a websocket or HTTP if using a networked setup. 7. AI Continues Processing: With the new data, the AI can adjust its plan, generate a more informed answer, or trigger further actions. For example, if the AI was asked a question about a user/s blockchain balance, it now has the balance from MCP and can include it in its answer. If the AI was autonomously managing something, it might decide the next step based on the data. This workflow happens quickly and often behind the scenes. From a high-level perspective, MCP extends the AI's capabilities on-the-fly. The AI remains focused on decision-making and language generation, while MCP handles the grunt work of fetching data and executing commands in external systems. ### Key components MCP consists of a few core components that work together to make the above workflow possible: ```mermaid flowchart LR A[AI Agent / LLM] --(1) request--> B{{MCP Server}} subgraph MCP Server B --> C1[Blockchain Connector] B --> C2[API Connector] B --> C3[File System Connector] end C1 -- fetch/query --> D[(Blockchain Network)] C2 -- API call --> E[(External API/Data Source)] C3 -- read/write --> F[(Local File System)] D -- data --> C1 E -- data --> C2 F -- file data --> C3 B{{MCP Server}} --(2) formatted data--> A[AI Agent / LLM] ``` * MCP Server: This is the central service or daemon that runs and listens for requests from AI agents. It can be thought of as the brain of MCP that coordinates everything. The MCP server is configured to know about various data sources and how to connect to them. In practice, you might run an MCP server process locally or on a server, and your AI agent will communicate with it via an API (like HTTP requests, RPC calls, or through an SDK). * MCP SDK / Client Library: To simplify usage, MCP provides SDKs in different programming languages. Developers include these in their AI agent code. The SDK handles the communication details with the MCP server, so a developer can simply call functions or methods (like mcp.getData(...)) without manually constructing network calls. The SDK ensures requests are properly formatted and sends them to the MCP server, then receives the response and hands it to the AI program. * Connectors / Adapters: These are modules or plugins within the MCP server that know how to talk to specific types of external systems. One connector might handle blockchain interactions (with sub-modules for Ethereum, Hyperledger, etc.), another might handle web APIs (performing HTTP calls), another might manage local OS operations (file system access, running shell commands). Each connector understands a set of actions and data formats for its domain. Connectors make MCP extensible - new connectors can be added to support new systems or protocols. * Configuration Files: MCP often uses configuration (like JSON or YAML) to know which connectors to activate and how to reach external services. For example, you might configure an MCP instance with the URL of your blockchain node, API keys for external services, or file path permissions. The configuration ensures that at runtime the MCP server has the info it needs to carry out requests safely and correctly. * Security Layer: Since MCP can access sensitive data and perform actions, it includes a security layer. This may involve API keys (like the --pat personal access token in the example) or authentication for connecting to blockchains and databases. The security layer also enforces permissions: it can restrict what an AI agent is allowed to do via MCP, preventing misuse. For instance, you might allow read-only access to some data but not allow any write or state-changing operations without additional approval. These components together make MCP robust and flexible. The separation of concerns (AI vs MCP vs Connectors) means each part can evolve or be maintained independently. For example, if a new blockchain is introduced, you can add a connector for it without changing how the AI asks for data. Or if the AI model is updated, it can still use the same MCP server and connectors as before. ## Settlemint's implementation of AI SettleMint is a leading blockchain integration platform that has adopted and implemented MCP to empower AI agents with blockchain intelligence and infractructure control. In SettleMint's implementation, MCP serves as a bridge between AI-driven applications and blockchain environments managed or monitored by SettleMint's platform. This means AI agents can deeply interact with blockchain resources (like smart contracts, transactions, and network data) but also with the underlying infrastructure (nodes, middlewares) through a standardized interface. By leveraging MCP, SettleMint enables scenarios where: * An AI assistant can query on-chain data in real time, such as retrieving the state of a smart contract or the latest block information. * Autonomous agents can manage blockchain infrastructure tasks (deploying contracts, adjusting configurations) without human intervention, guided by AI decision-making. * Developers using SettleMint can integrate advanced AI functionalities into their blockchain applications with relatively little effort, because MCP handles the heavy lifting of connecting the two worlds. ```mermaid sequenceDiagram participant AI as AI Model (Agent) participant MCP as MCP Server participant Chain as The Graph / Portal / Node participant API as External API AI->>MCP: (1) Query request (e.g., get contract state) Note over AI,MCP: AI asks MCP for on-chain data MCP-->>AI: (2) Acknowledgement & processing MCP->>Chain: (3) Fetch data from blockchain Chain-->>MCP: (4) Return contract state MCP->>API: (5) [Optional] Fetch related off-chain data API-->>MCP: (6) Return external data MCP-->>AI: (7) Send combined response Note over AI,MCP: AI receives on-chain data (and any other context) AI->>MCP: (8) Action request (e.g., execute transaction) MCP->>Chain: (9) Submit transaction to blockchain Chain-->>MCP: (10) Return tx result/receipt MCP-->>AI: (11) Confirm action result ``` In summary, SettleMint's version of MCP extends their platform's capabilities, allowing for AI-driven blockchain operations. This combination brings together the trust and transparency of blockchain with the adaptability and intelligence of AI. ### Capabilities and features SettleMint's MCP implementation comes with a rich set of capabilities tailored for blockchain-AI integration: * Seamless IDE Integration: SettleMint's tools work within common developer environments, meaning you can use MCP in the context of your development workflow. For example, if you're coding a smart contract or an application, an AI agent (like a code assistant) can use MCP to fetch blockchain state or deploy contracts right from your IDE. This streamlines development by giving real-time blockchain feedback and actions as you code. * Automated Contract Management: AI agents can interact with and even modify smart contracts autonomously through MCP. This includes deploying new contracts, calling functions on existing contracts, or listening to events. For instance, an AI ops agent could detect an anomaly in a DeFi contract and use MCP via SettleMint to trigger a safeguard function on that contract, all automatically. * AI-Driven Analytics: Through MCP, AI models can analyze blockchain data for insights and predictions. SettleMint's platform might feed transaction histories, token movements, or network metrics via MCP to an AI model specialized in analytics. The AI could then, say, identify patterns of fraudulent transactions or predict network congestion and feed those insights back into the blockchain application or to administrators. These features demonstrate how SettleMint's integration of MCP isn't just a basic link to blockchain, but a comprehensive suite that makes blockchain data and control accessible to AI in a meaningful way. It effectively makes blockchain networks intelligent by allowing AI to continuously monitor and react to on-chain events. ### Usage in AI and blockchain By combining the strengths of AI and blockchain via MCP, SettleMint unlocks several powerful use cases: * AI-Powered Smart Contract Management: Smart contracts often need tuning or updates based on external conditions (like market prices or usage load). An AI agent can use MCP to monitor these conditions and proactively adjust smart contract parameters (or advise humans to do so) through SettleMint's tools. This creates more adaptive and resilient blockchain applications. * Real-time Blockchain Monitoring: Instead of static dashboards, imagine an AI that watches blockchain transactions and alerts you to important events. With MCP, an AI can continuously query the chain for specific patterns (like large transfers, or certain contract events) and then analyze and explain these to a user or trigger automated responses. * Autonomous Governance: In blockchain governance (e.g., DAOs), proposals and decisions could be informed by AI insights. Using MCP, an AI agent could gather all relevant on-chain data about a proposal's impact, simulate different outcomes, and even cast votes or execute approved decisions automatically on the blockchain. This merges AI decision support with blockchain's execution capabilities. * Cross-System Orchestration: SettleMint's MCP doesn't have to be limited to blockchain data. AI can use it to orchestrate actions that span blockchain and off-chain systems. For example, an AI agent might detect that a supply chain shipment (tracked on a blockchain) is delayed, and then through MCP, update an off-chain database or send a notification to a logistics system. The AI acts as an intelligent middleware, using MCP to ensure both blockchain and traditional systems stay in sync. In practice, using MCP with SettleMint's SDK (discussed next) makes implementing these scenarios much easier. Developers can focus on the high-level logic of what the AI should do, while the MCP layer (managed by SettleMint's platform) deals with the complexity of connecting to the blockchain and other services. ## Practical examples To solidify the understanding, let's look at some concrete examples of how MCP can be used in a development workflow and in applications, especially with SettleMint's tooling. ### Implementing AI in a development workflow Suppose you are a developer working on a blockchain project, and you want to use an AI assistant to help manage your smart contracts. You can integrate MCP into your workflow so that the AI assistant has direct access to your project's context (code, files) and the blockchain environment. For instance, you might use a command (via a CLI or an npm script) to start an MCP server that is pointed at your project directory and connected to the SettleMint platform. An example command could be: ```sh npx -y @settlemint/sdk-mcp@latest --path=/Users/llm/asset-tokenization-kit/ --pat=sm_pat_xxx ``` Here's what this command does: * npx is used to execute the latest version of the @settlemint/sdk-mcp package without needing a separate install. * \--path=/Users/llm/asset-tokenization-kit/ specifies the local project directory that the MCP server will have context about. This could allow the AI to query files or code in that directory through MCP and have access to the environment settings from `SettleMint connect` * \--pat=sm\_pat\_xxx provides a Personal Access Token (PAT) for authenticating with SettleMint's services. This token (masked here as xxx) is required for the MCP server to connect to the SettleMint platform on your behalf. After running this command, you would have a local MCP server up and running, connected to both your local project and the SettleMint platform. Your AI assistant (say a specialized Claude Sonnet-based agent) could then do things like: * Ask MCP to write forms and lists based on the data you indexed in for example The Graph. * Query the live blockchain to get the current state of a contract you're working on, to verify something or test changes. * Deploy an an extra node in your network * List and later mint some new tokens in your stablecoin contract This greatly enhances a development workflow by making the AI an active participant that can fetch and act on real information, rather than just being a passive code suggestion tool. #### Using the SettleMint mpc in cursor Cursor (0.47.0 and up) provides a global `~/.cursor/mcp.json` file where you can configure the SettleMint MCP server. Point the path to the folder of your program, and set your personal access token. > The reason we use the global MCP configuration file is that your personal > access token should never, ever, ever be committed into hits and putting it in > the project folder, which is also possible in cursor opens up that > possibility. ```json { "mcpServers": { "settlemint": { "command": "npx", "args": [ "-y", "@settlemint/sdk-mcp@latest", "--path=/Users/llm/asset-tokenization-kit/", "--pat=sm_pat_xxx" ] } } } ``` Open Cursor and navigate to Settings/MCP. You should see a green active status after the server is successfully connected. #### Using the SettleMint mpc in claude desktop Open Claude desktop and navigate to Settings. Under the Developer tab, tap Edit Config to open the configuration file and add the following configuration: ```json { "mcpServers": { "settlemint": { "command": "npx", "args": [ "-y", "@settlemint/sdk-mcp@latest", "--path=/Users/llm/asset-tokenization-kit/", "--pat=sm_pat_xxx" ] } } } ``` Save the configuration file and restart Claude desktop. From the new chat screen, you should see a hammer (MCP) icon appear with the new MCP server available. #### Using the SettleMint mpc in cline Open the Cline extension in VS Code and tap the MCP Servers icon. Tap Configure MCP Servers to open the configuration file and add the following configuration: ```json { "mcpServers": { "settlemint": { "command": "npx", "args": [ "-y", "@settlemint/sdk-mcp@latest", "--path=/Users/llm/asset-tokenization-kit/", "--pat=sm_pat_xxx" ] } } } ``` Save the configuration file. Cline should automatically reload the configuration. You should see a green active status after the server is successfully connected. #### Using the SettleMint mpc in windsurf Open Windsurf and navigate to the Cascade assistant. Tap on the hammer (MCP) icon, then Configure to open the configuration file and add the following configuration: ```json { "mcpServers": { "settlemint": { "command": "npx", "args": [ "-y", "@settlemint/sdk-mcp@latest", "--path=/Users/llm/asset-tokenization-kit/", "--pat=sm_pat_xxx" ] } } } ``` Save the configuration file and reload by tapping Refresh in the Cascade assistant. You should see a green active status after the server is successfully connected. ### Ai-driven blockchain application or agent To illustrate a real-world scenario, consider an AI-driven Decentralized Finance (DeFi) application. In DeFi, conditions change rapidly (prices, liquidity, user activity), and it's critical to respond quickly. Scenario: You have a smart contract that manages an automatic liquidity pool. You want to ensure it remains balanced - if one asset's price drops or the pool becomes unbalanced, you'd like to adjust fees or parameters automatically. Using MCP in this scenario: 1. An AI agent monitors the liquidity pool via MCP. Every few minutes, it requests the latest pool balances and external price data (from on-chain or off-chain oracles) through the MCP server. 2. MCP fetches the latest state from the blockchain (pool reserves, recent trades) and maybe calls an external price API for current market prices, then returns that data to the AI. 3. The AI analyzes the data. Suppose it finds that Asset A's proportion in the pool has drastically increased relative to Asset B (perhaps because Asset A's price fell sharply). 4. The AI decides that to protect the pool, it should increase the swap fee temporarily (a common measure to discourage arbitrage draining the pool). 5. Through MCP, the AI calls a function on the smart contract to update the fee parameter. The MCP's blockchain connector handles creating and sending the transaction to the network via SettleMint's infrastructure. 6. The transaction is executed on-chain, adjusting the fee. MCP catches the success response and any relevant event (like an event that the contract might emit for a fee change). 7. The AI receives confirmation and can log the change or inform administrators that it took action. In this use case, MCP enabled the AI to be a real-time guardian of the DeFi contract. Without MCP, the AI would not have access to the live on-chain state or the ability to execute a change. With MCP, the AI becomes a powerful autonomous agent that ensures the blockchain application adapts to current conditions. This is just one example. AI-driven blockchain applications could range from automatic NFT marketplace management, to AI moderators for DAO proposals, to intelligent supply chain contracts that react to sensor data. MCP provides the pathway for these AI agents to communicate and act where it matters - on the blockchain and connected systems. file: ./content/docs/blockchain-and-ai/open-ai-nodes-and-pg-vector.mdx meta: { "title": "Open AI nodes and pgvector", "description": "A Guide to Building an AI-Powered Workflow with OpenAI Nodes and Vector Storage in Hasura", "sidebar_position": 2, "keywords": [ "integration studio", "OpenAI", "Hasura", "pgvector", "AI", "SettleMint" ] } This guide will demonstrate how to use the **SettleMint Integration Studio** to create a flow that incorporates OpenAI nodes for vectorization and utilizes the `pgvector` plugin in Hasura for similarity searches. If you are new to SettleMint, check out the [Getting Started Guide](/building-with-settlemint/getting-started). In this guide, you will learn to create workflows that: * Use **OpenAI nodes** to vectorize data. * Store vectorized data in **Hasura** using `pgvector`. * Conduct similarity searches to find relevant matches for new queries. ### Prerequisites * A SettleMint Platform account with **Integration Studio** and **Hasura** deployed * Access to the Integration Studio and Hasura consoles in your SettleMint environment * An OpenAI API key for using the OpenAI nodes * A data source to vectorize (e.g., Graph Node, Attestation Indexer, or external API endpoint) ### Example Flow Available The Integration Studio includes a pre-built AI example flow that demonstrates these concepts. The flow uses the SettleMint Platform's attestation indexer as a data source, showing how to: * Fetch attestation data via HTTP endpoint * Process and vectorize the attestation content * Store vectors in Hasura * Perform similarity searches You can use this flow as a reference while building your own implementation. Each step described in this guide can be found in the example flow. *** ## Part 1: Creating a Workflow to Fetch, Vectorize, and Store Data ### Step 1: Set Up Vector Storage in Hasura 1. Access your SettleMint's Hasura instance through the admin console. 2. Create a new table called `document_embeddings` with the following columns: * `id` (type: UUID, primary key) * `embedding` (type: vector(1536)) - For storing OpenAI embeddings ### Step 2: Set Up the Integration Studio Flow 1. **Open Integration Studio** in SettleMint and click on **Create Flow** to start a new workflow. ### Step 3: Fetch Data from an External API 1. **Add an HTTP Request Node** to retrieve data from an external API, such as a document or product listing service. 2. Configure the **API endpoint** and any necessary authentication settings. 3. **Add a JSON Node** to parse the response data, focusing on fields like `id` and `content` for further processing. ### Step 4: Vectorize Data with OpenAI Node 1. **Insert an OpenAI Node** in the workflow: * Use this node to generate vector embeddings for the text data using OpenAI's Embedding API. * Configure the OpenAI node to use the appropriate model and input data, such as `text-embedding-ada-002`. ![Create an OpenAI node](../../img/developer-guides/openai-node.png) ### Step 5: Store Vectors in Hasura with pgvector 1. **Add a GraphQL Node** to save the vector embeddings and data `id` in Hasura. 2. Set up a **GraphQL Mutation** to store the vectors and associated IDs in a table enabled with `pgvector`. Example Mutation: ```graphql mutation insertVector($id: uuid!, $vector: [Float!]!) { insert_vectors(objects: { id: $id, vector: $vector }) { affected_rows } } ``` 3. Ensure correct data mapping from the fetched data and vectorized output. ### Step 6: Deploy and Test the Workflow 1. **Deploy the Flow** within Integration Studio and **run it** to confirm that data is fetched, vectorized, and stored in Hasura. 2. **Verify Hasura Data** by checking the table to ensure vectorized entries and corresponding IDs are stored correctly. *** ## Part 2: Setting Up a Similarity Search Endpoint ### Step 1: Create a POST Endpoint 1. **Add an HTTP POST Node** to accept a JSON payload with a `query` string to be vectorized and compared to stored data. Payload Example: ```json { "query": "input string for similarity search" } ``` 2. **Parse the Request** by adding a JSON node to extract the `query` field from the incoming POST request. ### Step 2: Vectorize the Input Query 1. **Add an OpenAI Node** to convert the incoming `query` string into a vector representation. Example Configuration: ```text Model: text-embedding-ada-002 Input: {{msg.payload.query}} ``` ### Step 3: Perform a Similarity Search with Hasura 1. **Add a GraphQL Node** to perform a vector similarity search within Hasura using the `pgvector` plugin. 2. Use a **GraphQL Query** to order results by similarity, returning the top 5 most similar records. Example Query: ```graphql query searchVectors($vector: [Float!]!) { vectors(order_by: { vector: { _vector_distance: $vector } }, limit: 5) { id vector } } ``` 3. Map the vector from the OpenAI node output as the `vector` input for the Hasura query. ### Step 4: Format and Return the Results 1. **Add a Function Node** to format the response, listing the top 5 matches in a structured JSON format. ### Step 5: Test the Flow 1. **Deploy the Flow** and send a POST request to confirm the similarity search functionality. 2. **Verify Response** to ensure that the flow accurately returns the top 5 matches from the vectorized data in Hasura. *** ## Next Steps Now that you have built an AI-powered workflow, here are some blockchain-specific applications you can explore: ### Vectorize On-Chain Data * Index and vectorize smart contract events for similarity-based event monitoring * Create embeddings from transaction data to detect patterns or anomalies * Vectorize NFT metadata for content-based recommendations * Build semantic search for on-chain attestations ### Advanced Use Cases * Combine transaction data with natural language descriptions for enhanced search * Create AI-powered analytics dashboards using vectorized blockchain metrics * Implement fraud detection by vectorizing transaction patterns * Build a semantic search engine for smart contract code and documentation ### Integration Ideas * Connect to multiple blockchain indexers to vectorize data across networks * Combine off-chain and on-chain data vectors for comprehensive analysis * Set up automated alerts based on similarity to known patterns * Create a knowledge base from vectorized blockchain documentation For further resources, check out: * [SettleMint Integration Studio Documentation](/building-with-settlemint/integration-studio/) * [Node-RED Documentation](https://nodered.org/docs/) * [OpenAI API Documentation](https://openai.com/docs/) * [Hasura pgvector Documentation](https://hasura.io/docs/3.0/connectors/postgresql/native-operations/vector-search/) *** This guide should enable you to build AI-powered workflows with SettleMint's new OpenAI nodes and `pgvector` support in Hasura for efficient similarity searches. file: ./content/docs/building-with-settlemint/getting-started.mdx meta: { "title": "Getting started", "description": "Overview of blockchain development process" } ## Select between EVM and Fabric chains, or start with pre-built application kits
{/* EVM Chain Development */}

EVM chains

For Besu, Ethereum, Polygon, Optimism, and other EVM-compatible blockchains
  • Step-by-step development workflow
  • Solidity smart contract development and deployment
  • Graph middleware, API portal and other EVM tools
Explore EVM guide
{/* Hyperledger Fabric Development */}

Hyperledger Fabric

For permissioned enterprise blockchain networks with privacy requirements
  • Fabric network and node setup
  • Chaincode development and deployment
  • Fabconnect middleware and fabric toolkits
Explore fabric guide
{/* Application Kits */}

Application kits

Accelerate development using ready-made app kits tailored for common blockchain use cases
  • Ready-to-deploy smart contract logic
  • UI components integrated with SettleMint APIs
  • Customizable templates for faster prototyping
Explore app kits
## Select between SaaS and Self-Managed
{/* SaaS Deployment */}

SaaS - managed by SettleMint

Run your blockchain use case instantly with SettleMint hosting, scaling, and maintenance handled for you.
  • Instant setup and onboarding
  • Managed infrastructure and monitoring
  • No DevOps or system admin required
Explore SaaS option
{/* Self-Managed Deployment */}

Self-Managed

Deploy and operate SettleMint on your own infrastructure with full control and flexibility.
  • Deploy on Kubernetes or virtual machines
  • Bring your own cloud or on-premises setup
  • Full DevOps control and custom integrations
Explore self-managed option
## EVM development overview {/* Section 1: Platform Setup & Environment Preparation */}
Platform setup & environment preparation
{[ [ "1", "Sign up at console.settlemint.com using a corporate email.", "Sign Up", "https://console.settlemint.com/", ], [ "2", "Once logged in, create a new organization", "Create organization", "/documentation/building-with-settlemint/setup-account-and-billing", ], [ "3", "Invite collaborators and assign them roles such as Admin or User.", "Add team members", "/documentation/platform-components/blockchain-infrastructure/consortium-manager", ], [ "4", "Within the organization, create an application", "Create Application", "/documentation/building-with-settlemint/evm-chains-guide/create-an-application", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 2: Blockchain network & node deployment */}
Blockchain network & node deployment
{[ [ "5", "Add an EVM blockchain network using the 'Add Network' option.", "Add network", "/documentation/building-with-settlemint/evm-chains-guide/add-network-and-nodes", ], [ "6", "Deploy remaining nodes for byzantine fault tolerance and distaster recovery", "Add nodes", "/documentation/building-with-settlemint/evm-chains-guide/add-network-and-nodes#2-add-blockchain-nodes", ], [ "7", "Add the Blockchain Explorer (Insights) to view transactions and logs.", "Add insights", "/documentation/building-with-settlemint/evm-chains-guide/add-network-and-nodes#4-add-blockchain-explorer", ], [ "8", "Optionally add a load balancer to distribute traffic across nodes.", "Add load balancer", "/documentation/building-with-settlemint/evm-chains-guide/add-network-and-nodes#3-add-load-balancer", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 3: Smart contract development & deployment */}
Smart contract development & deployment
{[ [ "9", "Setup private keys and attach them to a node for Tx Signer", "Add private keys", "/documentation/building-with-settlemint/evm-chains-guide/add-private-keys", ], [ "10", "Add Code Studio IDE to create development environment", "Setup code studio", "/documentation/building-with-settlemint/evm-chains-guide/setup-code-studio", ], [ "11", "Develop your smart contract code or use one of the templates", "Develop contract", "/documentation/building-with-settlemint/evm-chains-guide/deploy-smart-contracts#1-lets-start-with-the-solidity-smart-contract-code", ], [ "12", "Write test scripts and test your smart contract ", "Test contract", "/documentation/building-with-settlemint/evm-chains-guide/deploy-smart-contracts#5-test-the-smart-contract", ], [ "13", "Compile smart contract and get the ABI", "Compile contract", "/documentation/building-with-settlemint/evm-chains-guide/deploy-smart-contracts#4-compile-the-smart-contract-code", ], [ "14", "Deploy contract to the network", "Deploy contract", "/documentation/building-with-settlemint/evm-chains-guide/deploy-smart-contracts#6-deploy-the-smart-contract-to-platform-network", ], [ "15", "Note the deployed contract address", "Get contract address", "/documentation/building-with-settlemint/evm-chains-guide/deploy-smart-contracts#deployed-contract-address", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 4: Setup middlewares and get APIs */}
Setup middlewares and get APIs
{[ [ "16", "Add smart contract portal Middleware and get write APIs for your contract", "Smart contract portal", "/documentation/building-with-settlemint/evm-chains-guide/setup-api-portal", ], [ "17", "Add Graph Middleware and write subgraph files in IDE", "Setup subgraph", "/documentation/building-with-settlemint/evm-chains-guide/setup-graph-middleware#subgraph-deployment-process", ], [ "18", "Build and deploy sub-graphs to setup indexing", "Deploy subgraph", "/documentation/building-with-settlemint/evm-chains-guide/setup-graph-middleware#codegen-build-and-deploy-subgraph", ], [ "19", "Do a transaction from API Portal", "Write data on chain", "/documentation/building-with-settlemint/evm-chains-guide/setup-api-portal#4-how-to-configure-rest-api-requests-in-the-portal", ], [ "20", "Read indexed data from Graph middleware", "Read data from chain", "/documentation/building-with-settlemint/evm-chains-guide/setup-graph-middleware#graph-middleware---querying-data", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 5: Off-Chain database, storage & integrations */}
Off-Chain database, storage & integrations
{[ [ "21", "Add Hasura to provision a PostgreSQL database with GraphQL APIs.", "Setup hasura", "/documentation/building-with-settlemint/evm-chains-guide/setup-offchain-database", ], [ "22", "Add MinIO or IPFS for centralized/decentralized file storage.", "Add storage", "/documentation/building-with-settlemint/evm-chains-guide/setup-storage", ], [ "23", "Enable Integration Studio for creating custom APIs and flows", "Add integration studio", "/documentation/building-with-settlemint/evm-chains-guide/integration-studio", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 6: Deploy frontend and other services */}
Deploy frontend and other services
{[ [ "24", "Use custom deployment module to deploy frontend or other services", "Deploy frontend", "/documentation/building-with-settlemint/evm-chains-guide/deploy-custom-services", ], [ "25", "Monitor RAM, CPU, and disk usage or apply upgrades.", "Monitoring dashboards", "/documentation/platform-components/usage-and-logs/monitoring-tools", ], [ "26", "Reach out to us for further assistance or technical support", "Get support", "/documentation/support/support", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
## Fabric development overview {/* Section 1: Platform Setup & Network Configuration */}
Platform setup & network configuration
{[ [ "1", "Sign up at console.settlemint.com using a corporate email.", "Sign Up", "https://console.settlemint.com/", ], [ "2", "Once logged in, create a new organization", "Create organization", "/documentation/building-with-settlemint/setup-account-and-billing", ], [ "3", "Invite collaborators and assign them roles such as Admin or User.", "Add team members", "/documentation/platform-components/blockchain-infrastructure/consortium-manager", ], [ "4", "Within the organization, create an application", "Create Application", "/documentation/building-with-settlemint/hyperledger-fabric-guide/create-an-application", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 2: Blockchain network & node deployment */}
Blockchain network & nodes deployment
{[ [ "5", "Add an Fabric blockchain network using the 'Add Network' option.", "Add network", "/documentation/building-with-settlemint/hyperledger-fabric-guide/add-network-and-nodes", ], [ "6", "Deploy remaining nodes for fault tolerance and distaster recovery", "Add nodes", "/documentation/building-with-settlemint/hyperledger-fabric-guide/add-network-and-nodes#2-add-blockchain-nodes", ], [ "7", "Add the Blockchain Explorer to view transactions and logs.", "Add insights", "/documentation/building-with-settlemint/hyperledger-fabric-guide/add-network-and-nodes#hyperledger-fabric-explorer", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 3: Chaincode Development & Deployment */}
Chaincode development & deployment
{[ [ "8", "Write chaincode in the code studio IDE", "Write Chaincode", "/documentation/building-with-settlemint/hyperledger-fabric-guide/deploy-chain-code", ], [ "9", "Package the chaincode", "Package Chaincode", "/documentation/building-with-settlemint/hyperledger-fabric-guide/deploy-chain-code#1-compile-and-package-chaincode", ], [ "10", "Commit and initialize chaincode", "Commit and initialize chaincode", "/documentation/building-with-settlemint/hyperledger-fabric-guide/deploy-chain-code#5-commit-chaincode", ], [ "11", "Deploy FabConnect middeware to get APIs on your chaincode", "Deploy FabConnect", "/documentation/building-with-settlemint/hyperledger-fabric-guide/setup-fabconnect-middleware", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 5: Off-Chain database, storage & integrations */}
Off-Chain database, storage & integrations
{[ [ "12", "Add Hasura to provision a PostgreSQL database with GraphQL APIs.", "Setup hasura", "/documentation/building-with-settlemint/hyperledger-fabric-guide/setup-offchain-database", ], [ "13", "Add MinIO or IPFS for centralized/decentralized file storage.", "Add storage", "/documentation/building-with-settlemint/hyperledger-fabric-guide/setup-storage", ], [ "14", "Enable Integration Studio for creating custom APIs and flows", "Add integration studio", "/documentation/building-with-settlemint/hyperledger-fabric-guide/integration-studio", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
{/* Section 6: Deploy frontend and other services */}
Deploy frontend and other services
{[ [ "15", "Use Custom Deployment module to deploy frontend or other services", "Deploy frontend", "/documentation/building-with-settlemint/hyperledger-fabric-guide/deploy-custom-services", ], [ "16", "Monitor RAM, CPU, and disk usage or apply upgrades.", "Monitoring dashboards", "/documentation/platform-components/usage-and-logs/monitoring-tools", ], [ "17", "Reach out to us for further assistance or technical support", "Get support", "/documentation/support/support", ], ].map(([step, action, link, url]) => ( ))}
{step} {action} {link}
file: ./content/docs/building-with-settlemint/setup-account-and-billing.mdx meta: { "title": "Setup account and billing", "description": "Getting started with Settlemint" } import { Tabs, Tab } from "fumadocs-ui/components/tabs"; import { Callout } from "fumadocs-ui/components/callout"; import { Steps } from "fumadocs-ui/components/steps"; import { Card } from "fumadocs-ui/components/card"; ## Account creation
{/* Left Column - Text Content */}

Navigate to SettleMint Console

To get started, enter your work email. No password is required! Simply enter your email, and you'll receive a magic link that allows you to sign up instantly without needing to create a password. After entering your email, click the "Send Magic Link" button. A secure link will be sent to your inbox, allowing you to log in effortlessly.

If you prefer, you can sign up using Google, GitHub or Auth0 as well. A 250 Euro credit is available for first time users enabling them to try out the platform.

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![SettleMint Signup](../../img/building-with-settlemint/signup.png)
## Setup billing info
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Enter a name for your organization to serve as the primary identifier for managing projects and collaboration within SettleMint. At a later stage, users can invite members to the organization for better collaboration.

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Provide your billing details securely via Stripe, with support for Visa, Mastercard, and Amex, to activate your organization. Follow the prompts to complete the setup and gain full access to SettleMint’s blockchain development tools. Ensure all details are accurate to enable a smooth onboarding experience. Your organization is billed monthly, with the invoice dates set for 1st of every month.

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file: ./content/docs/knowledge-bank/art-gaming-usecases.mdx meta: { "title": "Media and gaming use cases", "description": "A comprehensive guide to blockchain-powered transformations in digital art, content distribution, interactive media, and virtual economies" } ## Introduction to blockchain in creative and entertainment industries The convergence of blockchain technology with art, media, gaming, and digital collectibles has created a new paradigm for ownership, participation, and monetization in the creative economy. These sectors, once dependent on centralized platforms, are undergoing a transformation as creators seek direct engagement with audiences, transparent revenue models, and lasting digital value. Traditional models for creators often rely on intermediaries such as galleries, record labels, publishers, and distributors who control access, dictate terms, and retain a significant share of revenues. Audiences, on the other hand, typically receive limited rights to the digital content they consume and have no verifiable stake in its success or authenticity. Blockchain redefines this dynamic by introducing digital scarcity, decentralized ownership, programmable royalties, and tokenized interaction between creators and fans. It empowers artists, game developers, musicians, streamers, and content creators to distribute work independently, engage communities directly, and monetize value beyond attention or ad-based revenue. From NFTs and DAO-governed content platforms to play-to-earn economies and digital rights marketplaces, blockchain is reshaping how value is created, shared, and preserved in digital culture. ## Digital ownership and non-fungible tokens (NFTs) NFTs are cryptographic tokens that represent unique digital items on a blockchain. Unlike cryptocurrencies such as Bitcoin or Ether, which are interchangeable (fungible), each NFT has a distinct identity, metadata, and ownership record. Core features of NFTs: * Unique token ID and metadata recorded on-chain * Ownership transfers logged immutably * Provenance tracking including creator, transaction history, and authenticity * Compatibility with decentralized marketplaces and wallets In creative industries, NFTs allow creators to issue verifiable, tradable versions of digital art, music tracks, video clips, 3D assets, or written works. Buyers receive a blockchain-verified certificate of ownership, even if the underlying file remains publicly viewable. Example: * A digital artist mints a limited edition series of 10 animated artworks * Each is assigned a unique NFT with a cryptographic signature and IPFS-hosted media * Collectors buy, trade, and showcase the pieces on NFT platforms, while the creator receives royalties from each resale NFTs restore scarcity and collectibility to digital content, allowing creators to monetize directly while giving buyers ownership, resale value, and status within communities. ## Royalties and programmable revenue sharing One of the most powerful applications of blockchain in media and arts is the automation of royalty payments. Traditional royalty systems rely on manual tracking, opaque accounting, and long payment cycles. Smart contracts enable real-time, rule-based distribution of income to multiple stakeholders. Features of programmable royalties: * Automatic revenue splits upon each sale or resale * Recurring payments to creators, collaborators, and agents * Transparent, immutable tracking of who earns what and when * Compatibility with platforms and wallets without centralized control Example: * A musician mints a song as an NFT with a 10 percent creator royalty * Every time the NFT is sold, a smart contract routes 10 percent of the transaction to the musician’s wallet * If there are featured artists or producers, their wallets are also linked and receive a predefined share This model aligns incentives across creators, makes income streams predictable, and reduces dependency on record labels or publishing houses to collect and distribute funds. ## Creator-owned platforms and direct monetization Blockchain enables creators to bypass centralized distribution platforms such as YouTube, Spotify, or app stores by building or joining decentralized alternatives. These platforms use smart contracts, NFTs, and tokens to allow creators to monetize directly, set their own terms, and engage with audiences as stakeholders. Key elements include: * Token-gated content access and fan subscriptions * NFT-based ticketing or exclusive merch sales * Creator DAOs for collaborative decision-making * Transparent analytics and community rewards Example: * A filmmaker releases a short film on a blockchain streaming platform * Viewers purchase access using platform tokens or NFTs * Supporters who hold a certain number of tokens can vote on the creator’s next project or receive exclusive behind-the-scenes content These models reward loyalty, encourage experimentation, and create durable value networks between creators and their fans. ## Provenance, authentication, and forgery prevention Provenance is a critical issue in the art world and luxury media markets. Without a reliable method to verify the origin and ownership of a digital work, creators face plagiarism, and collectors face fraud. Blockchain solves this by creating a permanent, tamper-proof record of creation and transfer. Benefits include: * Timestamped registration of original works on-chain * Public verification of artist wallets and signature authenticity * Transparent ownership trails for galleries, auction houses, and collectors * Reduction in legal disputes and insurance claims due to forgery Example: * A digital painter registers a new series by minting NFTs immediately upon creation * A gallery verifies these on-chain records before listing the work for auction * Buyers can confirm authenticity by checking that the NFT came from the verified artist’s wallet and has not been altered or duplicated This creates trust in digital art markets and extends similar authentication to photography, music, digital fashion, and literature. ## Tokenized fan engagement and community building Creators can now involve their audiences not just as consumers but as participants, collaborators, and investors. Blockchain introduces fan tokens, governance rights, and revenue-sharing models that allow audiences to shape content and share in its success. Use cases include: * Fans buying creator tokens that grant voting rights or access * Crowdfunding future projects using NFTs with future revenue rights * Discord or Telegram communities gated by token ownership * Leaderboards and on-chain reputation scores for early supporters Example: * A podcaster issues a limited number of membership NFTs that grant early access to episodes, voting on guest lists, and discounts on merch * As the podcast grows in popularity, these NFTs become collector items with rising secondary market value * Fans feel a sense of ownership, which fuels viral promotion and retention Tokenized engagement shifts value creation from centralized platforms to creators and their most loyal communities. ## Interoperability and digital identity in metaverse environments With the rise of virtual worlds and metaverse platforms, creators are building persistent digital personas, avatars, and assets. Blockchain provides a cross-platform identity layer and asset ownership framework that allows users to port NFTs, wearables, and achievements between environments. Features include: * NFTs representing avatars, skins, or in-game items usable across metaverses * Verifiable creator identities for collaboration and attribution * Social graphs linked to wallet activity, reputation, and past contributions * Wallet-based access to events, games, or private spaces Example: * A 3D artist creates a line of virtual sneakers as NFTs * These can be used by holders in Decentraland, The Sandbox, and other metaverse platforms * Owners can also showcase them in wallet-based galleries or use them to unlock exclusive chat channels and games This interoperability gives creators new markets, increases asset utility, and encourages collaboration across ecosystems. ## Gaming economies and play-to-earn models Blockchain gaming introduces real digital ownership of in-game assets, player-driven marketplaces, and income opportunities through gameplay. Players no longer simply consume game content but earn, trade, and invest within decentralized gaming economies. Blockchain gaming features: * NFTs for characters, weapons, skins, and land with provable rarity * Play-to-earn models where players earn tokens for achievements or participation * DAO governance of game rules, development priorities, or treasury funds * Secondary markets where assets are traded peer-to-peer Example: * A strategy game issues limited edition NFT spaceships with specific capabilities * Players who win battles or complete missions earn game tokens * These tokens can be used to buy new assets or traded for other cryptocurrencies * Top players vote on game balance updates or expansions using their token holdings This model empowers players as co-creators, blurs the line between gaming and work, and enables sustainable game-based economies. ## Virtual land, real estate, and immersive experience design Digital land and 3D experiences are becoming assets with real-world value. Platforms like Decentraland, Voxels, and Otherside allow users to own parcels of virtual space and monetize them through content, advertising, or commerce. Blockchain ensures verifiable ownership and enables secondary trading. Use cases include: * NFTs representing parcels of land or buildings in virtual environments * Smart contract-based leases, events, and rentals * Galleries, concerts, brand activations, or storefronts hosted in virtual spaces * In-world assets such as art, wearables, and soundtracks tied to NFTs Example: * A fashion designer purchases a plot in a virtual world and builds an immersive boutique * Visitors can walk through the space, try on digital outfits, and mint them as wearable NFTs * Events hosted in the space are ticketed via NFTs and reward participants with airdrops Virtual land creates new revenue channels and experiential storytelling formats for creators, brands, and curators. ## Streaming, licensing, and fair-use automation Streaming platforms face growing tension between user access, creator compensation, and legal compliance. Blockchain introduces programmable content rights that automate licensing terms and provide transparent revenue flows. Streaming use cases: * Tokenized media access where viewers pay per stream or subscription * Embedded licenses that define how media can be used, remixed, or distributed * Streaming royalties distributed to all contributors via smart contracts * Auditable play counts and view logs recorded immutably Example: * An indie filmmaker releases a short film on a decentralized streaming platform * Each view is tracked on-chain and generates a micro-payment to the creator’s wallet * Distributors and co-producers receive their share based on the smart contract * Viewers can remix the film under a creative license by purchasing a tokenized derivative right This model creates transparency, rewards creativity, and eliminates friction between distribution, licensing, and payment. ## Tokenized storytelling and interactive content Storytelling in digital media is evolving into interactive, multi-perspective formats where audiences contribute to narrative development. Blockchain enables collaborative storytelling through tokenized participation, on-chain narrative branches, and shared ownership of characters or universes. Use cases include: * Story NFTs representing plotlines, characters, or chapters * Readers voting on story directions through DAO proposals * Writer royalties encoded in derivative works and spin-offs * Licensing of in-world assets via token-based permissions Example: * A science fiction author releases the first three chapters of a story as NFTs * Holders of the NFTs propose and vote on how the story continues * Selected writers contribute new arcs, which are minted and added to the series * A marketplace allows publishing houses or filmmakers to license characters, with smart contracts routing royalties to all co-creators This transforms readers into stakeholders, enables open-world storytelling, and fosters new economic models for serialized fiction, comics, and transmedia franchises. ## DAOs for creative collaboration and funding Decentralized Autonomous Organizations (DAOs) enable artists, developers, curators, and fans to coordinate around shared creative goals. These groups manage treasuries, select projects, and govern ecosystems through on-chain voting and proposal mechanisms. Creative DAOs can support: * Collective funding and commissioning of artworks, games, or films * Community-driven curation, exhibition, or programming * Shared revenue from NFT drops, royalties, or events * Transparent governance and conflict resolution processes Example: * An art DAO is formed by collectors, curators, and emerging artists * Members vote on which creators to commission and how to distribute funds * Completed works are auctioned as NFTs, with sales funding the next cycle * DAO tokens represent voting power and claim on collective revenues DAOs create trust-minimized structures for global creative collaboration, enabling projects that traditional institutions might overlook due to risk or lack of commercial viability. ## NFT infrastructure and platform design The NFT ecosystem relies on a complex stack of technologies and standards to ensure interoperability, security, and scalability. Creators and developers benefit from understanding the layers involved in building NFT-based products. Key infrastructure components: * NFT standards such as ERC-721 and ERC-1155 defining token structure and metadata * Decentralized file storage systems like IPFS, Arweave, or Filecoin for hosting media * Marketplaces for minting, listing, and trading NFTs * Smart contract libraries for royalties, airdrops, and auction mechanics Example: * A photography platform builds an NFT minting portal for verified creators * Metadata is stored on-chain, while high-resolution media is pinned to IPFS and mirrored via Arweave * Sales are processed using Dutch auctions with smart contract-enforced royalties * Buyers can display their collections in virtual galleries or export them to other platforms Building with these modular components allows creators to launch and scale NFT projects while preserving decentralization and ownership. ## On-chain provenance and metadata integrity Metadata defines the meaning, context, and value of NFTs. Whether it is the traits of a generative art piece, the credits of a music track, or the license type of a film, preserving metadata integrity is essential for long-term trust and utility. Blockchain ensures that: * Metadata cannot be altered without detection * Ownership and edit permissions are clearly defined * Version control is maintained for iterative content * Third parties can query, index, and verify NFT attributes Example: * A motion designer releases a short video NFT with embedded sound design, resolution specs, and frame count * This metadata is recorded on-chain and linked to verifiable sources * If the work is remixed or used in an ad campaign, the original creator is credited via smart contract logic Accurate metadata builds trust in digital marketplaces, supports creator attribution, and enables NFT composability across ecosystems. ## Wallets, identity, and cross-platform reputation Wallets are more than just transaction tools — they are identity containers in web3. Artists, fans, and developers use wallets to access content, sign contributions, prove reputation, and receive earnings. Blockchain allows users to carry their identity and history across platforms. Wallet-linked identity includes: * Verification of creator credentials, curation history, or voting activity * On-chain badges, POAPs (Proof of Attendance Protocol), and certifications * Social graphs based on mutual NFT ownership or DAO participation * Pseudonymous reputations backed by creative outputs Example: * A 3D artist builds a wallet-linked resume that shows which NFT collections they contributed to, DAO proposals they passed, and conferences they attended * Curators vet collaborators by viewing on-chain credentials and previous works * As the artist’s reputation grows, they gain access to exclusive drops and funding pools Decentralized identity empowers creators and users to build long-term credibility without relying on centralized accounts or institutional endorsements. ## Cross-platform composability of media assets Blockchain makes it possible for media assets to be reused, remixed, and reinterpreted across platforms and applications. Composability refers to the ability of NFTs and tokens to function in multiple contexts, enhancing their utility and value. Examples of composable media: * A music track NFT used as a game soundtrack, live performance token, or ambient layer in an art installation * A character NFT playable in multiple games or displayed in various metaverse environments * A 3D asset NFT used in both VR galleries and AR filters Example: * A visual artist mints a creature design as an NFT with metadata for pose, rigging, and file format * Game developers import the asset as a playable avatar * VR world builders integrate the asset as an NPC or boss enemy * The NFT holder earns a share of revenue each time the asset is used commercially This composability enables creators to build persistent digital universes and unlock new revenue streams through inter-platform collaborations. ## Legal frameworks and intellectual property management While blockchain records ownership of tokens, intellectual property (IP) law governs rights to use, distribute, or modify the underlying content. Bridging the gap between digital assets and legal enforceability requires careful design of licenses, terms, and jurisdictional awareness. NFT legal considerations include: * Licensing terms embedded in metadata (e.g., personal use, commercial rights, CC0) * Transferability and sublicensing rights during resale * Smart contracts that enforce payment, royalties, or usage boundaries * Tools to register NFTs with legal registries or notarize off-chain contracts Example: * A digital sculptor releases a work under a Creative Commons license, with clear terms recorded in the NFT metadata * Buyers can use the asset in derivative works but cannot sell merchandise without upgrading to a commercial license token * Disputes are resolved via arbitration integrated into the marketplace or referenced through an on-chain notary service Combining legal frameworks with smart contract enforcement ensures that digital rights are respected and disputes are minimized in the web3 creator economy. ## Generative art, randomness, and algorithmic creation Generative art is one of the most celebrated NFT categories. Artists use algorithms to create large collections of visual pieces, each with unique traits. Blockchain enables provable randomness, scarcity, and distribution mechanisms that reward discovery and curation. Generative NFT projects include: * Procedural creation of thousands of artwork variations at mint time * On-chain randomness using oracles or commit-reveal schemes * Trait rarity, visual layering, and metadata encoding * Whitelists, pre-mints, and gamified minting experiences Example: * A generative art project creates 10,000 abstract compositions using mathematical functions * Each mint triggers a random seed that determines color palette, symmetry, and movement pattern * Some traits are extremely rare, creating collector demand and social engagement * Smart contracts assign each piece an edition number and royalty structure This artform explores the fusion of code, creativity, and community, while leveraging blockchain for fair distribution and verification. ## Art curation, exhibition, and fractional ownership Blockchain enables decentralized curation of art collections, collaborative exhibitions, and shared ownership models. These innovations expand access to art, engage global audiences, and create new collector communities. Applications include: * NFT-based gallery curation where holders vote on featured pieces * Virtual exhibitions in metaverse spaces with ticketing and merch * Fractionalized NFTs representing partial ownership of high-value works * Collaborative collections managed by DAOs or cultural institutions Example: * A collective of art patrons purchases a rare NFT from a blue-chip artist * The token is fractionalized and each member receives a share * The group showcases the artwork in a virtual museum and licenses it to exhibitions * Profits from ticket sales and merch are distributed to fractional owners These models create inclusive, scalable, and borderless art ecosystems powered by decentralized governance. ## Game studios, indie developers, and token economies Blockchain gives both large and independent game studios the ability to rethink monetization, community engagement, and content ownership. Developers can issue native tokens, sell in-game assets as NFTs, and establish DAOs for roadmap decisions or development bounties. Applications in game development: * Pre-selling assets, characters, or land as NFTs before launch * Rewarding beta testers or early adopters with tokens that hold future utility * Creating player-owned marketplaces where item value is determined by demand * Building decentralized game guilds that pool resources and share earnings Example: * An indie developer releases a beta version of a fantasy game and sells NFT weapons to fund development * Buyers receive game tokens that can be used to craft items or trade with other players * Token holders vote on future quests, expansions, and balance changes * A guild forms around collecting rare items and enters competitions for token prizes This model builds passionate communities from day one and turns players into long-term contributors to game economies. ## Digital fashion, wearables, and avatar customization Digital fashion refers to clothing, accessories, and design elements created for use in virtual environments. These items, often minted as NFTs, can be worn by avatars, used in games, or displayed in metaverse spaces. Designers are creating entire collections of digital fashion that function as identity tools and investment assets. Key elements include: * NFT garments that can be worn across multiple platforms * Time-limited or edition-based releases to create scarcity * Interactivity, animation, and augmented reality functionality * Secondary markets for resale and customization Example: * A digital fashion house releases a seasonal collection of 3D jackets and glasses as NFTs * Users dress their avatars in these pieces for events, livestreams, and VR meetups * Each item carries metadata for brand, designer, rarity, and compatible platforms * Collectors showcase their looks in galleries, AR apps, or social feeds Digital fashion enables sustainable design, cross-platform identity, and new forms of brand loyalty beyond physical apparel. ## Cultural preservation and digital heritage Blockchain provides a permanent, tamper-proof ledger for recording, archiving, and distributing cultural content. From indigenous knowledge to ancient manuscripts, digital preservation of heritage materials can benefit from decentralized storage, provenance tracking, and community governance. Applications in cultural preservation: * Archiving language, music, or ritual recordings using decentralized file systems * Creating NFTs of digitized artifacts for educational or funding purposes * Issuing access tokens for scholars, museums, or diaspora communities * Preventing manipulation or erasure of culturally significant content Example: * A cultural preservation project partners with local communities to digitize ancestral songs * Each recording is uploaded to IPFS, with accompanying history and attribution stored on blockchain * NFTs are issued to supporters, granting access to educational resources and curation rights * Funds raised go back to the community through transparent smart contracts Blockchain ensures that cultural memory is preserved for future generations in ways that respect ownership, participation, and authenticity. ## Creator tooling, SDKs, and launch platforms A new generation of creator tools is emerging to simplify the blockchain experience. These tools allow artists, musicians, and developers to mint NFTs, build interactive projects, and deploy smart contracts without writing code. Tooling and platform trends: * No-code NFT minting interfaces with metadata customization * APIs and SDKs for integrating wallet-based access into games or websites * Templates for generative collections, auctions, and token drops * Cross-chain deployment tools for reaching diverse audiences Example: * A musician uses a no-code platform to mint a series of concert ticket NFTs * They choose royalty percentages, media hosting options, and gating rules * Fans purchase the NFTs using fiat or crypto, and gain backstage access via a connected mobile app * The artist tracks sales and royalties through a dashboard without technical complexity These tools lower the barrier to entry, empower experimentation, and foster creative independence across domains. ## Digital twins and virtual asset mirroring Digital twins are virtual representations of physical objects or environments, often used in engineering and manufacturing. In art and fashion, digital twins allow creators to issue NFTs that correspond to real-world items, enabling verification, resale, and interaction in the digital realm. Digital twin applications: * Minting NFTs linked to physical artworks, sculptures, or garments * Augmented reality filters that animate the digital twin for social use * Ownership transfer mechanisms tied to physical handover or redemption * Display and storage solutions for bridging physical and digital spaces Example: * A sculptor creates a bronze statue and mints an NFT version that carries a video of the making process and a 3D model * The collector receives both the physical piece and a digital twin * When the artwork is sold, the NFT is transferred and used to track provenance * The digital twin is also showcased in online exhibitions or used in virtual reality Digital twins create new opportunities for authenticity, interaction, and archival of creative works. ## Copyright management and DRM replacement Digital rights management (DRM) has long been used to protect content from unauthorized copying or use, but it often limits fair use and inconveniences legitimate buyers. Blockchain introduces a new model of rights management that is flexible, programmable, and user-respecting. Features of blockchain DRM: * NFTs granting time-based, region-based, or usage-limited access to content * Smart contracts defining sharing rules, revocation, and renewals * Audit logs showing exactly how and when content was accessed * Creator-controlled permissions for collaboration or licensing Example: * An e-book publisher distributes reading access via tokenized content licenses * Each token allows five reads within 30 days, with metadata recording usage * If the token is resold, the license resets and royalties are routed to the original author * Libraries or institutions purchase bundles of tokens for lending purposes This approach replaces rigid DRM with adaptable, enforceable rules that preserve creator rights and reader convenience. ## Cross-chain NFT ecosystems and multichain strategy As the NFT space matures, creators and collectors are exploring multiple blockchains for different use cases. Ethereum remains dominant for high-value collectibles, but other chains offer lower fees, faster transactions, and unique communities. Multichain strategy considerations: * Launching on Ethereum for provenance and recognition * Using Polygon or Solana for accessibility and gas efficiency * Interoperability tools to bridge NFTs or sync metadata * Cross-chain marketplaces for unified trading and discovery Example: * A generative art project launches its premium editions on Ethereum and its open edition on Avalanche * The artist uses a cross-chain indexer to display all works in one gallery * Collectors can bridge NFTs between chains to access different experiences or liquidity pools * Smart contracts synchronize royalties across ecosystems Multichain deployments increase reach, optimize performance, and build resilience into digital collections. ## Blockchain monetization risks and regulatory issues Despite the potential of blockchain in creative sectors, monetization brings legal, financial, and ethical challenges. Creators must navigate fluctuating token markets, evolving regulations, and community expectations. Risks and concerns: * Securities classification of NFTs or tokens triggering regulatory oversight * Tax implications of sales, royalties, and airdrops across jurisdictions * Market volatility affecting long-term project viability * Community backlash from perceived cash grabs or misaligned incentives Example: * A gaming DAO issues tokens for early supporters, but fails to clearly define governance utility * Regulators question whether the tokens constitute unregistered securities * Treasury mismanagement and community discontent lead to project decline Mitigating these risks requires legal counsel, transparent communication, and alignment between economic design and creative integrity. ## Educational content and onboarding experiences To bring millions of creators and users into web3, education and user experience must be prioritized. Onboarding involves more than setting up a wallet — it includes understanding blockchain principles, risks, and opportunities. Educational efforts can include: * Interactive tutorials that reward learners with NFTs or tokens * Artist residencies and incubators focused on blockchain skills * Documentation, templates, and case studies for each use case * Web3 education DAOs, open source courses, and peer-to-peer mentoring Example: * A music NFT platform runs a six-week cohort for emerging artists * Participants mint practice NFTs, join DAO calls, and receive feedback from industry mentors * Upon graduation, each artist launches a curated drop with built-in support * Community members vote to feature top-performing graduates in showcases Education accelerates adoption, reduces fraud, and cultivates a more diverse and capable creative ecosystem. ## Immersive performances and virtual event monetization Blockchain enables creators to produce, host, and monetize virtual performances in ways that are secure, permissioned, and transparent. From live concerts in metaverse arenas to interactive poetry readings, artists can token-gate experiences, reward participants, and archive performances immutably. Applications include: * NFT tickets for virtual concerts and streamed events * Token-based access to backstage content, meetups, or replays * Smart contracts handling split payments for performers and organizers * Proof-of-attendance collectibles and engagement rewards Example: * A DJ hosts a virtual performance in a voxel-based metaverse space * Fans purchase NFT tickets, which also unlock exclusive tracks and merchandise * The event is streamed and recorded, with blockchain metadata capturing attendance * Royalties from ticket sales and replay streams are split automatically among collaborators This model allows for global reach, minimal overhead, and long-tail monetization from community-driven experiences. ## Rights management for performing arts and public installations Theater productions, public murals, sound installations, and live art can all benefit from blockchain-enabled rights management. Artists can define licensing conditions, usage permissions, and archival rules through smart contracts and tokenized rights. Features include: * On-chain documentation of contributor credits and performance rights * Licensing models for derivative works, restaging, or media adaptation * Community governance of installation maintenance or location changes * Timestamped records of public feedback, engagement, and impact Example: * A choreographer tokenizes the staging rights for a contemporary dance piece * Cultural institutions or universities can purchase licenses and restage the work with attribution * Smart contracts track royalties and assign roles to dancers, lighting designers, and composers * All performance data is logged for future reference and research This supports cultural institutions in honoring creative attribution, simplifying administrative processes, and ensuring that performance legacies endure across time and place. ## Decentralized funding for creative projects Blockchain provides tools for creators to fund their work through direct community support rather than centralized grants or sponsors. Funding can be structured through token sales, NFT campaigns, or decentralized autonomous grant pools. Models include: * Crowdsourced treasury governed by community voting (e.g., MolochDAO, Gitcoin) * NFT pre-sales to fund writing, animation, or album production * Matching donation models based on community preference * Social tokens linked to creator milestones and content access Example: * A documentary filmmaker launches a campaign using collectible frame NFTs * Supporters mint frames that represent moments from the production timeline * Funds are released in tranches tied to completion of key phases, such as filming or post-production * NFT holders are credited in the final cut and receive revenue shares from distribution Decentralized funding redistributes power in creative ecosystems, enabling more diverse voices and community-driven cultural expression. ## AI-generated content and creative attribution The rise of AI-generated images, music, and text introduces new challenges for attribution, provenance, and intellectual property. Blockchain offers solutions for tracking contributions, verifying originality, and structuring collaborative compensation models. Blockchain + AI applications: * Tokenizing AI models and prompt parameters to track inputs and training * Recording attribution logs for co-created works between humans and machines * Auditable provenance for AI-generated media published or sold * Licensing models that define AI usage rights and output restrictions Example: * An artist creates a collection of AI-assisted abstract works using custom-trained models * Each piece is minted with metadata including prompt hashes, model versions, and human edits * The NFTs specify whether the output can be reused, remixed, or displayed commercially * Smart contracts route royalties to the model’s creator, prompt designer, and visual editor Blockchain provides clarity, fairness, and provenance in a rapidly evolving landscape where creativity and computation are deeply intertwined. ## Digital preservation and archival integrity Digital art, media, and games require long-term preservation strategies. Centralized hosting is vulnerable to censorship, decay, or shutdowns. Blockchain and decentralized storage systems ensure that cultural works remain accessible and verifiable across decades. Preservation tools: * Decentralized file storage using IPFS, Arweave, or Filecoin * Content-addressable hashes stored immutably on-chain * Archive DAOs that fund the long-term storage of works across formats * Cross-institutional redundancy with timestamped metadata Example: * A university partners with an NFT archive to preserve the digital works of a contemporary poet * Each poem is stored using content-addressable storage and linked to NFTs * Metadata includes publication context, critical essays, and reading performances * Future researchers access a tamper-proof, accessible archive without relying on centralized publishers This secures cultural memory, ensures creator visibility over time, and supports historical analysis of digital creativity. ## Blockchain-native storytelling platforms New platforms are emerging where narrative structure, character arcs, and media releases are tied directly to blockchain. These platforms integrate NFTs, tokens, and smart contracts into the fabric of narrative development. Features include: * On-chain world-building, where each character or location is tokenized * Reader governance over plot development or character survival * Dynamic NFTs that evolve based on community interaction or data feeds * Episodic content gated by ownership or subscription tokens Example: * A fantasy series is developed with each character represented by a token * Readers who own a character vote on its fate during climactic story events * Side quests, lore, and media expansions are unlocked based on community milestones * The entire world is built collaboratively by writers, artists, and players Blockchain-native stories redefine authorship, encourage interactive creativity, and foster community ownership of fictional universes. ## Market trends, sustainability, and ethical considerations As adoption grows, the creative blockchain space faces important questions around environmental impact, accessibility, and cultural ethics. Projects are responding with innovation in protocol design, governance, and social responsibility. Key developments: * Migration to energy-efficient blockchains such as Polygon, Tezos, and Solana * Offset protocols for NFT minting and trading emissions * DAOs focused on indigenous rights, anti-plagiarism, and creator diversity * Open source tools for transparency, reproducibility, and education Example: * A collective of environmental artists releases a zero-emission NFT series * Minting is done on a proof-of-stake chain and bundled with verified carbon credits * The project funds local restoration efforts and supports creators from frontline climate communities * Smart contracts ensure transparency of donation flows and allow community oversight This convergence of technology, culture, and ethics pushes the creative sector toward a regenerative model of growth, innovation, and justice. Blockchain is redefining the landscape of art, media, gaming, and creative collaboration. It introduces technical primitives for trust, ownership, and automation — but its real impact lies in how these tools empower creators to imagine new models of cultural production. Its influence includes: * Shifting control from intermediaries to creators and communities * Unlocking new formats of storytelling, interaction, and immersion * Enabling sustainable, global funding models for creative work * Preserving digital heritage and validating artistic innovation This is not simply a technological shift — it is a cultural movement. As blockchain becomes increasingly embedded in the tools and platforms of everyday creativity, it will expand who gets to create, how value is measured, and what stories are told. The future of creative expression will be more open, participatory, and programmable — and blockchain is playing a foundational role in that transformation. file: ./content/docs/knowledge-bank/besu-transaction-flow.mdx meta: { "title": "Besu transaction cycle", "description": "Hyperledger besu transaction cycle" } ## Ethereum Virtual Machine (EVM) Transaction Lifecycle ### Key Generation and Account Creation The transaction lifecycle begins with cryptographic key generation using the secp256k1 elliptic curve. A randomly generated 256-bit private key produces a corresponding public key through elliptic curve multiplication. The Ethereum address is derived as the last 20 bytes of the Keccak-256 hash of the uncompressed public key. This address serves as the account identifier, analogous to a bank account number in traditional finance. ### Smart Contract Compilation and Encoding For smart contract interactions, Solidity code undergoes compilation into two critical components: 1. **Bytecode**: The EVM-executable machine code containing initialization and runtime segments 2. **ABI**: A JSON interface specifying function signatures and parameter types\ Constructor arguments are encoded using Recursive Length Prefix (RLP) encoding and appended to the deployment bytecode. Dynamic types like strings include length prefixes and offsets in their encoding scheme. ### Transaction Construction and Signing Transactions contain several critical fields: * `nonce`: Sequence number preventing replay attacks * `gasPrice`/`gasLimit`: Fee market parameters * `chainId`: Network identifier (EIP-155) * `data`: For contract calls, ABI-encoded function selectors and arguments These are signed using ECDSA with the sender's private key, producing three signature components: * `v`: Recovery identifier + chainId×2 + 35 * `r`, `s`: Components of the elliptic curve signature ### EVM Execution Mechanics The EVM processes transactions through deterministic opcode execution: 1. **Calldata Decoding**: Extracts function selectors and parameters using ABI specifications 2. **Storage Computation**: State variables are stored at slots computed via `keccak256(padded_slot_index)` 3. **State Modification**: `SSTORE` updates contract storage, while `SLOAD` reads values 4. **Memory Management**: Temporary data stored in linear memory during execution ### State Trie Architecture Ethereum maintains three Merkle Patricia Tries (MPT): 1. **State Trie**: Maps addresses to account states (nonce, balance, storageRoot, codeHash) 2. **Storage Trie**: Contract-specific key-value storage (updated per transaction) 3. **Receipts Trie**: Transaction execution metadata Each storage slot update modifies the trie structure, with branch nodes (17-item arrays) and leaf nodes (compact-encoded paths) forming cryptographic proofs of state transitions. ### Layer 2 Scaling Solutions #### zkEVMs * **Validity Proofs**: Generate cryptographic proofs of correct execution * **On-chain Verification**: Posts state roots + SNARK/STARK proofs to L1 * **Full EVM Equivalence**: Maintains identical storage layouts and ABI encoding #### Optimistic Rollups * **Fraud Proofs**: Challenges invalid state transitions during dispute windows * **Data Availability**: Batches transaction data via calldata compression * **Delayed Finality**: 7-day challenge periods for state finalization ### Deterministic Execution Guarantees The system enforces consistency through: * **RLP Encoding**: Standardized serialization for all persistent data * **Keccak-256 Hashing**: Uniform slot computation across execution environments * **Gas Accounting**: Precise opcode cost tracking preventing infinite loops This architecture demonstrates how Ethereum combines cryptographic primitives, optimized data structures, and distributed consensus to achieve secure, verifiable computation in a decentralized environment. ## EVM Transaction Lifecycle ## 1. Key Pair & Account Creation Ethereum accounts are generated using the elliptic curve secp256k1. The private key is a randomly generated 256-bit number, the public key is computed via elliptic curve multiplication, and the address is the last 20 bytes of the Keccak256 hash of the uncompressed public key. ```javascript const { ethers } = require("ethers"); const wallet = ethers.Wallet.createRandom(); console.log("Private Key:", wallet.privateKey); console.log("Public Key:", wallet.publicKey); console.log("Address:", wallet.address); ``` Example Output: ``` Private Key: 0x9c332b1492d2d9ccdbb4b4628d8695095ad2c22b86c5ef79a2173e0c6f877c22 Public Key: 0x04535b2d2a6c9c44c1791f26791ed5ed1e50481f79cf6bdb238a5d4ae54fe65d74a57e72a2ef5e22a0f8bb006e6f85ea552d4c4c30df5c841b43f9cd1493acfb80 Address: 0xd8cD4DAfD4e581dE9e69fB9588b6E547C206Efd1 ``` Layman Explanation: Your Ethereum identity is just a pair of cryptographic keys. The private key is like your password. The address is like your bank account number , derived from the public key using a hashing function. *** ## 2. Smart Contract: HelloWorld.sol We write a basic smart contract with a message variable and a setter method. ```solidity pragma solidity ^0.8.0; contract HelloWorld { string public message; constructor(string memory _msg) { message = _msg; } function updateMessage(string memory _msg) public { message = _msg; } } ``` Layman Explanation: This contract is a small program that stores a message. When deployed, it sets the message to something like "Hello Ethereum!" and anyone can later update it. *** ## 3. Compilation → ABI & Bytecode We compile the contract using solc and extract: * ABI , a JSON description of the contract interface * Bytecode , the raw EVM machine code ABI: ```json [ { "inputs": [{ "internalType": "string", "name": "_msg", "type": "string" }], "stateMutability": "nonpayable", "type": "constructor" }, { "inputs": [], "name": "message", "outputs": [{ "internalType": "string", "name": "", "type": "string" }], "stateMutability": "view", "type": "function" }, { "inputs": [{ "internalType": "string", "name": "_msg", "type": "string" }], "name": "updateMessage", "outputs": [], "stateMutability": "nonpayable", "type": "function" } ] ``` Bytecode (full, no truncation): ``` 0x608060405234801561001057600080fd5b5060405161011b38038061011b83398101604081905261002f9161003b565b806000819055506100db565b600080fd5b6000819050919050565b61005781610044565b811461006257600080fd5b50565b6000813590506100748161004e565b92915050565b6000602082840312156100905761008f61003f565b5b600061009e84828501610065565b91505092915050565b6100b281610044565b82525050565b60006020820190506100cd60008301846100a9565b92915050565b6000819050919050565b6100e7816100d4565b81146100f257600080fd5b50565b600081359050610104816100de565b92915050565b6000602082840312156101205761011f61003f565b5b600061012e848285016100f5565b9150509291505056fea2646970667358221220bd485cd0e3e06eeb6eac6e324b8e121b6fba8332faafbe3e60ad7fdfaf0b649264736f6c634300080c0033 ``` Layman Explanation: The ABI acts like a menu of available functions in the contract. The bytecode is the actual machine-readable code that the EVM will run. *** ## 4. Constructor Arguments Encoding We encode constructor arguments to include with the deployment bytecode. ```javascript const ethers = require("ethers"); const encodedArgs = ethers.utils.defaultAbiCoder.encode( ["string"], ["Hello Ethereum!"] ); ``` Encoded Constructor Args (hex): ``` 0x0000000000000000000000000000000000000000000000000000000000000020 0000000000000000000000000000000000000000000000000000000000000010 48656c6c6f20457468657265756d210000000000000000000000000000000000 ``` * 0x20: offset to string data * 0x10: length of string (16 bytes) * "Hello Ethereum!" = 0x48656c6c6f20457468657265756d21 padded to 32 bytes Final Full Deployment Bytecode = bytecode + encoded args: ``` 0x608060405234801561001057600080fd5b5060405161011b38038061011b83398101604081905261002f9161003b565b806000819055506100db565b600080fd5b6000819050919050565b61005781610044565b811461006257600080fd5b50565b6000813590506100748161004e565b92915050565b6000602082840312156100905761008f61003f565b5b600061009e84828501610065565b91505092915050565b6100b281610044565b82525050565b60006020820190506100cd60008301846100a9565b92915050565b6000819050919050565b6100e7816100d4565b81146100f257600080fd5b50565b600081359050610104816100de565b92915050565b6000602082840312156101205761011f61003f565b5b600061012e848285016100f5565b9150509291505056fea2646970667358221220bd485cd0e3e06eeb6eac6e324b8e121b6fba8332faafbe3e60ad7fdfaf0b649264736f6c634300080c00330000000000000000000000000000000000000000000000000000000000000020 0000000000000000000000000000000000000000000000000000000000000010 48656c6c6f20457468657265756d210000000000000000000000000000000000 ``` Layman Explanation: We attach the initial message ("Hello Ethereum!") to the bytecode during deployment. The encoded version includes length and position info so the EVM can read it correctly when deploying. *** ## 5. Raw Deployment Transaction: RLP Encoding and ECDSA Signature We will now create a raw transaction to deploy the HelloWorld contract, and generate its signature using ECDSA over the RLP-encoded payload. Transaction Object (Pre-Signature): ```json { "nonce": "0x00", "gasPrice": "0x04a817c800", // 20 gwei "gasLimit": "0x2dc6c0", // 3000000 "to": null, // contract creation "value": "0x00", "data": "", "chainId": 1 } ``` Step 1: RLP Encoding (pre-signature) RLP of the transaction (pre-signature) includes: ``` [ nonce, gasPrice, gasLimit, to (null → 0x), value, data, chainId, 0, 0 ] ``` We use: ``` nonce = 0x00 gasPrice = 0x04a817c800 (20,000,000,000 wei) gasLimit = 0x2dc6c0 (3000000) to = null (for contract deployment) value = 0x00 data = (as in Point 4) chainId = 1 ``` Full RLP-Encoded Unsigned TX (Hex): ``` 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 0000000000000000000000000000000000000000000000000000000000000010 48656c6c6f20457468657265756d210000000000000000000000000000000000 018080 ``` *** Step 2: Sign the Keccak256 Hash of Above We now hash the RLP-encoded transaction (excluding v, r, s) and sign it using the private key. ```javascript const txHash = keccak256(rlpEncodedUnsignedTx); const signature = ecsign(txHash, privateKey); ``` Example: ```json { "v": 0x25, "r": "0x3aeec3c3a7eb1a13c6d408419816f6bb5563a9cf4263a6b9d170e9bb5b88e5bb", "s": "0x275d3d113e2f06d90d3dc9e16ff3387ff145f1fe9d62c1e421693d6d24eaa598" } ``` * v = 37 = 1 \* 2 + 35 for chain ID 1 (EIP-155) * r, s are ECDSA signature components (from secp256k1) *** Final Signed Raw Transaction (RLP w/ Signature): ``` 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 0000000000000000000000000000000000000000000000000000000000000010 48656c6c6f20457468657265756d210000000000000000000000000000000000 25 3aeec3c3a7eb1a13c6d408419816f6bb5563a9cf4263a6b9d170e9bb5b88e5bb 275d3d113e2f06d90d3dc9e16ff3387ff145f1fe9d62c1e421693d6d24eaa598 ``` Layman Explanation: This is like digitally signing a message that says "Deploy this program with this code." The r and s values prove it's your signature. The v value tells the network which chain you're sending it to. *** ## 6. Send Transaction to Ethereum Network The signed raw transaction is sent via: ```javascript await provider.sendTransaction(signedTx); ``` A node will verify: * Signature is valid (recover sender address) * Nonce is correct * Sender has enough ETH to cover gasLimit × gasPrice If valid, the transaction is broadcast into the mempool and included in the next block. *** ## 7. Contract Address Calculation The contract address is computed before deployment completes using: ```javascript const contractAddress = ethers.utils.getContractAddress({ from: "0xd8cD4DAfD4e581dE9e69fB9588b6E547C206Efd1", nonce: 0, }); ``` Internally: ``` contractAddress = keccak256(rlp([sender, nonce]))[12:] ``` Step-by-step: 1. RLP(\[0xd8cD4DAfD4e581dE9e69fB9588b6E547C206Efd1, 0]) → 0xd6... (RLP-encoded) 2. keccak256(RLP) → 0x5cbd38cc74f924b1ef5eb86d9b54f9931f75d7e3c5e17a63ab7aeb7ddde893b1 3. Contract Address = 0x5cbd38cc74f924b1ef5eb86d9b54f9931f75d7e3 Layman Explanation: Ethereum pre-computes the future address of the contract using your address and how many transactions you've sent before (the nonce). *** ## 8. Storage Trie Initialization Ethereum contracts store all state variables in a Merkle Patricia Trie. Each storage slot is addressed by: ```javascript slotKey = keccak256(padded_slot_index); ``` For variable message at slot 0x00: ```javascript slot = ethers.utils.keccak256(ethers.utils.hexZeroPad("0x00", 32)); // Output: ("0x290decd9548b62a8d60345a988386fc84ba6bc95484008f6362f93160ef3e563"); ``` Layman Explanation: The contract's internal variables are stored in a key-value database where keys are hashed. Slot 0x00 refers to the first declared state variable, which is message. *** 9. Submit updateMessage("Goodbye Ethereum!") We now send a second transaction that calls the smart contract's updateMessage() function with the new string "Goodbye Ethereum!". Encode Calldata with ABI ```javascript const iface = new ethers.utils.Interface(abi); const data = iface.encodeFunctionData("updateMessage", ["Goodbye Ethereum!"]); ``` *** Full Calldata (Untruncated): ``` 0xc47f00270000000000000000000000000000000000000000000000000000000000000020 0000000000000000000000000000000000000000000000000000000000000011 476f6f6462796520457468657265756d2100000000000000000000000000000000 ``` Breakdown: | Bytes Range | Value | Meaning | | ----------- | ------------------------------------- | ------------------------------------------------------------------ | | 0x00–0x04 | 0xc47f0027 | Function selector = keccak256("updateMessage(string)").slice(0, 4) | | 0x04–0x24 | 0000000000...0000020 | Offset to start of string data (32 bytes) | | 0x24–0x44 | 0000000000...0000011 | Length of the string = 17 bytes | | 0x44–0x64 | 476f6f6462796520457468657265756d21... | ASCII "Goodbye Ethereum!" padded to 32 bytes | Layman Explanation: This is the binary version of: "Hey smart contract, call updateMessage() with the new string 'Goodbye Ethereum!'" The EVM uses this exact layout to read parameters. *** ## 9. Construct and Sign Transaction ```javascript const tx = { nonce: 1, to: "0x5cbd38cc74f924b1ef5eb86d9b54f9931f75d7e3", // deployed contract address gasPrice: ethers.utils.parseUnits("20", "gwei"), gasLimit: 100000, value: 0, data: "0xc47f00270000000000000000000000000000000000000000000000000000000000000020" + "0000000000000000000000000000000000000000000000000000000000000011" + "476f6f6462796520457468657265756d2100000000000000000000000000000000", chainId: 1, }; const signedTx = await wallet.signTransaction(tx); ``` *** ## 10. EVM Execution Trace for updateMessage() Let's now simulate the internal EVM execution step-by-step. The EVM receives the transaction, parses the calldata, and executes opcodes that perform: * Decoding the dynamic string argument * Computing the storage slot * Writing the new string to that slot using SSTORE Instruction-Level Breakdown (Simplified): ``` CALLDATALOAD → push offset (0x20) → stack: [0x20] ADD → string pointer = 0x04 + 0x20 = 0x24 CALLDATALOAD → string length (0x11) [... memory allocation and copy string ...] SHA3 → keccak256(0x00) = storage slot SSTORE → write to slot ``` *** Storage Slot Computation ```javascript slotKey = ethers.utils.keccak256(ethers.utils.hexZeroPad("0x00", 32)); // Result: ("0x290decd9548b62a8d60345a988386fc84ba6bc95484008f6362f93160ef3e563"); ``` *** Storage Value (UTF-8 String → Hex) "Goodbye Ethereum!" (17 bytes) → 0x476f6f6462796520457468657265756d21 Padded to 32 bytes (for EVM): ``` 0x476f6f6462796520457468657265756d2100000000000000000000000000000000 ``` Layman Explanation: The EVM copies the string to memory, calculates the exact key to store it under, and then saves the new message in the contract's database. *** ## 11. State Trie and Storage Trie Update The Ethereum state trie now reflects this update. Account Object: ```json { "nonce": 2, "balance": 0, "storageRoot": "0xa1c9f3d17704e632bb58bb85e332e0bcbcc181c1cce6dd13a6adca048f2e94f3", "codeHash": "0x1b449b7a3f5b631d5fa963dfba2dfc19a7d62a9a79e0f6828aee5f785dcfd94a" } ``` * nonce: 2 (this is the second tx from the account) * storageRoot: Merkle root of contract's key-value store (after update) * codeHash: unchanged unless contract self-destructs or is overwritten *** Storage Trie Node: Key (slot): ``` 0x290decd9548b62a8d60345a988386fc84ba6bc95484008f6362f93160ef3e563 ``` Value (RLP encoded string): ``` 0x83476f6f6462796520457468657265756d21 ``` Explanation: * RLP prefix 0x83 means string length is 3 bytes more than 32 , due to prefix * The value is a string, padded and hashed into the trie Layman Explanation: The new message replaces the old one in a secure data structure called the Merkle Patricia Trie. The root hash of this trie proves that the value was updated, even without seeing the full database. *** ## 12. Transaction Receipt, Logs, and Bloom Filter If an event was emitted, logs would be added to the receipt. Even though we didn't emit an event, here's what a standard receipt might include. Example Receipt: ```json { "transactionHash": "0x9e81fbb3b8fd95f81c0b4161d8ef25824e64920bca134a9b469ec72f4db3cf61", "blockNumber": 18465123, "from": "0xd8cD4DAfD4e581dE9e69fB9588b6E547C206Efd1", "to": "0x5cbd38cc74f924b1ef5eb86d9b54f9931f75d7e3", "gasUsed": "0x4a38", // 19000+ gas "status": "0x1", // success "logs": [], "logsBloom": "0x00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000" } ``` Layman Explanation: This receipt is like a receipt you get from a store: it proves the transaction happened. The Bloom filter is a searchable fingerprint of all logs in the block , so you can find your transaction without scanning everything. *** ## 13. Merkle Patricia Trie Proofs: Structure, Path, Nodes Ethereum uses a Merkle Patricia Trie (MPT) for three major tries: | Trie | Purpose | Root Hash Stored In | | ------------ | -------------------------- | -------------------- | | State Trie | All EOAs and contracts | Block header | | Storage Trie | Contract key-value storage | Per-contract account | | Receipt Trie | All tx receipts in a block | Block header | Each key is hashed with Keccak256 and converted to hex-nibbles (base-16) for trie traversal. Nodes are: * Branch node: 17 slots (16 for hex chars + 1 for value) * Extension/Leaf node: \[prefix, value] with compact encoding *** Example: Storage Trie Proof Path for Slot 0x00 Slot key (from earlier): ``` key = 0x290decd9548b62a8d60345a988386fc84ba6bc95484008f6362f93160ef3e563 ``` Hex nibble path: ``` [2, 9, 0, d, e, c, d, 9, 5, 4, 8, b, 6, 2, a, 8, d, 6, 0, 3, 4, 5, a, 9, 8, 8, 3, 8, 6, f, c, 8, 4, b, a, 6, b, c, 9, 5, 4, 8, 4, 0, 0, 8, f, 6, 3, 6, 2, f, 9, 3, 1, 6, 0, e, f, 3, e, 5, 6, 3] ``` The path guides the trie down nodes (branch → extension → leaf). Each proof includes: * All nodes from root → leaf * Sibling hashes * RLP encoding of node contents *** Example Leaf Node: ```json [ "0x35ab3c...", // Compact-encoded key "0x83476f6f6462796520457468657265756d21" ] ``` Layman Explanation: The Ethereum state is like a massive tree of keys and values. To prove something exists in it, you can walk the exact path and show only the parts needed , no need to reveal the entire tree. This enables efficient proof of data inclusion. *** ## 14. Final Contract Account Object (Post-Execution) After two transactions, the account object in the state trie looks like this: ```json { "address": "0x5cbd38cc74f924b1ef5eb86d9b54f9931f75d7e3", "nonce": 1, "balance": "0x00", "codeHash": "0x1b449b7a3f5b631d5fa963dfba2dfc19a7d62a9a79e0f6828aee5f785dcfd94a", "storageRoot": "0xa1c9f3d17704e632bb58bb85e332e0bcbcc181c1cce6dd13a6adca048f2e94f3" } ``` Details: * nonce: Number of txs this contract has sent (usually 1 or 0) * codeHash: keccak256(contract bytecode) * storageRoot: Root hash of contract's internal storage trie *** ## 15. ZK-Rollup (zkEVM) Transaction Lifecycle Differences zkEVM-compatible rollups (e.g. Polygon zkEVM, Scroll, Taiko) execute transactions differently: Execution Flow: 1. Transaction is submitted to the zk-rollup (off-chain) 2. EVM is simulated inside a zk-circuit 3. A validity proof is generated for: * Execution trace * State changes * Storage writes 4. L1 receives: * Final stateRoot * SNARK/STARK proof * Compressed calldata *** Compatible With: | Feature | zkEVM Behavior | | -------------------- | ------------------- | | Bytecode | Fully supported | | Storage slot hashing | Identical | | Calldata encoding | Same ABI format | | Gas metering | Emulated in circuit | | Logs/events | Recorded for proof | Layman Explanation: Instead of making every Ethereum node re-execute your transaction, zkEVM rollups do it once, then prove mathematically to everyone else that the result is valid. The proof is posted to Ethereum, and no one needs to trust the prover , the math guarantees correctness. *** ## 16. Optimistic Rollups (Arbitrum, Optimism) Optimistic Rollups take a different approach. Execution Model: 1. Transactions are sent to the rollup chain 2. Execution is done off-chain, but results are considered valid by default 3. After a delay window (e.g. 7 days), L1 finalizes the result 4. Anyone can submit a fraud proof if they detect an invalid state root *** L1 Calldata Format Rollup batches are posted to Ethereum as calldata in a single tx: ``` 0x0000... |-- tx1 calldata |-- tx2 calldata |-- ... ``` Calldata compression techniques: * Zlib/snappy * Merkle batching * Prefix compression *** Rollup vs zkEVM Differences | Feature | Optimistic Rollup | zkEVM | | ----------------- | ----------------------- | ---------------------------- | | Trust model | Fraud-proof (challenge) | Validity-proof (math) | | Finality | Delayed (7 days) | Near-instant | | Gas efficiency | Higher (calldata heavy) | Lower (proof cost amortized) | | EVM compatibility | High (native EVM) | High (EVM circuits) | Layman Explanation: Optimistic rollups assume everything is okay unless someone proves otherwise. zkEVMs prove everything is correct from the start. Both post data to Ethereum, but the trust assumptions and confirmation times are different. *** Final World State Snapshot ```json { "ContractAddress": "0x5cbd38cc74f924b1ef5eb86d9b54f9931f75d7e3", "Storage": { "SlotKey": "0x290decd9548b62a8d60345a988386fc84ba6bc95484008f6362f93160ef3e563", "SlotValue": "0x476f6f6462796520457468657265756d2100000000000000000000000000000000" }, "AccountObject": { "nonce": 1, "codeHash": "0x1b449b7a3f5b631d5fa963dfba2dfc19a7d62a9a79e0f6828aee5f785dcfd94a", "storageRoot": "0xa1c9f3d17704e632bb58bb85e332e0bcbcc181c1cce6dd13a6adca048f2e94f3" }, "LastTransaction": { "Function": "updateMessage(string)", "Calldata": "0xc47f00270000000000000000000000000000000000000000000000000000000000000020" + "0000000000000000000000000000000000000000000000000000000000000011" + "476f6f6462796520457468657265756d2100000000000000000000000000000000", "v": "0x25", "r": "0x3aeec3c3a7eb1a13c6d408419816f6bb5563a9cf4263a6b9d170e9bb5b88e5bb", "s": "0x275d3d113e2f06d90d3dc9e16ff3387ff145f1fe9d62c1e421693d6d24eaa598" }, "ExecutionContext": { "L1": "Ethereum Mainnet", "Rollups": { "zkEVM": "Validity proof enforces correctness", "Optimistic": "Post and challenge model with 7d delay" } } } ``` *** ## Ethereum vs Hyperledger Fabric - Comparison ## Technical Comparison Table | Category | Ethereum (EVM-Based Chains) | Hyperledger Fabric | | ---------------------------------- | ------------------------------------------------------------ | --------------------------------------------------------------- | | **1. Identity Model** | ECDSA secp256k1 key pair; address = Keccak256(pubkey)\[12:] | X.509 certificates issued by Membership Service Providers (MSP) | | **2. Network Type** | Public or permissioned P2P (Ethereum Mainnet, Polygon, BSC) | Fully permissioned consortium network | | **3. Ledger Architecture** | Global state stored in Merkle Patricia Trie (MPT) | Channel-based key-value store (LevelDB/CouchDB) | | **4. State Model** | Account-based: balances and storage in accounts | Key-value database with versioned keys per channel | | **5. Smart Contract Format** | EVM bytecode; written in Solidity/Vyper/Yul | Chaincode packages in Go, JavaScript, or Java | | **6. Contract Execution** | Executed in deterministic sandbox (EVM) | Executed in Docker containers as chaincode | | **7. Contract Invocation** | `eth_sendTransaction`: ABI-encoded calldata | SDK submits proposals → endorsers simulate | | **8. Transaction Structure** | Nonce, to, value, gas, calldata, signature | Proposal + RW Set + endorsements + signature | | **9. Signing Mechanism** | ECDSA (v, r, s) signature from sender | X.509-based MSP identities; multiple endorsements | | **10. Endorsement Model** | No built-in multi-party endorsement (unless multisig logic) | Explicit endorsement policy per chaincode | | **11. Consensus Mechanism** | PoS (Ethereum 2.0), PoW (legacy), rollup validators | Ordering service (Raft, BFT) + validation per org | | **12. Ordering Layer** | Implicit in block mining / validator proposal | Dedicated ordering nodes create canonical blocks | | **13. State Change Process** | Contract executes → SSTORE updates global state | Endorsers simulate → Orderer orders → Peers validate/commit | | **14. Double-Spend Prevention** | State root update + nonce per account | MVCC: Version check of key during commit phase | | **15. Finality Model** | Probabilistic (PoW), deterministic (PoS/finality gadget) | Deterministic finality after commit | | **16. Privacy Model** | Fully public by default; private txs via rollups/middleware | Channel-based segregation + Private Data Collections (PDCs) | | **17. Data Visibility** | All nodes hold all state (global visibility) | Per-channel; only authorized peers see data | | **18. Data Storage Format** | MPT for state; key-value in trie; Keccak256 slots | Simple key-value in LevelDB/CouchDB | | **19. Transaction Validation** | EVM bytecode + gas + opcode checks | Validation system chaincode enforces endorsement policy + MVCC | | **20. Gas / Resource Metering** | Gas metering for all computation and storage | No gas model; logic must guard resource consumption | | **21. Events and Logs** | LOGn opcode emits indexed events | Chaincode emits named events; clients can subscribe | | **22. Query Capability** | JSON-RPC, The Graph, GraphQL, custom RPC | CouchDB rich queries, GetHistoryForKey, ad hoc queries | | **23. Time Constraints** | Optional: `block.timestamp`, `validUntil` for EIP-1559 txs | Custom fields in chaincode; no native tx expiry | | **24. Execution Environment** | Global EVM sandbox; each node runs all txs | Isolated Docker container per chaincode; endorsers simulate | | **25. Deployment Flow** | Deploy via signed transaction containing bytecode | Lifecycle: package → install → approve → commit | | **26. Smart Contract Upgrade** | Manual via proxy pattern or CREATE2 | Controlled upgrade via chaincode lifecycle & endorsement policy | | **27. Programming Languages** | Solidity (primary), Vyper, Yul | Go (primary), also JavaScript and Java | | **28. Auditability & History** | Full block-by-block transaction trace, Merkle proof of state | Immutable ledger + key history queries | | **29. Hashing Functions** | Keccak256 (SHA-3 variant) | SHA-256, SHA-512 (standard cryptographic primitives) | | **30. zk / Confidentiality Tools** | zkRollups, zkEVM, TornadoCash, Aztec | External ZKP libraries; no native zero-knowledge integration | *** ## Execution Lifecycle Comparison | Stage | Ethereum (EVM) | Hyperledger Fabric | | ----------------- | -------------------------------------------- | -------------------------------------------------------- | | **1. Initiation** | User signs tx with ECDSA and submits to node | Client sends proposal to endorsing peers via SDK | | **2. Simulation** | EVM runs the tx using opcode interpreter | Endorsing peers simulate chaincode, generate RW set | | **3. Signing** | Sender signs tx (v, r, s) | Each endorser signs the proposal response | | **4. Ordering** | Block produced by validator | Ordering service batches txs into blocks | | **5. Validation** | Gas limit, signature, nonce, storage check | Validation system checks endorsement + MVCC versioning | | **6. Commit** | State trie updated, new root in block header | Valid txs update state in DB; invalid txs marked as such | | **7. Finality** | Final after sufficient blocks (PoW/PoS) | Final immediately after block commit | *** ## Summary Insights * **Ethereum** offers a globally synchronized, public execution model with gas metering and strong ecosystem tooling. It emphasizes decentralization, programmability, and composability. * **Fabric** is a modular enterprise-grade DLT with configurable privacy, endorsement policies, and deterministic execution. It separates simulation from ordering, enabling fine-grained control. file: ./content/docs/knowledge-bank/bfsi-blockchain-usecases.mdx meta: { "title": "BFSI use cases", "description": "Use case guide for blockchain applications in BFSI" } The BFSI sector has long relied on legacy systems, manual workflows, and siloed databases to manage highly sensitive operations. From international remittances and loan processing to fraud detection and claims settlement, the industry must balance security, speed, trust, and compliance.
Blockchain technology introduces a shared, immutable ledger that enables secure, transparent, and auditable transactions between parties without the need for intermediaries. Its adoption within BFSI brings the potential to drastically reduce operational friction, lower costs, and improve customer trust. Banks, financial institutions, and insurance providers are increasingly piloting and deploying blockchain-based solutions to streamline payments, digitize assets, improve regulatory reporting, automate claims processing, and prevent fraud.
Unlike traditional centralized databases, blockchain offers real-time settlement, consensus-based data integrity, and cryptographic proof of records, making it highly suitable for use cases that require trust, traceability, and automation. ## Core benefits of blockchain Blockchain platforms provide specific benefits that directly address longstanding inefficiencies in financial and insurance systems: * Real-time transaction finality without reconciliation delays * Cryptographic immutability that ensures tamper-evident audit trails * Decentralized access and trustless execution via smart contracts * Permissioned data sharing across regulated entities * Tokenization of financial instruments for faster settlement * Transparent, on-chain identities for AML/KYC verification These benefits enable use cases that range from programmable payments to automated reinsurance and interbank settlements. Whether in public or permissioned blockchains, these principles can modernize core workflows across BFSI ecosystems. ## Cross-border payments and remittances Cross-border transfers suffer from multiple inefficiencies: high fees, slow settlement times, limited visibility, and heavy reliance on correspondent banking networks.
Blockchain-based payment networks remove intermediaries and offer near-instant settlement with reduced costs. In a typical setup, banks or remittance providers integrate with a blockchain ledger where stablecoins or central bank digital currencies (CBDCs) are used to represent fiat. Users can initiate payments across jurisdictions with real-time FX conversion, on-chain confirmation, and smart contract-enforced compliance checks. Example workflow: * A customer initiates a payment in USD from the United States to a recipient in India * USD is converted into a stablecoin or CBDC and recorded on-chain * The blockchain transaction is finalized and visible to both sending and receiving institutions * The recipient receives the equivalent INR, settled in local currency and credited directly Key advantages: * Settlement in seconds instead of 2–5 days * Dramatically reduced foreign exchange spread and wire fees * Full transparency of transaction status and audit trail * Reduced dependency on SWIFT or correspondent banking infrastructure Blockchain-based payment networks like RippleNet and Stellar have shown strong results in this domain, partnering with hundreds of banks and remittance corridors. ## Trade finance and supply chain finance Trade finance involves multiple stakeholders, document exchanges, and settlement workflows, often delayed by manual verifications, fraud risk, and jurisdictional complexity.
Blockchain can digitize trade documents, automate terms via smart contracts, and provide a shared, tamper-proof ledger that all parties agree upon. Use cases include: * Letter of credit automation * Bill of lading digitization * Proof-of-origin tracking * Invoice financing with tokenized invoices * Milestone-based disbursement via smart contracts Example scenario: * A buyer and seller agree on a contract where goods are shipped from China to Germany * A smart contract encodes the delivery terms, payment conditions, and timelines * Shipping updates are submitted on-chain via IoT or logistics APIs * Upon delivery confirmation and customs clearance, the payment is automatically released to the seller This process reduces counterparty risk, lowers trade finance barriers for SMEs, and ensures real-time compliance reporting for regulators and banks involved in trade facilitation. Consortium platforms like we.trade, Marco Polo, and Contour are building on R3 Corda and Hyperledger Fabric to deliver these solutions to global financial institutions. ## Asset tokenization and capital markets Tokenization refers to the process of creating blockchain-based representations of real-world assets. These tokens can represent equity, bonds, real estate, commodities, or fund shares, enabling programmable ownership, fractional access, and 24/7 trading.
In capital markets, this enables faster issuance, improved liquidity, and automated compliance. Types of tokenized assets: * Tokenized equity and shares for private companies * Digitally issued debt instruments (bonds, debentures) * Tokenized REITs or real estate portfolios * Gold and commodity-backed tokens * Asset-backed security tokens for capital raising Blockchain improves capital market infrastructure by: * Automating cap table management * Enforcing transfer restrictions via smart contracts * Providing real-time investor registries * Enabling peer-to-peer secondary trading Example: A company issues tokenized bonds via a permissioned blockchain. Investors can subscribe directly through digital wallets, receive interest payouts via smart contracts, and trade the tokens on regulated secondary marketplaces. Custody, KYC, and audit trails are all maintained on-chain. Institutions like SIX Digital Exchange, JPMorgan Onyx, and Deutsche Börse are actively exploring and launching tokenization platforms. ## Digital identity and KYC Banks and insurers must perform Know Your Customer (KYC), Anti-Money Laundering (AML), and other due diligence checks for each new customer. This results in redundant checks, slow onboarding, and fragmented records.
Blockchain enables self-sovereign identities and shared KYC registries that reduce duplication and protect privacy. Use case model: * A user completes KYC once with a trusted institution and receives a digital identity token or credential on-chain * The token contains zero-knowledge proofs or signed attestations from the verifier * When opening an account with another institution, the user can share their KYC credential, which is cryptographically verified without resubmitting all documents Advantages: * Reduced onboarding time and friction * Shared trust between financial institutions * User-controlled privacy and selective disclosure * Real-time regulator audit capabilities Hyperledger Indy and Sovrin are examples of identity-focused networks enabling decentralized KYC. Several central banks and consortiums are building private networks for verifiable credential exchange. ## Credit scoring and lending automation Traditional credit scoring relies on outdated models and opaque datasets, often excluding individuals without formal banking history.
Blockchain introduces new methods for creditworthiness evaluation, especially in underbanked markets. Use cases: * Blockchain-based micro-lending platforms where users build reputation through repayment history stored on-chain * Collateralized lending using tokenized assets or NFTs as security * Peer-to-peer lending marketplaces governed by smart contracts * Open credit registries where borrower behavior is immutably recorded A blockchain lending workflow: * A user pledges tokenized assets into a lending pool * A smart contract verifies asset type and risk level * Funds are disbursed based on predefined ratios * Interest accrues and is paid out on-chain * Collateral is liquidated automatically upon default This model removes intermediaries, reduces operational costs, and enables global access to credit markets. On-chain data like wallet activity, DAO participation, or DeFi history can supplement or replace traditional credit bureaus. ## Insurance claims and policy management Insurance processes are often burdened by manual claims processing, delayed validations, document fraud, and lack of transparency for policyholders.
Blockchain introduces an efficient alternative through shared ledgers, smart contracts, and automated oracles. Use cases in insurance: * Automated claims approval via smart contracts * Fraud-resistant policy records with digital proofs * Shared risk pools with on-chain contribution tracking * Parametric insurance that triggers payouts based on predefined events Parametric models are especially impactful in agricultural or travel insurance. A parametric contract might pay out when rainfall drops below a defined level or when a flight is delayed beyond a threshold. With oracles feeding real-world data, claims are processed instantly and without human involvement. Example: * A farmer purchases a crop insurance policy recorded on-chain * Weather APIs feed rainfall data into the blockchain through a trusted oracle * A drought condition is detected and meets the payout threshold * The smart contract automatically disburses the insured amount to the farmer’s wallet Benefits for insurers: * Lower administrative overhead * Higher customer satisfaction due to faster settlements * Greater transparency in premium calculation and claim handling * Immutable audit trails for regulators Insurtech startups like Lemonade and Etherisc are already piloting such systems for flight delay insurance, weather protection, and more. ## Regulatory compliance and audit automation Compliance is a non-negotiable aspect of banking and financial services. Institutions must report to central banks, tax agencies, financial intelligence units, and auditing firms. Traditional compliance workflows are reactive, expensive, and prone to human error.
Blockchain turns compliance into a real-time, traceable, and proactive process. Use cases: * Automated generation of audit logs for transactions * Smart contract enforcement of regulatory thresholds (e.g., transaction limits) * AML pattern monitoring on-chain using transparent analytics * Tamper-evident timestamping of disclosures and approvals Example: * A digital bank integrates a smart contract that flags transactions over $10,000 * When a flagged transaction occurs, the details are shared with a registered regulatory node * The compliance officer views the data instantly and approves or freezes the transaction in near real-time The benefits are substantial: * Reduction in regulatory fines due to non-compliance * Faster turnaround on audits and reconciliation * Greater accountability in process governance * Trusted reporting to tax and enforcement agencies Permissioned blockchains like Hyperledger Fabric or Corda allow fine-grained access control, ensuring that only authorized regulators can see sensitive data while maintaining transparency. ## Fraud detection and prevention Financial fraud takes many forms: identity theft, money laundering, account manipulation, synthetic identities, insider collusion. Traditional fraud detection tools rely on pattern recognition in siloed systems.
Blockchain changes this paradigm by providing a unified, tamper-evident, and verifiable ledger across entities. Fraud prevention use cases: * Detecting duplicate or forged loan applications by checking hashes of submitted data * Verifying transaction history using zero-knowledge proofs * Preventing multiple claims on the same insured asset using NFT-based ownership * Cross-institutional fraud investigation via shared analytics on a consortium ledger How it works: * Each customer interaction, transaction, or submitted document is hashed and recorded * Fraud detection models query the ledger for patterns of reuse, suspicious timing, or high-risk counterparties * Alerts are triggered and routed to the risk management team with auditable metadata By design, blockchain makes backdating, overwriting, or double-spending nearly impossible. This drastically raises the bar for attackers while making legitimate operations easier to monitor. Banks that adopt blockchain-based audit layers report higher detection rates and faster resolution cycles. ## Blockchain in reinsurance Reinsurance involves the transfer of risk from an insurance company to a reinsurer. The process often involves multi-party contracts, delayed settlements, and complex reconciliations.
Blockchain brings transparency and shared truth to reinsurance treaties and settlement workflows. Use cases: * Recording reinsurance contracts as smart contracts with embedded payout logic * Automating premium calculation and claim apportionment * On-chain risk transfer between insurers and reinsurers * Shared claims history to reduce disputes Example: * An insurer writes a group life insurance policy * A reinsurance smart contract is signed and recorded on-chain with automated payout triggers * When a claim is validated and paid, the reinsurance contract allocates the appropriate reimbursement to the reinsurer * All records, documents, and funds are tracked with full transparency Benefits: * Reduced operational friction between insurer and reinsurer * Real-time visibility into portfolio exposure and liabilities * Automated, trusted settlement of reinsurance claims * Elimination of spreadsheet-based reconciliations Blockchain platforms like B3i and RiskStream Collaborative are working to digitize global reinsurance networks using distributed ledger infrastructure. ## Blockchain in capital adequacy and liquidity tracking Banks are required to maintain sufficient liquidity and capital under Basel III regulations. Monitoring these ratios requires real-time awareness of obligations, exposures, and market positions.
Blockchain enables transparent, real-time monitoring and automated triggers based on compliance thresholds. Use cases: * Real-time exposure tracking across clearing networks * Instant visibility into pledged collateral or reserve assets * Automated capital requirement testing based on smart contract rules * Stress test modeling using shared on-chain simulations With tokenized assets and digital balance sheets, blockchain allows regulators to run stress tests or compliance checks directly from the ledger, improving visibility and response time. Banks can also build internal dashboards that pull on-chain collateral positions and simulate liquidity thresholds without manual inputs or spreadsheets. This model supports proactive compliance and smoother communication with central banks and auditors. ## Blockchain in wealth and asset management Wealth management involves portfolio balancing, client onboarding, investor reporting, and regulatory alignment. Asset managers must coordinate multiple parties, custodians, and asset classes across global jurisdictions.
Blockchain simplifies this process through tokenization, automated reporting, and smart contract-based advisory services. Use cases: * Tokenized funds with programmable compliance and fractional ownership * Blockchain-based investor onboarding and KYC checks * Digital audit logs for every portfolio rebalancing event * Peer-to-peer reallocation of assets with embedded rules For example: * A mutual fund tokenizes its shares using an ERC1400-compliant smart contract * Each investor receives tokenized fund units in a secure wallet * The fund manager can update NAV daily on-chain and issue redemptions directly through the contract * All investor actions are recorded and accessible for regulatory audit This not only reduces fund administration costs but also enables the creation of next-generation digital investment platforms, opening the door to robo-advisory, DeFi-native funds, and 24/7 investment access. ## Blockchain in insurance fraud prevention Insurance fraud often includes staged accidents, inflated claims, or identity misuse. These are hard to detect in traditional systems due to data fragmentation.
Blockchain offers real-time cross-verification and immutable claims history for both insurers and regulators. Use cases: * On-chain claim submission with encrypted document hashes * Shared fraud detection database among insurers with privacy-preserving analytics * NFT-based vehicle or property identity to prevent multiple claims on the same item * Integration of IoT data (e.g., dashcam, GPS) with on-chain verification Example: * A car accident claim is submitted along with timestamped dashcam footage * The footage hash is registered on-chain and linked to the claim * Another insurer receives a similar claim from the same VIN and sees the duplicate in real-time * The fraud is flagged and halted before payout Blockchain’s immutable design and shared access model dramatically reduce the opportunity for fraudulent behaviors and facilitate collaborative anti-fraud strategies. ## Smart contract auditability in financial agreements In the BFSI sector, contractual obligations between parties require transparency, enforceability, and historical traceability. Smart contracts offer a programmable way to encode these terms on-chain with automatic execution and audit trails.
However, for adoption at scale, these contracts must be auditable by legal teams, regulators, and counterparties. Use cases: * Encoding loan terms, covenants, and repayment logic in smart contracts * Automated escrow releases based on multi-party agreement * Modular compliance layers for jurisdictional alignment * Real-time reporting of contract events for audits Example: * A syndicated loan agreement is recorded as a smart contract * Each lender’s portion, repayment schedule, and interest accrual logic is visible and enforced by code * Regulators can access a read-only view of the contract lifecycle * Auditors can verify that each clause executed correctly and that no party modified or bypassed terms Smart contracts provide a single source of truth, eliminating disputes and removing ambiguity. With logging, versioning, and structured storage, audit readiness becomes continuous rather than periodic. Standards like ACTUS and ISDA’s Common Domain Model are being integrated into blockchain contracts to enable interoperable financial logic. ## Risk scoring and blockchain-based rating models Credit risk and counterparty risk are central to financial decision-making. Traditional models rely on centralized credit bureaus, proprietary data, and delayed updates.
Blockchain-based scoring models offer real-time, transparent, and decentralized alternatives. Use cases: * On-chain credit scoring based on wallet behavior, loan repayment, or DAO participation * Open-source risk models using oracles and DeFi reputation metrics * Federated scoring systems where multiple banks contribute data while preserving customer privacy Example: * A borrower participates in three DeFi lending pools, repaying on time for six months * A DAO-based credit protocol aggregates on-chain behavior, collateral ratios, and staking history * A score is generated and shared as a verifiable credential * A bank uses the score to offer a microloan without redoing the entire KYC process Risk scoring models can evolve continuously with on-chain behavior, and are portable across platforms. Combining blockchain analytics with zero-knowledge proofs enables scoring without exposing sensitive user data. ## ESG reporting and sustainability tracking Environmental, Social, and Governance (ESG) compliance is a growing requirement for banks, insurers, and institutional investors.
Blockchain enhances ESG initiatives by offering transparent, tamper-proof tracking of sustainability metrics and carbon-related disclosures. Use cases: * Tokenized carbon credits with traceable issuance and retirement * Real-time ESG impact logging in lending and investment portfolios * Supply chain tracking for ethically sourced goods * On-chain emissions and energy data for green financing Example: * A bank issues a green bond on a public-permissioned blockchain * The bond terms include a clause that funds must be used for renewable energy deployment * Solar panel installations are tracked via IoT devices and registered on-chain * Each energy milestone triggers a smart contract report to regulators and ESG dashboards Blockchain provides both accountability and automation. Issuers, verifiers, and regulators can collaborate on shared networks to ensure that sustainability claims are verifiable and traceable. Institutions like the World Bank and IFC have piloted blockchain-based green bonds and carbon registries to improve transparency in ESG-linked instruments. ## Central bank digital currencies and interbank settlement Central Bank Digital Currencies (CBDCs) represent a transformative application of blockchain in the financial sector.
They offer programmable, state-issued digital money that can be used for retail payments, wholesale banking, and government services. CBDC use cases: * Real-time gross settlement between banks without intermediaries * Tokenized cash collateral in derivative clearing * Instant payroll and government subsidy disbursement * Cross-border CBDC interoperability for FX efficiency Example: * The central bank issues a wholesale CBDC to commercial banks as digital tokens * When Bank A wants to settle an interbank transfer with Bank B, it sends a CBDC token on-chain * The smart contract checks settlement logic and confirms instantly * No intermediaries, no reconciliation, no delays Benefits: * Reduced systemic risk via 24/7 settlement finality * Automated monetary policy tools (e.g., interest-bearing tokens) * Enhanced auditability and anti-money laundering controls * Frictionless cross-border settlement between central banks Pilot programs are active in multiple countries including India (e₹), China (e-CNY), Europe (Digital Euro), and Singapore. Platforms like mBridge, Project Dunbar, and BIS’s Innovation Hub are shaping the global CBDC infrastructure. ## Derivatives and structured product automation Derivatives trading relies on complex legal documentation, manual clearing processes, and fragmented settlement systems. Blockchain allows these instruments to be modeled, issued, and settled automatically using smart contracts. Use cases: * On-chain options and futures contracts with programmable strike logic * Collateral management using tokenized assets * Real-time margin tracking and liquidation * Structured note issuance with embedded payout calculations Example: * A structured note is issued with a payoff tied to the performance of a crypto index * The smart contract calculates the value daily and updates investor balances * If a stop-loss trigger is hit, the product unwinds automatically and funds are returned * Regulatory reports are generated in real-time and sent to the compliance node This approach eliminates settlement delays, reduces counterparty risk, and allows for instant customization and automation of derivative products. Projects like ISDA’s CDM on DLT and derivatives protocols on platforms like Corda and Hyperledger are advancing this domain. ## Regulatory sandboxes and blockchain test networks As innovation accelerates, regulators need secure ways to observe, experiment with, and understand new financial technologies.
Blockchain-based sandboxes allow regulated testing of new digital products with full visibility and control. Use cases: * Deploying pilot versions of CBDCs or digital securities in isolated environments * Sharing testnet analytics with regulators and oversight boards * Real-time rule enforcement simulation for AML/KYC logic * Stress-testing financial instruments on synthetic chains Example: * A startup launches a tokenized investment platform inside a regulatory sandbox * The regulator node is granted access to transaction data and contract logic * The sandbox simulates investor flows, stress scenarios, and compliance breaches * Insights are shared transparently without impacting real users These sandboxes help both startups and incumbents validate concepts, while giving regulators the tools to shape future rules with hands-on data. ## Blockchain-based treasury management For corporations and banks, treasury functions like cash positioning, liquidity monitoring, and inter-entity settlements are mission-critical.
Blockchain simplifies these functions through tokenization, smart workflows, and global asset visibility. Use cases: * Tokenized cash and intra-company transfers across jurisdictions * Real-time cash pooling and visibility dashboards * Treasury collateral backed by tokenized assets * Automated FX hedging and conversions Example: * A multinational enterprise tokenizes its cash across five subsidiaries * Each treasury operation (e.g., funding, FX, reconciliation) is performed on-chain using smart contracts * Daily cash positions and liquidity buffers are visible to HQ instantly Benefits: * Faster liquidity management and funding decisions * Compliance with capital controls and internal audit policies * Elimination of interbank friction for internal settlements Treasury digitization using blockchain transforms a traditionally opaque function into a real-time, transparent, and auditable system. ## Financial inclusion and microfinance Traditional banking infrastructure often fails to reach underserved populations, especially in rural or developing areas. Lack of physical branches, credit history, and identification prevent individuals from accessing savings, credit, or insurance.
Blockchain reduces onboarding friction and expands reach via mobile-first, peer-to-peer financial services. Use cases: * Wallet-based micro-savings accounts accessible with a phone * On-chain credit history and loan tracking for unbanked individuals * Community lending pools governed by smart contracts * Blockchain identity tokens linked to social or behavioral data Example: * A rural cooperative uses blockchain wallets to collect savings from members * The funds are pooled into a smart contract-managed treasury * Members can apply for loans, which are approved by consensus or voting * Repayments are tracked on-chain, and successful borrowers build a decentralized reputation Benefits: * Lower operational costs for service providers * Trust-building in communities without intermediaries * Reduced corruption or mismanagement in fund allocation * Inclusion of populations without formal documentation Projects like Celo, Moeda, and Kotani Pay use mobile-first blockchain tools to deliver microfinance and community banking solutions globally. ## Cross-jurisdictional compliance automation BFSI institutions often operate across multiple regulatory jurisdictions, each with its own AML, tax, capital, and reporting rules. Ensuring compliance in this fragmented landscape requires constant coordination and adaptation.
Blockchain offers a standardized yet flexible foundation for building regulatory logic into transactions themselves. Use cases: * Automated jurisdiction checks before trade execution * On-chain withholding tax calculation and remittance * Smart contract enforcement of transfer restrictions by region * Role-based access for regulators to specific transaction types Example: * A securities exchange tokenizes debt instruments accessible to both EU and APAC investors * The smart contract includes jurisdiction filters that validate the user’s region before allowing a purchase * Tax is calculated and logged automatically based on regional rules * The local regulator can query regional transaction summaries via API Benefits: * Lower cost of multi-region compliance * Fewer errors due to built-in rule enforcement * Transparent and real-time reporting to regulators * Easier entry for fintechs operating in multiple countries This model turns regulation into an API, improving trust and reducing legal risk. ## Blockchain integration with decentralized finance (DeFi) DeFi is a rapidly growing ecosystem of permissionless financial applications that run on public blockchains. Traditional BFSI players are increasingly exploring integration opportunities with DeFi protocols to unlock liquidity, reach new markets, and automate services.
Bridging these worlds requires risk controls, compliance mechanisms, and robust custody. Use cases: * Tokenized assets from banks used as collateral in DeFi lending protocols * DeFi vault strategies embedded within traditional fund products * CeFi (centralized finance) APIs for users to access DeFi under a regulated wrapper * Regulated stablecoins issued by banks and used in liquidity pools Example: * A bank creates a tokenized treasury bond product * Users can deposit the bond token into a DeFi protocol to earn yield * A risk layer ensures only approved tokens or verified addresses can interact with the protocol * Custody and reporting are managed through the bank’s regulated interface Benefits: * Hybrid offerings combining security and innovation * Greater capital efficiency and 24/7 liquidity * Access to programmable yield strategies * Participation in open financial infrastructure Platforms like Aave Arc, Compound Treasury, and Fireblocks are building institutional-grade interfaces for DeFi-BFSI convergence. ## Customer identity, consent, and privacy management Managing customer identity is fundamental to BFSI operations. However, centralized identity systems create silos, increase data leakage risk, and impose high friction on the user experience.
Blockchain enables a new model of decentralized, user-controlled identity and consent. Use cases: * Self-sovereign identities with reusable KYC credentials * Selective disclosure using zero-knowledge proofs * Time-bound or context-specific access tokens * Consent receipts recorded immutably on-chain Example: * A user completes KYC once with a trusted bank and receives a digital identity credential * When accessing another bank or insurer, the user shares a proof without exposing underlying documents * The institution verifies authenticity and timestamp without storing user data * The user can revoke or audit consent from a wallet-based dashboard Benefits: * Lower onboarding and compliance costs * Increased user privacy and control * Shared trust across financial institutions * Verifiable, real-time identity auditability Standards like W3C Verifiable Credentials, DID, and zkSNARK-based privacy schemes are enabling compliant yet private financial identity ecosystems. ## Governance and internal audit automation Internal governance and audit processes are often manual, retrospective, and disconnected across departments.
Blockchain enables proactive, continuous governance with structured logic, audit trails, and programmable access controls. Use cases: * Multi-signature workflows for approvals (e.g., fund transfers, vendor onboarding) * On-chain documentation of board decisions and change logs * Tamper-evident internal audit journals * Event-based compliance rule triggers (e.g., time-locked decisions) Example: * An insurance firm encodes its claim approval policy into a governance smart contract * Each claim over $100,000 requires digital signatures from two managers and one compliance officer * Once approved, funds are released and a record is posted to a compliance-only channel * Internal audit can trace the entire process in real time This approach: * Reduces risk of non-compliance or fraud * Enables faster resolution of governance events * Creates transparent alignment between teams and regulators * Makes internal processes more efficient and enforceable Blockchain’s deterministic nature ensures that what is written is what executes, minimizing ambiguity and enhancing accountability. ## Blockchain for financial product traceability Many financial products — especially in insurance and investment — pass through multiple hands before reaching the end user. Each transfer creates legal, financial, and regulatory obligations that are often poorly tracked.
Blockchain provides granular, real-time traceability of asset creation, ownership, transfer, and redemption. Use cases: * Tracking of structured product ownership from issuance to redemption * Provenance of insurance-backed financial guarantees * Mapping product flows across multiple financial intermediaries * Detection of unauthorized product reselling or re-wrapping Example: * A mortgage-backed security is tokenized, with each mortgage traced to its original loan agreement * Each transfer, tranche, and investor action is logged on-chain * When regulators or auditors review the instrument, they see full traceability from origin to current holder Benefits: * Enhanced investor protection * Clear proof of ownership and entitlement * Compliance with distribution and suitability rules * Reduced complexity in downstream servicing and auditing Product traceability powered by blockchain builds a digital thread from origin to delivery, fostering trust and reducing opacity. ## Digital custody and asset safekeeping As banks and asset managers enter the world of tokenized assets and digital securities, the need for institutional-grade custody becomes paramount.
Digital custody refers to the secure storage and management of private keys and on-chain assets using regulated, auditable infrastructure. Use cases: * Custody of tokenized bonds, equities, and funds * Secure storage for corporate treasury crypto holdings * Delegated access and transaction signing for institutional accounts * Integration with trading, compliance, and risk systems Example: * A bank launches a digital asset desk to serve clients interested in investing in tokenized products * Private keys are held inside a certified Hardware Security Module (HSM) with multi-factor access * Client requests are signed by an approval workflow and broadcast via a secure, compliant node * The system logs every action and connects to internal risk, reconciliation, and client reporting tools Benefits: * Meets regulatory requirements around safekeeping and segregation * Supports operational controls like transaction limits, role separation, and alerts * Enables DeFi participation while protecting private key exposure * Bridges traditional custody models with on-chain capabilities Leading players like Anchorage, Fireblocks, Metaco, and BitGo offer custody-as-a-service to banks, while many incumbents are launching in-house digital vaults. ## Blockchain for clearing and settlement Clearing and settlement infrastructure in capital markets is built on layers of intermediaries, each introducing latency and cost. Trades settle in T+1 or T+2 cycles, and reconciliation can take days.
Blockchain reduces this friction by enabling real-time atomic settlement of trades, fully transparent to both parties. Use cases: * Tokenized securities and cash settled instantly via Delivery versus Payment (DvP) * Post-trade reconciliation eliminated via shared ledger * Real-time clearing with automated netting logic * Instant asset transfer across accounts without custodial lag Example: * Two institutions trade a tokenized bond and stablecoin via a smart contract * The DvP logic confirms both assets are available and locks them until mutual execution * The swap executes atomically, and both institutions receive their new holdings * Regulators view the transaction on a read-only node with full metadata Benefits: * Elimination of counterparty and settlement risk * Reduced reliance on clearinghouses and central depositories * 24/7 trade finality and reporting * Lower cost of transaction infrastructure Platforms like SDX (SIX Digital Exchange), Fnality, and Deutsche Börse’s D7 use blockchain-based settlement rails for digitized financial products. ## Financial messaging and interbank workflows Banks and financial institutions depend heavily on messaging networks like SWIFT, FIX, and ISO 20022 for routing payments, orders, and confirmations.
These networks are limited by format rigidities, message latency, and reconciliation gaps. Blockchain introduces a shared messaging and settlement layer that unifies both instruction and execution. Use cases: * On-chain settlement instructions replacing SWIFT messages * Tokenized representations of ISO 20022 messages * Real-time messaging between correspondent banks * Transparent workflow tracking for trades, FX, and asset servicing Example: * A bank sends a message to initiate a cross-border payment with embedded compliance metadata * The message is tokenized and signed on-chain, with built-in approval logic * The receiver bank validates and confirms, and funds are released by a smart contract * The audit trail includes timestamps, sender identity, and message content hash Benefits: * Secure, verified, and standardized instruction layer * End-to-end visibility into transaction processing * Faster dispute resolution and exception handling * Integration with digital asset payment rails Blockchain-based messaging reduces opacity, harmonizes data, and links action with outcome for real-time workflows. ## Real-world deployment case studies ### Case: JP Morgan Onyx and JPM Coin JP Morgan launched its Onyx platform to digitize wholesale payments and settlement using blockchain. JPM Coin is used by institutional clients to settle USD payments instantly and with finality.
Clients onboard through a permissioned system and can send programmable payments between entities without waiting for ACH or SWIFT cycles. Results: * Billions settled through JPM Coin with full compliance oversight * Tokenized repo trades executed with intraday maturity * Pilot of multicurrency settlement across Onyx network ### Case: DBS Bank and Project Guardian DBS Bank partnered with MAS and other institutions to tokenize government securities, forex, and liquidity pools under Project Guardian.
The pilot demonstrated end-to-end execution of real-world financial instruments in a composable, on-chain environment. Results: * Instant settlement of tokenized bonds and FX swaps * Asset managers could compose and execute DeFi strategies with full KYC * MAS confirmed regulatory frameworks for future pilots ### Case: ICICI and blockchain trade finance ICICI Bank deployed a blockchain-based trade finance solution to process import-export documentation between Indian firms and international banks.
The platform digitized letters of credit, shipping data, and invoices with participant-specific visibility. Outcomes: * Reduced trade cycle from weeks to days * 100 percent visibility into transaction progression * Lower document error rates and fraud risk ### Case: AXA’s parametric flight insurance AXA piloted a smart contract-based flight delay insurance product. Users purchased policies via an app, and the blockchain oracle tracked flight status.
If a flight was delayed beyond two hours, the smart contract paid the insured party automatically. Benefits: * Elimination of claims submission process * Fully automated payout in hours * Enhanced transparency and customer trust These examples showcase how blockchain is evolving from a theoretical construct to an operational backend across various BFSI verticals. ## Blockchain’s role in the future of banking and finance As blockchain infrastructure matures, BFSI institutions are undergoing a structural shift toward programmable, transparent, and collaborative systems.
The core value drivers include: * Shared truth among participants * Immutable yet flexible digital infrastructure * Smart contract automation of financial logic * Decentralized control without operational chaos The convergence of blockchain with AI, IoT, and privacy technologies will power the next wave of intelligent finance. Smart assets will self-report status, compliance will be machine-enforced, and customer onboarding will happen in seconds — all anchored to tamper-evident ledgers. Financial firms that adopt blockchain thoughtfully can: * Reduce back-office costs by up to 50 percent * Open new markets with 24/7 tokenized offerings * Enhance trust through cryptographic audit trails * Innovate faster with composable infrastructure Regulators are evolving alongside, building legal frameworks, innovation hubs, and oversight mechanisms that support safe experimentation. While challenges remain — from scalability to interoperability — the BFSI sector’s early investments are maturing into high-impact deployments. Blockchain is not a silver bullet, but in BFSI, it solves real structural problems: trust gaps, data fragmentation, manual workflows, fraud risk, and legacy costs.
Its success lies not in replacing core systems outright, but in augmenting them with secure, verifiable, and programmable layers. As institutions pilot and scale their blockchain strategies, collaboration becomes essential — across banks, regulators, startups, and technology providers.
The future of finance is decentralized in design, centralized in standards, and distributed in execution. file: ./content/docs/knowledge-bank/blockchain-ai-usecases.mdx meta: { "title": "Blockchain & AI use cases", "description": "Exploring the intersection of artificial intelligence and blockchain for secure, decentralized, and intelligent systems across industries" } ## Introduction to blockchain and AI convergence Artificial intelligence and blockchain represent two of the most transformative technologies of the 21st century. AI brings capabilities such as predictive analytics, natural language understanding, image recognition, and autonomous decision-making. Blockchain, on the other hand, provides tamper-proof data storage, decentralized consensus, and programmable transactions. When combined, these technologies offer unique synergies that unlock trust, auditability, and intelligence at the edge of digital ecosystems. AI needs high-quality, reliable, and often distributed data — while blockchain ensures data integrity, traceability, and verifiability. Blockchain systems benefit from adaptive and efficient algorithms — which AI provides through optimization, pattern detection, and autonomous logic. Together, blockchain and AI empower new architectures for decision automation, decentralized data marketplaces, model provenance, autonomous agents, and verifiable insight delivery. These use cases cut across sectors including healthcare, finance, logistics, cybersecurity, education, insurance, smart cities, agriculture, and supply chains. This documentation explores joint applications of blockchain and AI, highlighting their combined potential to deliver systems that are intelligent, decentralized, explainable, and secure. ## Verifiable AI models and on-chain provenance AI models are only as trustworthy as their training data and evolution history. In high-stakes environments such as finance, medicine, and critical infrastructure, it is essential to prove how models were built, what data they used, and who owns them. Blockchain provides a mechanism to record and verify every step of an AI model's lifecycle. Applications include: * Storing hashes of training datasets on-chain to prove their integrity * Logging model versions, retraining events, and hyperparameter changes * Registering intellectual property claims for proprietary AI models * Creating audit trails for compliance and regulatory purposes Example: * A bank develops a credit scoring model and stores a cryptographic hash of the training dataset on blockchain * Each retraining session is logged with timestamp, data source identifier, and performance benchmarks * If regulators audit the system, they can verify that the model was trained fairly, with documented bias mitigation steps This ensures that AI models deployed in production are explainable, traceable, and auditable — reducing legal risk and building institutional trust. ## Decentralized data marketplaces and federated learning AI systems thrive on large, diverse datasets. However, in industries like healthcare or finance, data sharing is restricted by privacy regulations, competitive interests, and security concerns. Blockchain enables decentralized data marketplaces where organizations can contribute, access, and monetize data without relinquishing control. Combined with federated learning, AI models can be trained across decentralized nodes without exposing raw data. Blockchain coordinates trust, payment, and access control across participants. Applications include: * Token-based data exchange platforms with provenance and access rules * Incentive models for contributing anonymized, high-quality datasets * Federated learning smart contracts that log model performance per data node * Monetization of underutilized datasets for AI researchers and startups Example: * Multiple hospitals participate in a federated learning initiative to build a cancer prediction model * Each hospital trains the model locally on their data and submits encrypted updates to a central aggregator * Blockchain records each contribution, assigns weights based on data volume and quality, and distributes rewards accordingly * No raw patient data is ever shared, preserving HIPAA and GDPR compliance This approach accelerates AI development in regulated environments while maintaining control, privacy, and fairness. ## AI for smart contract risk analysis and testing Smart contracts are the core execution layer of blockchain applications. However, they are vulnerable to bugs, exploits, and logic flaws — which can result in irreversible financial loss. AI systems can analyze smart contracts to detect potential vulnerabilities, test for attack vectors, and optimize gas usage. Key use cases: * AI-based static code analysis for smart contract logic and dependencies * Natural language processing (NLP) to match smart contract behavior with legal terms * Reinforcement learning to generate adversarial transaction sequences for stress testing * Automated report generation for auditors and protocol maintainers Example: * A DeFi protocol integrates an AI engine that reads newly deployed smart contracts and flags anomalies in fund locking logic * Developers receive alerts about integer overflows, unprotected upgrade paths, or faulty access controls * A dashboard displays risk scores and recommended patches, improving platform resilience AI acts as a real-time co-auditor, significantly reducing the time and effort required to secure decentralized applications. ## Blockchain for AI model sharing and incentivization Training AI models is computationally expensive and often requires infrastructure that many developers lack. Blockchain supports ecosystems where model developers can publish, license, and monetize their AI models securely and transparently. Features of blockchain-enabled AI sharing: * Tokenized model access rights and subscriptions * Usage-based royalties enforced via smart contracts * Provenance tracking of model versions and forks * Distributed inference markets where developers earn for API calls Example: * An NLP researcher publishes a sentiment analysis model on a blockchain AI marketplace * Each time the model is queried via API, a micropayment is triggered through a smart contract * Derivative models built on the base version are linked and routed royalties through a shared economic model This democratizes AI access, aligns incentives between creators and users, and encourages innovation through composable model ecosystems. ## AI-powered identity verification and fraud detection Identity verification is a foundational challenge in digital systems. AI models excel at biometric analysis, pattern recognition, and behavioral profiling. When combined with blockchain-based identity frameworks, they enable secure, privacy-preserving identity verification systems. Use cases: * AI-based facial recognition paired with self-sovereign identity wallets * Behavioral authentication through typing patterns, device signals, or voice * On-chain identity scoring to detect bots, sybils, or social engineering attempts * AI-trained fraud detection models for KYC, AML, and credit scoring workflows Example: * A decentralized exchange integrates an AI model that detects fraudulent behavior based on wallet activity and transaction timing * The user’s self-sovereign identity is linked to a dynamic risk score recorded on-chain * If a transaction crosses a fraud threshold, the platform requests multi-factor authentication or flags it for review Combining AI and blockchain delivers both intelligence and accountability in identity management and access control. ## Governance automation and AI-assisted DAOs Decentralized autonomous organizations (DAOs) coordinate resources, make collective decisions, and manage treasuries. AI enhances DAO functionality by providing analytics, forecasting, and decision recommendations to voters. Blockchain ensures that proposals, votes, and outcomes are tamper-proof. Applications: * AI models analyzing voting history and proposing policy simulations * Automated treasury management with risk-adjusted investment strategies * NLP interfaces that summarize proposals and translate governance documents * Reinforcement learning agents optimizing DAO efficiency and participation Example: * A climate impact DAO uses an AI agent to score grant proposals based on carbon impact, feasibility, and regional needs * The scoring algorithm is recorded on-chain for transparency * DAO voters review AI recommendations alongside human-curated comments before casting votes This augments human governance with machine intelligence, leading to faster, more informed decision-making without sacrificing transparency. ## AI-enhanced oracles for real-world data verification Oracles connect blockchain systems to external data sources. AI enhances oracle reliability by filtering, validating, and scoring incoming data before it is injected into smart contracts. This improves decision accuracy in DeFi, insurance, gaming, and prediction markets. AI-integrated oracle functions: * Outlier detection and data sanity checks before transmission * Confidence scoring and reliability reputation for data providers * Real-time sentiment or event detection from web, media, and sensors * AI prediction models that translate raw data into actionable insights Example: * A decentralized insurance protocol uses an AI oracle to detect natural disaster events by analyzing satellite imagery and news reports * The AI model confirms the likelihood of a flood event, assigns a confidence score, and transmits the result to the smart contract * If the score exceeds a threshold, claims are paid automatically without manual investigation AI-powered oracles bridge the gap between raw information and verified decision-ready signals. ## Generative AI and NFT ecosystem integration Generative AI models can create unique digital art, music, video, and code. When paired with blockchain, each creation can be minted as an NFT, attributed to its creator, and monetized through programmable royalties. Applications include: * On-demand generative content tied to ownership or subscription NFTs * Co-creation platforms where users guide AI models and mint outputs * Generative collectibles where traits are AI-generated at mint time * Metadata linking prompts, model versions, and provenance to each NFT Example: * A creator uses a generative AI model to produce one-of-a-kind digital sculptures * Buyers mint these pieces as NFTs, each containing the prompt, algorithmic seed, and rendering data * Royalties are routed to the creator each time the NFT is resold * Some NFTs grant remix rights, allowing new artworks to be created and monetized collaboratively This opens up a new frontier of programmable, AI-generated art governed by blockchain-based intellectual property frameworks. ## Autonomous agents and blockchain coordination Autonomous agents are software entities that operate independently to perform tasks such as negotiation, data collection, and transaction execution. When powered by AI, these agents can make context-aware decisions. Blockchain allows them to interact in a trustless environment with accountability, persistence, and value transfer. Key features of blockchain-coordinated agents: * Identity and reputation management through on-chain logs * Smart contract-based payment for services or data exchange * Agent-to-agent negotiation for logistics, bandwidth, or compute resources * Multi-agent systems for collaborative supply chain or market tasks Example: * A fleet of delivery drones operates in a city to transport medical supplies * Each drone is an autonomous agent that uses AI to plan routes, avoid obstacles, and respond to weather * Drones negotiate drop-offs, pickups, and recharges using blockchain-based tokens and smart contracts * The entire fleet operates transparently, and each drone’s actions are logged for compliance and optimization Combining AI and blockchain in multi-agent systems leads to autonomous economies capable of self-organization, resilience, and distributed negotiation. ## Healthcare diagnostics and decentralized AI validation AI is rapidly transforming healthcare diagnostics, helping detect anomalies in medical images, predict patient outcomes, and personalize treatments. However, clinical environments require strict auditability, transparency, and data protection. Blockchain complements AI by preserving data provenance, enforcing model transparency, and supporting decentralized clinical collaboration. Healthcare applications include: * Blockchain-logged diagnosis reports with verified AI inputs and outputs * Secure sharing of diagnostic models between hospitals and research labs * Training models across decentralized medical datasets using federated learning * Clinical trial coordination with real-time data logging and audit support Example: * A consortium of hospitals trains an AI model to detect diabetic retinopathy from eye scans * Each diagnosis is recorded on blockchain with an encrypted reference to the scan, AI decision, and physician override * Patients can grant revocable access to their health record for second opinions or follow-up * Regulators audit the model's accuracy and fairness using blockchain-anchored training documentation This architecture strengthens confidence in AI-assisted care while preserving patient rights, transparency, and medical ethics. ## Regulatory compliance and algorithmic accountability As AI systems become integral to decision-making in sectors like banking, insurance, and hiring, regulators are demanding more transparency and auditability. Blockchain provides immutable logs of how, when, and why AI models made certain decisions — creating a verifiable trail for regulators, users, and stakeholders. Key benefits of blockchain for AI compliance: * Recording model scores, thresholds, and decision criteria * Timestamped logs of AI decisions, overrides, and exceptions * Storage of bias mitigation steps and retraining triggers * Secure evidence repositories for audits and investigations Example: * A fintech platform uses an AI model to evaluate loan applications * Each decision is accompanied by an explanation token and logged on-chain with the applicant’s consent * If an applicant is rejected, they can retrieve the reason and request a manual review * Regulators receive monthly compliance digests with model changes and performance audits This ensures that AI decisions comply with legal frameworks such as GDPR, the EU AI Act, and the US Equal Credit Opportunity Act, while preserving fairness and recourse for users. ## Explainability and interpretability of AI via blockchain records AI explainability refers to the ability to understand how models reach their conclusions. In high-risk domains such as finance, defense, and law, explainability is crucial. Blockchain enables traceable recording of decision flows, feature importance rankings, and post-hoc explanations. Use cases include: * On-chain logs of LIME, SHAP, or other explanation algorithm outputs * Storage of attention maps, saliency maps, or causal graphs tied to model output * Verifiable model audit logs showing who accessed what, when, and how * User-facing explanation tokens embedded in digital transactions or content Example: * A digital hiring platform uses an AI model to screen resumes * For each decision, it generates a SHAP explanation that identifies the features that contributed to the ranking * This explanation is stored as a hash on blockchain and linked to the candidate’s application record * Hiring managers and candidates can view the reasoning and flag inaccuracies for redress Explainability builds user trust, supports audits, and helps organizations prove compliance while reducing reputational risk. ## AI training transparency and dataset bias monitoring One of the biggest risks in AI is bias in training data. Bias can result in discriminatory behavior by models, especially in domains such as criminal justice, credit scoring, or hiring. Blockchain offers mechanisms to log dataset composition, model behavior on protected attributes, and community-verified fairness audits. Applications include: * Dataset registration with attribute distribution and source metadata * Logs of model performance across demographic slices (e.g., age, race, income) * Community-driven model probing, challenge-response testing, and crowd audits * Smart contracts that trigger retraining when bias thresholds are exceeded Example: * A government uses AI to screen grant applications * The training dataset is logged on-chain with metadata about gender and geographic representation * A fairness watchdog DAO conducts periodic audits and submits probes to test model outcomes * If bias is detected, the smart contract alerts administrators and freezes further deployment This framework promotes responsible AI development and encourages transparency by design. ## AI-enhanced legal contracts and dispute resolution Smart contracts are deterministic and efficient but often lack nuance in interpreting real-world ambiguity. AI systems can assist in translating natural language contracts into code, resolving disputes through semantic analysis, and interpreting context in decentralized arbitration. Features of blockchain + AI in law: * NLP models parsing legal text to generate contract logic or flags * Machine-assisted arbitration through case summarization and similarity matching * Predictive models estimating outcomes based on prior case history * Blockchain records storing claims, arguments, and rulings immutably Example: * A decentralized freelance platform uses smart contracts for payments and delivery conditions * If a dispute arises over quality, an AI system reviews previous interactions, checks for keyword compliance in the deliverable, and summarizes arguments * Arbitrators receive AI-generated digests and make decisions recorded on-chain * The smart contract then executes the payout or refund based on the decision Combining AI’s analytical power with blockchain’s trust layer transforms how contracts are created, interpreted, and enforced globally. ## AI in decentralized finance and algorithmic portfolio management Decentralized finance (DeFi) protocols automate financial services using smart contracts. AI enhances DeFi by enabling dynamic risk analysis, portfolio optimization, market prediction, and yield strategy selection. AI + blockchain in DeFi supports: * Portfolio rebalancing based on risk profiles and market signals * Detection of arbitrage, rug pulls, or suspicious trading activity * AI-generated DeFi strategies encoded as DAO proposals or automation scripts * Reputation scores for wallets based on past trades, interactions, and strategy quality Example: * An investment DAO uses an AI engine that tracks liquidity pools, token volatility, and macroeconomic data * Based on these inputs, it recommends staking in low-risk stablecoin pairs for a two-week window * The DAO votes on the strategy, and if approved, a smart contract executes the allocation * Performance is tracked, logged on-chain, and used to refine future recommendations This fusion of data-driven intelligence and automated execution creates adaptive financial ecosystems without centralized control. ## Content generation and IP attribution in synthetic media AI models like large language models (LLMs) and generative adversarial networks (GANs) are capable of producing text, images, music, and video at scale. Blockchain ensures that each piece of synthetic content can be traced to its origin, model, prompt, and usage rights. Applications in synthetic media: * Tokenizing AI-generated content with embedded attribution and license * Registering prompts and model configuration as part of NFT metadata * Revenue sharing among prompt engineers, model creators, and remix artists * Storing hashes of generated content for plagiarism detection Example: * A marketer uses an AI model to generate taglines for a product campaign * The chosen content is minted as an NFT containing the prompt and model version used * As the campaign succeeds, the prompt designer receives a bonus through a smart contract split * If disputes arise over originality, the blockchain record is used to verify authorship This architecture supports synthetic creativity while maintaining intellectual integrity, transparency, and legal clarity. ## AI agents for compliance monitoring and reporting Regulatory compliance requires continuous monitoring, accurate reporting, and audit-readiness. AI agents can scan on-chain data, evaluate contracts, and detect violations in real time. Blockchain provides the substrate for evidence collection, report generation, and tamper-proof storage. Examples include: * AML and KYC enforcement using AI flagging of transaction behavior * Monitoring emissions or sustainability KPIs in tokenized carbon markets * Smart contract evaluation for blacklisted wallet interaction or slippage * Dashboards for regulators linked to AI-generated compliance metrics Example: * A green finance protocol tokenizes verified carbon credits * An AI model monitors transaction flows and compares them to emissions targets, reporting anomalies * Dashboards used by regulators receive alerts if trading exceeds pre-set thresholds or bypasses audit triggers * Every report is hashed and timestamped on blockchain for future accountability This combination creates real-time compliance systems that are data-rich, automated, and trustworthy by default. ## AI-assisted DAO governance and treasury forecasting DAOs rely on collective decision-making to allocate funds, vote on upgrades, and manage ecosystems. However, coordinating thousands of members with different preferences and technical backgrounds can lead to inefficiencies. AI systems help by modeling decision outcomes, summarizing proposals, and forecasting treasury health. Capabilities include: * Budget simulations based on historical DAO spending and market data * Clustering of proposals by theme, urgency, or category * NLP-based summaries of governance discussions or proposal descriptions * Predictive modeling of vote outcomes and stakeholder alignment Example: * A grants DAO receives 200 funding proposals in a month * An AI assistant tags each proposal based on content, filters out duplicates, and highlights strategic relevance * Treasury models show that funding 70 percent of them would reduce runway to five months * The AI ranks proposals based on alignment, budget impact, and contributor history This use of AI improves governance quality and scalability while keeping the decision process transparent and explainable through blockchain logs. ## Predictive supply chain intelligence and blockchain provenance Supply chains increasingly rely on predictive analytics to manage risk, forecast demand, and optimize inventory. When paired with blockchain, AI models can use trusted, real-time data across suppliers, logistics providers, and regulators — creating predictive intelligence ecosystems. Applications include: * Predicting shortages, delays, or compliance failures using blockchain-verified data * AI models trained on real-time events like customs clearances or IoT logs * Smart contract responses to risk events based on AI thresholds * Model versioning and performance tracking logged on-chain Example: * A global food supplier tracks shipments using blockchain-based logistics records * An AI model monitors port congestion, weather, and customs clearance rates to forecast delivery delays * If risks are detected, a smart contract reroutes orders to secondary suppliers or triggers contract renegotiation clauses This ensures that decisions are made on trusted data, with audit trails for every predictive action and automated contingency handling via blockchain workflows. ## Dynamic token economics and AI-guided parameter tuning Designing token economies requires complex trade-offs between incentives, supply dynamics, staking rewards, and inflation. AI models simulate different token configurations and forecast economic behaviors. Blockchain smart contracts enforce these rules on-chain. Use cases include: * Agent-based modeling to simulate user behavior under different reward curves * AI optimization of staking multipliers and liquidity incentives * On-chain governance adjusting token parameters based on predictive models * Transparent logs of token economic changes and their justifications Example: * A play-to-earn game suffers from token oversupply and falling engagement * AI models test several inflation reduction curves and staking bonuses * Community votes on the best model, and a smart contract implements the new parameters * Treasury and user behavior are monitored for rebound indicators, all logged on-chain This approach results in adaptive, data-driven token economies that evolve with ecosystem needs and remain accountable to stakeholders. ## AI-powered education platforms with on-chain credentials Education platforms benefit from adaptive learning algorithms that personalize content, assess mastery, and guide students. Blockchain enhances this by issuing verifiable, portable credentials that reflect progress, reputation, and skill ownership. Key applications: * On-chain credentials tied to AI-assessed knowledge milestones * Tokenized incentives for peer mentoring, quiz completion, or content creation * AI-generated learning paths with real-time adjustment * DAO-based governance of learning content and certification standards Example: * A decentralized coding school issues badges to students as they complete AI-curated modules * Tests are proctored by biometric AI tools and issued time-locked certification tokens * Top students earn tokens they can use for mentorship, DAO voting, or fee waivers * Institutions verify graduates by querying blockchain for course history and assessment provenance This system makes learning more accessible, verifiable, and globally interoperable without centralized gatekeepers. ## AI in climate and energy optimization with blockchain tracking AI models are essential for optimizing energy use, predicting emissions, and simulating climate risks. Blockchain enables transparent, decentralized systems for reporting emissions, tracking credits, and enforcing sustainability goals. Applications include: * AI models forecasting energy demand and grid usage * Blockchain-recorded emissions data for carbon credits and ESG compliance * Smart contracts adjusting resource pricing based on AI forecasts * Distributed oracles for environmental data verified through multi-party sources Example: * A city uses AI to predict peak energy demand across districts based on weather, usage patterns, and historical data * Smart meters upload data to blockchain, and credits are adjusted in real time through automated contracts * Companies that exceed emission limits purchase verified offsets tracked via tokenized carbon credits * Dashboards provide real-time reporting to regulators and community stakeholders Combining AI’s foresight with blockchain’s verifiability helps build more sustainable and responsive energy systems. ## Behavioral economics and gamification in blockchain systems AI models can simulate user psychology, preferences, and motivation in decentralized platforms. When combined with blockchain’s programmable incentives, these insights guide the design of effective gamification and nudges. Applications include: * Predicting user churn and adjusting incentive structures accordingly * Modeling the effect of reward frequency, randomness, or tiering * Adaptive leaderboards and engagement tiers tied to wallet activity * AI-suggested quests, challenges, or missions based on user profile clustering Example: * A decentralized learning platform uses AI to detect drops in engagement for intermediate learners * It launches a “streak challenge” with NFT rewards personalized to individual goals * Completion data is stored on-chain, and social sharing triggers bonus airdrops * New users are matched with peer mentors based on profile similarity This approach helps DAOs, DApps, and ecosystems retain users, reward loyalty, and sustain long-term value through intelligent incentive design. ## Ethical alignment and value modeling for autonomous systems As autonomous AI systems make increasingly complex decisions, ensuring ethical alignment becomes critical. Blockchain allows the encoding, tracking, and collective shaping of AI values through governance, audits, and verifiable behavior logs. Applications: * Embedding ethical rules into autonomous agent policies * Blockchain-anchored decisions showing why an action was taken * Stakeholder votes on ethical trade-offs or value conflicts * Penalties and corrections enforced through DAO-mediated redress systems Example: * A self-driving logistics company trains an AI fleet to prioritize safety, efficiency, and eco-friendliness * Each delivery decision logs its path, trade-offs, and rationale using AI-generated summaries stored on-chain * If an incident occurs, stakeholders review the blockchain record to assess alignment with declared values * Public feedback guides model retraining and the adjustment of priorities This model ensures that autonomous decisions remain transparent, improvable, and aligned with evolving human norms. ## Cross-chain AI agents and interoperability As blockchain ecosystems fragment across multiple chains, AI agents act as intelligent routers, translators, and coordinators of logic across platforms. These agents can abstract away complexity and enable seamless multichain user experiences. Capabilities include: * AI-powered bridges that choose optimal chains for transactions * Cross-chain arbitration of disputes based on policy prediction * AI summarization of multichain identity profiles for dApps * Unified dashboard interfaces driven by AI indexing across chains Example: * A wallet AI scans user assets and gas fees across Ethereum, Avalanche, and Arbitrum * It recommends bridging funds to the most cost-effective chain for a DeFi strategy * Transactions are signed, routed, and logged on blockchain with traceable agent IDs * Portfolio performance is summarized with AI-powered alerts and yield tips AI improves the usability and intelligence of the multichain future while blockchain guarantees security and transaction consistency. ## Final remarks on emerging directions The convergence of blockchain and AI is still in its early stages, but momentum is growing rapidly. This dual stack of decentralized infrastructure and intelligent computation is driving the evolution of: * Autonomous markets and machine-to-machine coordination * Verifiable intelligence pipelines and trustless analytics * Privacy-preserving AI training and secure multi-party learning * AI-native governance interfaces for DAOs and digital nations Projects that integrate both technologies will benefit from transparency, decentralization, and optimization — opening the door to a new class of applications where systems are not only decentralized but adaptive, explainable, and aligned with stakeholder interests. ## Edge AI and blockchain for decentralized infrastructure Edge computing refers to processing data closer to its source — such as on mobile devices, IoT sensors, or autonomous drones — rather than in centralized cloud systems. AI deployed at the edge enables real-time decision-making, while blockchain ensures secure data exchange, usage verification, and tamper-proof audit trails. Key joint capabilities: * Logging model inputs and decisions at the device level using lightweight blockchains * Authenticating edge devices using decentralized identity and access control * Triggering smart contracts based on edge AI outcomes (e.g., anomaly detection) * Federated edge learning with blockchain-coordinated updates and incentives Example: * A network of agricultural sensors uses AI to monitor soil moisture and crop health * When drought conditions are detected, smart contracts trigger alerts to irrigation DAOs * Farmers receive recommended actions and funding for intervention * Sensor data and actions are logged on-chain to build trust and track environmental impact This architecture allows for privacy-preserving, scalable intelligence on distributed hardware with secure coordination across stakeholders. ## Blockchain-AI synergy in decentralized science (DeSci) DeSci refers to decentralized science ecosystems where researchers, institutions, and citizen scientists collaborate openly on research, publishing, funding, and data sharing. AI helps automate research workflows, while blockchain ensures that data, models, and credit are verifiable, transparent, and resistant to censorship. Use cases include: * Open-access scientific datasets with AI-assisted metadata tagging and indexing * Blockchain records of peer review, model training, and publication edits * Tokenized reputation scores for contributors, reviewers, and AI-assisted analysis * On-chain lab notebooks and time-stamped research provenance Example: * A cancer research group publishes datasets on a decentralized registry * An AI model helps identify correlations between gene expression and treatment outcomes * Results, model versions, and citations are registered on blockchain * Contributors receive token rewards based on reproducibility metrics and community validation This ecosystem promotes reproducibility, transparency, and equitable participation in global research efforts. ## Zero-knowledge proofs and AI: verifiable privacy Zero-knowledge proofs (ZKPs) allow parties to prove that a statement is true without revealing the underlying data. When combined with AI, ZKPs enable models to operate on private data while still proving correctness. This is essential for use cases involving sensitive information. Applications include: * Verifying that an AI made a decision using valid rules without revealing input data * Proving fairness or bias checks were run correctly before deploying a model * Enabling private inference: showing a model output is valid without exposing the model weights * Protecting trade secrets or proprietary logic during multi-party computation Example: * A credit scoring model runs locally on a user’s device and returns an approval decision * A zero-knowledge proof is generated showing that the result was computed using a regulatory-approved model * The score and proof are recorded on-chain without exposing income, history, or other private features * Auditors can confirm validity using public smart contracts This unlocks AI-powered services in finance, health, and defense where confidentiality is non-negotiable. ## AI pattern detection in blockchain analytics Blockchain datasets are publicly accessible, vast, and rapidly growing. AI models are uniquely suited to analyzing on-chain behavior, transaction flows, and ecosystem dynamics. These insights can be used for fraud detection, investment research, compliance, and market intelligence. Key applications: * Graph neural networks for identifying clusters, mixers, or bot networks * Sequence modeling of wallet activity to detect Ponzi schemes or insider trading * Topic modeling and NLP analysis of governance forums and DAO chats * Predictive analytics for token velocity, DeFi positions, or NFT trends Example: * A compliance firm uses a machine learning model to analyze transaction graphs across multiple chains * It flags wallets that interact with sanctioned entities or show signs of front-running * Results are embedded in smart contract risk scores used by DeFi aggregators * DAOs use this data to exclude high-risk actors from participating in votes or rewards AI transforms raw blockchain data into structured insight, while blockchain ensures that the models and alerts remain accountable and tamper-resistant. ## Reinforcement learning in autonomous financial agents Reinforcement learning (RL) is a type of AI that learns optimal behavior through trial and error in dynamic environments. Blockchain allows RL agents to interact with real financial systems in a secure, trackable manner — creating intelligent strategies for trading, liquidity provision, and hedging. Applications: * AI agents that autonomously stake, borrow, lend, or rebalance portfolios * Smart contracts defining environments, rewards, and penalties for RL agents * On-chain validation of RL performance and behavior constraints * Governance frameworks for agent registration, oversight, and improvement Example: * A decentralized hedge fund deploys multiple RL agents across lending protocols * Each agent competes to maximize return while maintaining a target risk level * Performance and model updates are published periodically and recorded immutably * Token holders vote on which agents to fund, scale, or sunset This model creates financial ecosystems where strategies evolve autonomously, but transparently, under shared governance. ## AI-enabled copyright enforcement and creative provenance Creative industries face growing challenges around content theft, plagiarism, and unauthorized use of generative AI outputs. Blockchain and AI together provide tools to enforce copyright, track creative lineage, and preserve attribution. Use cases: * AI detection of duplicate media or model-generated derivatives * Blockchain anchoring of original content hashes and licensing terms * Smart contract enforcement of royalty splits and resale rights * IP registries that index AI-generated assets with human attribution logs Example: * An artist mints a generative video piece as an NFT * An AI crawler detects a copy used without permission on a centralized platform * The violation is flagged and proof is recorded on-chain * A smart contract automates the claim process or engages a DAO for arbitration This protects creative ecosystems, ensures AI compliance with original licenses, and deters unauthorized appropriation at scale. ## Collaborative AI agents in creative DAOs AI tools can participate in DAOs not just as tools, but as creative collaborators. From generating visual ideas to suggesting storylines, these agents operate within rules, track their outputs, and receive attribution and compensation. Blockchain tracks contributions, manages payments, and enables remix licensing. Examples: * AI tools writing base melodies that human artists refine * DAO-licensed AI avatars acting as NPCs in games or virtual stories * Generative poetry bots trained by DAO members and voted on for publishing * Shared revenue pools that reward both code and content contributors Example: * A visual art DAO uses a collective AI model trained on their style * Each new piece is minted with dual attribution: DAO and the human editor * Royalties are split, and the AI’s training logs and source weights are verifiable on-chain * Holders of creative contribution tokens can propose new styles or curation themes This unlocks collaborative workflows where creativity is distributed, documented, and governed transparently. ## Autonomous NFT behavior and on-chain AI triggers NFTs are evolving from static digital representations into dynamic, interactive agents. AI allows NFTs to adapt, evolve, or respond based on context. Blockchain defines the logic and execution triggers behind these behaviors. Capabilities: * NFTs that change appearance based on real-world data (weather, location, events) * AI-generated evolutions or narrative updates embedded in NFT metadata * On-chain inputs driving state changes such as rarity, traits, or utility * Smart contract-controlled interactions with games, social platforms, or marketplaces Example: * A story-based NFT evolves through chapters unlocked via wallet interaction * Each new chapter is generated with AI assistance, and token holders vote on which plotline is accepted * Evolution logs, prompt metadata, and user choices are recorded on-chain * The NFT becomes a living artifact, responsive to both machine logic and human community This redefines what digital ownership means — from owning a file to co-creating an evolving digital identity. ## Intelligent robotics and blockchain-based coordination Robots that act autonomously in real-world environments require trust, coordination, and verifiable interaction logs. AI gives robots perception and decision-making capabilities. Blockchain ensures that robots authenticate their actions, resolve tasks collaboratively, and exchange value securely. Key integrations: * On-chain registration of robots as agents with unique identities and capabilities * AI models for navigation, manipulation, and interaction * Blockchain-based task assignment, contract fulfillment, and payment * Decentralized logs of incidents, maintenance, and updates Example: * A smart factory deploys robots that handle manufacturing, inspection, and packaging * Each robot is linked to a blockchain profile recording uptime, tasks, and upgrades * When products are damaged, AI logs the cause and records the event immutably * Robots can bid on task assignments or share status through a coordination smart contract This setup makes robotics infrastructure transparent, interoperable, and accountable across manufacturers, regulators, and service providers. ## Synthetic identity and AI-persona ecosystems Synthetic identity systems use AI to generate personas, agents, or avatars that interact with users across platforms. Blockchain provides the identity layer for anchoring these agents to wallets, contracts, or reputational histories. Capabilities include: * AI-generated personas (voice, image, behavior) with unique token-bound IDs * On-chain reputation tied to agent conduct, task completion, or content quality * Privacy-preserving attestation of skills, access rights, or certifications * Marketplaces for agent leasing, licensing, or delegation Example: * A news platform uses synthetic presenters generated via voice and image synthesis * Each AI persona is tied to a blockchain credential showing training data, bias testing, and ownership * Advertisers can verify that content delivery met tone and demographic targets using on-chain logs * If an AI persona violates terms or receives negative engagement scores, it is paused or retrained via governance Synthetic identity systems create programmable, accountable agents that operate transparently in regulated or user-facing environments. ## AI and blockchain in metaverse experience design The metaverse is an emerging domain where users interact via immersive digital environments. AI drives behavior, narrative, and simulation. Blockchain enables ownership, transactions, and persistence of digital identities and assets. Integrated metaverse use cases: * AI agents as NPCs or guides trained by DAO-curated content * NFTs linked to adaptive in-game assets powered by machine learning * Smart contracts enforcing experience triggers, progression, or access * Behavioral analytics for user experience personalization stored on-chain Example: * A museum in the metaverse features interactive AI docents trained on cultural archives * Visitors earn badges (NFTs) based on completed tours, which grant deeper access * Conversations are anonymized, indexed, and used to improve AI knowledge via on-chain reputation scores * Curators propose new exhibits, and AI suggests layouts based on visitor behavior This enables metaverse platforms to deliver highly interactive, personalized, and verifiable digital worlds governed by creative communities and intelligent agents. ## Long-context LLMs as DAO tools and co-creators Large language models (LLMs) like GPT can act as summarizers, editors, debaters, and decision-support systems within DAO environments. With blockchain integration, their outputs, prompts, and roles can be tracked, governed, and monetized. Use cases: * LLMs generating DAO proposal summaries or explaining governance processes * Verified chain-of-prompt records to ensure output provenance and transparency * Reward systems for helpful prompts, evaluated through DAO voting or activity logs * LLM moderation of community channels with recordable intervention logic Example: * A public goods DAO uses an LLM to analyze grant proposals and produce summary dashboards * Each summary links to the original prompt, user, and model checkpoint ID on-chain * Token holders can upvote useful summaries, triggering a smart contract reward * The DAO also funds model tuning for domain specificity, with updates versioned on blockchain These language models become trusted members of decentralized ecosystems with defined responsibilities and transparent influence. ## Blockchain-based AI risk governance frameworks As AI systems take on greater autonomy, society needs mechanisms to assess, approve, and govern their deployment. Blockchain enables decentralized risk registers, audit logs, and enforcement contracts for AI models. Applications: * On-chain declarations of AI risk category, training methods, and guardrails * Decentralized peer review of model behavior and edge case testing * Smart contracts enforcing risk thresholds or operational constraints * Public dashboards visualizing exposure, coverage, and performance over time Example: * An autonomous drone AI is registered as a high-risk system under an EU-aligned taxonomy * It logs test flights, anomalies, and retraining efforts to a blockchain risk registry * DAO-based ethics reviewers flag behavior outliers, triggering a vote on usage restrictions * Smart contracts automatically ground the drone if certain violation scores are breached This ensures that powerful AI systems are deployed with accountability, verifiability, and shared oversight — not just centralized risk reporting. ## AI-native token design and behavioral feedback loops Designing token systems that incentivize positive behavior and sustainable growth is a complex challenge. AI models can analyze wallet behaviors, protocol interactions, and community health to guide token supply and governance decisions. Features include: * Behavioral analytics for token holders and DApp users * AI-generated recommendations for inflation schedules, staking rates, or airdrop eligibility * Blockchain-enforced adoption of updated parameters through DAO vote * Real-time feedback loops between user behavior, reward curves, and protocol health Example: * A contributor DAO uses AI to detect periods of low morale, inactivity, or whale influence * Token issuance slows automatically, and bonus pools are redirected to reputation growth events * The AI also suggests modified voting quorums or review incentives based on activity levels * The full rationale is published on-chain with links to model inputs and expected outcomes This keeps token ecosystems adaptive, healthy, and aligned with community contribution dynamics. ## Distributed AI inference and blockchain monetization As more models run on decentralized infrastructure, blockchain enables metering, access control, and revenue sharing for AI inference. This approach reduces reliance on centralized API providers and promotes open infrastructure. Applications: * On-chain payments for inference queries processed on decentralized hardware * Proof-of-inference attestations recorded by nodes for transparency * Model routing optimization to reduce latency and compute cost * Token reward systems for GPU contributors in distributed model networks Example: * An open-source image model is hosted across decentralized compute nodes * Users pay small fees in stablecoins or protocol tokens to run image stylization tasks * Each node logs proof of service, verified by zk-snarks or cross-checking peers * Earnings are split among node operators, model authors, and prompt engineers This powers AI-as-a-service ecosystems that are censorship-resistant, cost-efficient, and equitably monetized. ## Decentralized large language models and model ownership Large language models (LLMs) are currently hosted by centralized providers, limiting transparency, usage control, and monetization options for independent developers. Blockchain offers the foundation for decentralized LLM ecosystems where training, hosting, and revenue can be distributed fairly. Key capabilities: * Tokenized ownership of model checkpoints and training weights * Federated hosting of model shards with incentive structures for node operators * Governance of training data policies, fine-tuning directions, and access pricing * On-chain usage metering for API calls and query responses Example: * A language model trained on open-source legal texts is split into segments across hosting nodes * Each node receives micropayments for query execution via smart contracts * Token holders vote on which datasets should be added for fine-tuning * Researchers build wrappers on top of the core model and receive licensing royalties through programmable attribution Decentralized LLMs align with the goals of transparency, interoperability, and sovereignty in knowledge systems. ## AI-powered DAO recruitment and skill matching As decentralized organizations grow, hiring and contributor engagement become difficult to manage through manual processes. AI can assist by parsing proposals, analyzing contributions, and recommending roles. Blockchain ensures that reputation, verification, and incentives are handled securely and transparently. Applications: * AI parsing of GitHub, forum, and wallet data to identify active contributors * Natural language extraction of skills and past work from public profiles * Matching between proposal requirements and contributor availability * On-chain verification of completed tasks and issuance of skill credentials Example: * A DeFi protocol launches a bounty for a new smart contract module * AI recommends developers based on their past Solidity work, DAO participation, and timezone availability * Accepted contributors receive tokens, which convert to credentials visible in future DAO hiring rounds * Community votes adjust role criteria and signal demand for specific skills This enhances the agility, inclusiveness, and quality of contributor onboarding across the decentralized economy. ## Blockchain-powered digital twin modeling with AI integration Digital twins are virtual representations of real-world systems such as factories, vehicles, or cities. They rely on sensor data, predictive models, and simulation engines. Blockchain provides the shared data backbone and tamper-proof logging necessary for collaboration, versioning, and compliance. Capabilities: * AI models predict behavior, degradation, or failure of real-world assets * Blockchain stores lifecycle logs, update history, and control permissions * Stakeholders verify simulation parameters and update rights * Smart contracts automate reconfiguration, billing, or intervention triggers Example: * A wind farm maintains digital twins of each turbine using telemetry data and AI forecasts * Maintenance DAOs receive alerts when components exceed vibration thresholds * Spare part logistics, crew scheduling, and token-based accountability are coordinated on-chain * Regulators and insurance providers audit operational logs in real time This fusion of real-time AI and blockchain ensures high trust, uptime, and auditability for cyber-physical infrastructure. ## Security co-design between AI and blockchain layers Blockchain applications require robust security at multiple levels — from smart contract logic to network behavior. AI models assist in detecting anomalies, defending against attacks, and predicting exploits. In return, blockchain logs are used to train and evaluate these security systems. Joint security use cases: * Anomaly detection for smart contract interactions and DApp behavior * Machine learning models for phishing, MEV, or transaction front-running identification * Real-time mitigation or alerts triggered via smart contracts * Blockchain-verified training and test data for AI red-teaming Example: * A Web3 wallet integrates an AI assistant that flags suspicious transactions or approvals * If an approval looks risky, the user is prompted to verify with a second wallet or biometric check * The AI model learns from on-chain feedback (was it fraud or not?) and improves over time * Model versions, incident hashes, and retraining events are stored immutably This system increases security while minimizing false positives, empowering users and developers alike. ## Generative AI in decentralized entertainment and gameplay Entertainment experiences increasingly integrate generative AI to produce real-time dialogue, characters, or visuals. With blockchain, these experiences can be owned, traded, and governed — forming the foundation for participatory digital storytelling and economies. Applications include: * Procedural narrative engines where AI co-authors plotlines and quests * Dynamic NFT content that adapts to player behavior or in-game choices * Token-gated prompts and co-creation layers for fan-fiction and story arcs * Royalty flows and remix rights enforced via smart contracts and generative fingerprints Example: * A fantasy game allows players to summon AI-generated characters whose backstories evolve over time * Players mint episodes of their journey as NFT story arcs that other players can adopt or remix * Popular characters are licensed by other creators, with all attribution and income streams handled on-chain * A meta-AI tracks lore consistency across thousands of parallel stories This infrastructure supports co-created entertainment that is dynamic, owned, and endlessly generative. ## Federated governance of AI ethics and compliance AI governance faces global fragmentation and value pluralism. Blockchain enables federated, transparent mechanisms where organizations, communities, and regulators can collaboratively shape AI behavior — even in the absence of a single authority. Governance capabilities: * Voting protocols for ethical rule selection, weighting, or overrides * Registry of regulatory compliance templates and audited outcomes * Incentivized red-teaming and bug bounty protocols for model behavior * Composability between different jurisdictional constraints and model versions Example: * An international group develops an AI model for news recommendation * Each jurisdiction submits policy constraints, like source diversity or misinformation thresholds * The model is audited by both AI agents and human reviewers, with results logged on-chain * Deployments in different regions use distinct configurations, all traceable to a shared governance base This creates trust across borders and encourages compliance with evolving expectations of fairness, inclusiveness, and accountability. ## Future outlook for AI and blockchain convergence The integration of artificial intelligence and blockchain will define the infrastructure layer for tomorrow’s economy, society, and governance systems. Their joint application is evolving along several major trajectories: * Autonomous value networks: Machines transact, coordinate, and optimize without centralized control * Programmable trust: Smart contracts and AI agents dynamically evaluate and enforce social, legal, and economic rules * Decentralized intelligence ecosystems: Communities train, audit, and own models collaboratively * On-chain analytics: Blockchain is no longer just a ledger, but a knowledge substrate updated by AI in real time In this landscape: * Models will be born and live in public * Knowledge will be composable, licensed, and monetized through transparent rails * Governance will shift from binary votes to nuanced, contextual decision support powered by explainable systems * Safety, creativity, and alignment will become provably auditable properties As blockchain provides the secure substrate and AI supplies the adaptive logic, together they will shape a world where intelligence is not centralized, opaque, or proprietary — but shared, programmable, and decentralized. file: ./content/docs/knowledge-bank/blockchain-app-design.mdx meta: { "title": "Blockchain application design", "description": "Guide to designing blockchain applications" } import { Callout } from "fumadocs-ui/components/callout"; import { Card } from "fumadocs-ui/components/card"; # Blockchain application design Effective blockchain application design requires careful consideration of architecture, security, and scalability. ![Web2 Vs Web3 App](../../img/knowledge-bank/web2-vs-web3-app.png) ## Architecture patterns
### On-Chain Components * Smart contracts * State management * Access control * Business logic ### Off-Chain Components * User interface * Data storage * API integration * Business services
In traditional application architectures, the application code and the data it processes are typically managed as two distinct components. The application code, written in languages like Java, Python, or JavaScript, resides on a central server or in a containerized cloud environment and is responsible for handling business logic, user sessions, and orchestrating data flows. In parallel, the actual storage of transactional data, user profiles, orders, logs, etc. is delegated to a separate database layer, such as PostgreSQL, MySQL, or MongoDB. The application code interacts with the database through APIs or query languages, and both components are independently developed, scaled, and maintained. This separation provides flexibility in system design but also introduces dependencies on central operators and trust in the integrity and availability of the database.
In blockchain-based applications, this separation collapses into a single, unified execution environment. Both the application logic and the transactional data reside on the blockchain itself. Smart contracts, typically written in languages like Solidity or Vyper, are deployed directly onto the blockchain network and serve as immutable programs that execute predefined business logic. When users interact with the application, they submit transactions that trigger functions within these smart contracts. These transactions, including the input parameters and resulting state changes, are recorded permanently on the blockchain ledger and are independently validated by all participating nodes.
This convergence of logic and data on a shared decentralized layer introduces several key properties. First, it ensures that the execution of application logic is transparent and verifiable by all parties, since both the contract code and the input/output of each transaction are publicly accessible. Second, it eliminates the reliance on a single trusted database provider, replacing it with consensus-based trust. Every piece of data written to the ledger has been validated by the network and is cryptographically linked to previous transactions, providing tamper-evident auditability.
In blockchain-based systems, the application code, deployed as smart contracts, is inherently tamper-proof once published to the network. Unlike traditional applications where backend code can be modified or patched by system administrators at any time, smart contracts are immutable by default. Once deployed on the blockchain, the code is stored across all nodes and executed identically by every participant. This ensures that no single party can alter the logic or behavior of the application unilaterally, providing strong guarantees of integrity, consistency, and trustless execution.
The integrated nature of code and data on the blockchain also imposes constraints. Unlike traditional applications that can easily modify database records or iterate on business logic by updating backend services, smart contracts are immutable once deployed unless they are explicitly designed to be upgradeable. Additionally, since blockchain networks maintain global state across distributed nodes, every write operation consumes resources and incurs transaction fees, making optimization of both logic and storage essential. Nonetheless, this architecture provides unparalleled security, traceability, and consistency, particularly in multi-party applications where trust boundaries are complex.
By collapsing the application tier and data tier into a single, consensus-governed layer, blockchain shifts the paradigm from “you trust my backend and my database” to “we all trust the same code and data on-chain.” This creates a powerful foundation for building systems that are not only resilient and secure but also provably fair and transparent to all participants.
Blockchain application development requires a fundamentally different approach than traditional software engineering. It introduces decentralized state management, cryptographically enforced rules, and distributed consensus to the application architecture. At its core, the design of a blockchain application is rooted in a few foundational principles, decentralization, security, and scalability, all of which influence the choice of technologies, development patterns, and system boundaries.
Decentralization lies at the heart of blockchain systems and must be thoughtfully applied across application layers. This includes distributing data storage across nodes, ensuring no single point of failure or control exists, and relying on consensus mechanisms such as Proof of Authority (PoA), IBFT2, or QBFT to validate transactions. Network topology must be designed to accommodate validator nodes, light clients, and external observers while maintaining synchronization and performance. The application architecture should aim to minimize trust assumptions between parties by delegating critical workflows to smart contracts, ensuring that execution is deterministic and transparently verifiable on-chain.
Security is a non-negotiable aspect of blockchain application design. Smart contracts must undergo rigorous review and testing to prevent vulnerabilities such as reentrancy, integer overflows, and improper access control. Every interaction must be governed by robust access control policies, often implemented using role-based patterns. Key management must be enforced across both client and infrastructure layers, ensuring that private keys used for transaction signing are never exposed or misused. Moreover, blockchain systems provide a natural audit trail through their immutable transaction history, which can be leveraged to ensure accountability and compliance with regulatory standards.
Scalability must be considered from both a technical and user experience perspective. While Layer 1 blockchains offer security and decentralization, they often face throughput limitations. Therefore, developers may choose to integrate Layer 2 solutions such as sidechains, rollups, or state channels to offload transaction volume. On the data side, efficient storage patterns, like separating on-chain references from off-chain payloads, and leveraging caching strategies can significantly enhance application responsiveness. Load balancing across API services and indexers also ensures that the system remains performant under real-world usage conditions.
The blockchain application stack typically consists of three main layers: frontend, middleware, and the blockchain itself. The frontend is the user’s point of interaction and includes Web3 integration libraries such as ethers.js or web3.js, modern UI frameworks like React or Vue, and robust state management solutions like Redux or Zustand. Frontends connect to wallets, sign transactions, and present real-time blockchain states to users. The user experience must account for asynchronous transaction finality, network confirmation delays, and error feedback to guide users through actions like signing or waiting for a block to be mined.
The middleware layer serves as a bridge between the frontend and blockchain. It includes event listeners that subscribe to smart contract events, transform them into structured data, and store them in off-chain databases. Middleware may also include cache layers to accelerate queries, API gateways for routing and authentication, and custom logic for enforcing workflows that span both on-chain and off-chain systems. This layer is crucial for supporting backend integration, indexing, alerting, and analytics.
At the blockchain layer, the smart contracts govern the core business rules of the application. These contracts are deployed on networks selected based on the project’s performance, cost, and decentralization requirements. Developers must carefully design contract logic to be modular, upgradeable, and optimized for gas consumption. Storage patterns such as mapping-based structures and event-based tracking are preferred to reduce state bloat and execution cost. Gas efficiency and deterministic behavior are essential not only for performance but also for ensuring user affordability and network stability.
Smart contract development should follow a few established best practices. Contracts should be designed in a modular way, separating core logic, access control, and storage. Where upgradability is required, proxy patterns such as UUPS or Transparent Proxy should be used to allow future extension without compromising the initial deployment. Security checks must be embedded at every function entry point to validate sender roles, parameter ranges, and external call risks. Testing suites must simulate edge cases and validate all logic under both normal and adversarial conditions.
Data management also plays a key role in blockchain-based systems. Developers must decide what data is stored on-chain versus off-chain. Typically, hashes of documents, references to IPFS files, or key-value mappings are stored on-chain, while the actual content lives in IPFS, cloud storage, or SQL/NoSQL databases. This separation allows for efficient querying, large data handling, and regulatory compliance. Caching layers such as Redis or ElasticSearch may be introduced to improve responsiveness, especially for dashboards or frequently accessed metadata.
Integration patterns are essential to bridge smart contract logic with the rest of the digital ecosystem. Events emitted from smart contracts are captured by event listeners and passed to downstream processes, whether for updating UI state, triggering business workflows, or invoking external APIs. REST and GraphQL APIs must be designed to abstract the blockchain complexity while exposing key application functions securely and efficiently. Error handling in blockchain applications is critical due to the probabilistic nature of block confirmations and potential gas price volatility. Transaction management components must handle nonce tracking, confirmation polling, and user feedback loops to ensure a smooth experience. file: ./content/docs/knowledge-bank/blockchain-introduction.mdx meta: { "title": "Blockchain introduction", "description": "A comprehensive overview of blockchain technology" } import { Callout } from "fumadocs-ui/components/callout"; import { Card } from "fumadocs-ui/components/card";
![Blockchain Technology](../../img/knowledge-bank/blockchain-header.png)
Blockchain is a decentralized, tamper-resistant technology that enables secure data sharing and transaction recording without relying on a central authority. It works by storing information in blocks that are cryptographically linked, creating an immutable audit trail. This architecture enhances transparency, trust, and accountability across multi-party systems. Blockchain is widely used in finance, supply chain, healthcare, and government to digitize workflows and automate trust. Its programmability through smart contracts further enables the creation of decentralized applications and digital assets.
## Cryptographic foundations Blockchain systems rely heavily on cryptographic techniques to ensure security and integrity of data: > **Hashing**: A cryptographic hash function takes an input (such as a > transaction or an entire block) and produces a fixed-size alphanumeric digest > unique to that input. Even a small change in the input will produce a > drastically different hash. Blockchain uses hashing to chain blocks together > by including the previous block's hash in each new block. Hashing also helps in creating digital fingerprints for data (for example, transaction IDs or block IDs) and contributes to the formation of Merkle trees for efficient verification. > **Nonce**: A nonce ("number only used once") is a value that will be varied to > influence a cryptographic process. In proof-of-work blockchains, the nonce is > a field in the block header that miners adjust when hashing the block. Miners > repeatedly hash the block header with different nonce values until a hash is > produced that meets the network's difficulty target (typically a hash with a > certain number of leading zeros). The correct nonce makes the block's hash valid under the consensus rules, allowing the block to be added. Nonces ensure that each mining attempt produces a different hash output. (In other contexts, such as transactions, the term "nonce" can also refer to a one-time number used to prevent replay attacks or track transaction order, as seen in account-based blockchains.) > **Public/private key pairs**: Blockchain uses asymmetric cryptography for > identity and authentication. Each participant has a private key (kept secret) > and a corresponding public key. The private key can be used to generate > digital signatures on transactions, and the public key allows others to verify > those signatures. This ensures that only the holder of the private key could > have authorized a given transaction. Public keys (or their hashes) often serve as addresses or identifiers on the network. The cryptography (typically elliptic curve cryptography) is designed such that it is computationally infeasible to derive the private key from the public key, providing strong security for users' funds and data. ## Block structure A blockchain is composed of a sequence of blocks, each containing a batch of transactions and a header linking it to the previous block. The structure of a block typically includes: > **Block header**: The header contains metadata about the block. Crucially, it > holds the previous block's hash, linking the block to the chain and ensuring > continuity. It also includes a Merkle root (a single hash representing all > transactions in the block, explained further in the Merkle Trees section) that > commits to the contents of the block. Additional header fields commonly include a timestamp (when the block was created), a difficulty target and nonce (in proof-of-work systems, as described above), and a version or protocol indicator. In some blockchains, the header may also contain other fields; for example, Ethereum's header contains the root of the global state and other metadata. > **Block body**: The body of the block contains the list of transactions that > are included in this block. Each transaction in the body is fully detailed > (including information like sender, receiver, amount, signatures, etc., > covered in the Transactions section). Typically, the block body begins with a special transaction called the coinbase transaction (in cryptocurrencies like Bitcoin) or miner reward transaction, which awards the block creator (miner or validator) any newly minted coins and fees from included transactions. The rest of the body is the series of validated transactions that this block is adding to the ledger. > **Metadata**: Beyond header fields, some blockchains include additional > metadata or auxiliary structures. For instance, a block may contain a block > height (the sequence number of the block in the chain) or references to > alternate chains (like "uncles" or "ommers" in Ethereum). However, these > details vary by blockchain implementation. The key aspect is that any metadata included is also summarized by the block's hash (directly or indirectly), so that the block's identity reflects all of its content. Every block's header (especially the previous hash link and Merkle root) ensures that blocks are tamper-evident. If anything in an earlier block's content were altered, the change would propagate to that block's hash and invalidate all subsequent links, breaking the chain's continuity unless massive recomputation or a consensus override occurs. ## Transactions Transactions are the fundamental operations that update the ledger state within a blockchain. Each transaction represents a transfer of value or an execution of some logic (in the case of smart contracts). Key points about transactions include: > **Transaction structure**: While specifics differ between blockchain > platforms, a transaction generally includes fields such as the source > (implicitly or explicitly indicated by a signature or an input reference), > destination address(es), the amount of value to transfer, and other > parameters. In a UTXO-based system (Unspent Transaction Output model, used by Bitcoin), a transaction has one or more inputs (references to unspent outputs from previous transactions that the sender owns) and one or more outputs (newly created outputs assigning value to new owners). Each output can be locked by a cryptographic condition (e.g., "only unlockable by a signature from X's key"). In an account-based system (used by Ethereum and others), a transaction explicitly contains the sender's address, the receiver's address, the transfer amount, and a unique sequence number (nonce) for the sender's account. It may also include a payload data field (for carrying arbitrary data or contract commands) and a gas limit or fee information (especially in systems that charge computational fees). > **Transaction validation**: When a node receives a new transaction, it will > validate it before accepting it into the local transaction pool. Validation > includes checking that the transaction is properly formed and that the sender > has sufficient rights to spend the funds. For UTXO transactions, this means verifying that each input refers to an existing unspent output and that the sum of input values matches or exceeds the sum of outputs (the difference being the transaction fee). For account-based transactions, validation involves checking that the sender's account balance is sufficient and that the nonce (sequence number) is correct (to prevent replay or out-of-order execution). In all cases, the transaction's digital signature(s) must be verified using the associated public key(s) to ensure authenticity. If any part of validation fails, the transaction is rejected by the node. > **Transaction signing**: A transaction must be authorized by the owner of the > funds or resources it is spending. This is achieved through digital > signatures. The creator of a transaction uses their private key to sign the > transaction's data (often the transaction hash or a structured message derived > from the transaction fields). This signature is then attached to the > transaction. Nodes will use the corresponding public key (usually derivable from information in the transaction, such as an included public key or an implicit address reference) to verify the signature. A valid signature proves that the transaction was approved by the holder of the private key associated with the source address. Modern blockchains use secure signature schemes (like ECDSA or EdDSA on elliptic curves) to ensure that forging a signature without the private key is computationally infeasible. Once signed and validated, transactions are broadcast to the network for inclusion in a block. ## Wallets A wallet in blockchain is a software or hardware component that manages a user's key pairs and facilitates the creation of transactions. Importantly, wallets store keys, not coins , the actual assets remain recorded on the blockchain ledger. Key points about wallets include: > **Types of wallets**: There are several forms of wallets, each with different > security and usability trade-offs. Software wallets are applications (on a > desktop, web, or mobile) that store private keys on the user's device, often > encrypted with a password. Hardware wallets are dedicated physical devices > that securely store private keys in a protected hardware module and sign > transactions internally (the private key never leaves the device). Paper wallets are an offline approach, where the key information (often a seed phrase or a QR code of the private key) is printed or written on paper and kept physically secure. Wallets can also be categorized as hot (connected to the internet, e.g., a mobile app wallet for daily use) or cold (completely offline, e.g., hardware or paper wallets) depending on how they are stored and used. > **Key storage and usage**: Wallets generate or import a private key (or a set > of keys). Modern wallets often use a single master seed (a random secret > usually represented as a 12-24 word mnemonic phrase) from which they derive > multiple key pairs (this is the hierarchical deterministic wallet approach, > allowing one backup to secure many addresses). The wallet stores the private key(s) securely, typically encrypted with a user passphrase if it's a software wallet, or in secure hardware in the case of hardware wallets. When the user wants to send a transaction, the wallet software will assemble the transaction data (recipient, amount, etc.), then use the appropriate private key to produce a digital signature on that transaction. The signed transaction is then broadcast to the blockchain network via a node. Wallets also manage addresses (which are often derived from the public keys) and will track the user's balances by monitoring the blockchain (either by running a full node internally, or by querying external nodes). In summary, wallets abstract the cryptographic key management for users, ensuring private keys are safely stored and used to sign transactions when needed. ## Nodes and networking Nodes are the computers that participate in the blockchain network, maintaining and updating the ledger. The network of nodes is peer-to-peer, meaning there is no central server; instead, each node connects to other nodes, forming a resilient mesh that shares data. There are different kinds of nodes and various responsibilities they hold: > **Node types and roles**: In a typical blockchain, a full node downloads and > stores the entire blockchain (all blocks and transactions) and independently > verifies all transactions and blocks against the consensus rules. Full nodes > are the backbone of the network's security and decentralization, as they do > not trust others for validation. A light node (SPV node), by contrast, downloads only block headers or a subset of data and relies on full nodes to provide proofs of transactions (using techniques like Merkle proofs). Light nodes verify that a transaction is included in the chain without storing everything, trading some trust and completeness for efficiency. Miner/Validator nodes are specialized full nodes that, in addition to validating blocks, also create new blocks. In proof-of-work, these are miners that compete to find valid blocks, and in proof-of-stake or BFT systems, these are validators that are selected or rotate to add blocks. Some networks may further differentiate roles (for example, in certain protocols there are "archival nodes" that keep full history vs. pruning nodes, or dedicated witness/masternodes for special tasks), but fundamentally all nodes share the goal of maintaining consensus on the blockchain state. > **Peer-to-peer communication**: Nodes communicate through a peer-to-peer (P2P) > network protocol. When a node starts up, it will discover and connect to a set > of peer nodes (using discovery protocols or a list of known bootstrap peers). > Once connected, nodes exchange information in a gossip-like fashion: if a node > finds out about a new transaction or block (either because it created it or > received it from a peer), it will verify it and then forward it to its other > peers. In this way, new transactions propagate through the network, and newly mined/validated blocks are quickly distributed to all nodes. The P2P network is typically unstructured and robust: each node connects to a random sampling of peers, ensuring redundancy. There is no single point of failure; even if many nodes drop offline, others can still maintain the network. Nodes continuously maintain connections, update each other about the latest block (the tip of the chain), and request data (for example, if a node is syncing from scratch, it will ask peers for blocks sequentially from the genesis up to the latest block). This decentralized networking ensures that all copies of the ledger held by honest nodes eventually converge to the same state. ## Transaction pool (mempool) Before transactions are confirmed and added to a block, they reside in what's commonly called the transaction pool or memory pool (mempool) of each node. The mempool is a staging area for all pending transactions that have been propagated to the network but not yet included in a block. Key aspects of the mempool include: > **Collection of pending transactions**: When a valid transaction is broadcast, > each node that receives it and validates it will place it into its mempool (an > in-memory list of unconfirmed transactions). These transactions remain queued > in the mempool until a miner or validator picks them up to include in a new > block. Each node's mempool might not be exactly identical at all times (due to network propagation delays or node-specific policies), but in general, popular transactions will quickly be seen by most nodes' mempools. > **Prioritization and fees**: Because blocks have a limited capacity (either a > maximum size in bytes, or a gas limit in systems like Ethereum that limits > computational work per block), not all pending transactions can be included > immediately. Transactions in the mempool are typically prioritized by the fee > they offer to the miner/validator. For example, in Bitcoin, transactions offering higher satoshis per byte (fee density) will be preferred, and in Ethereum, transactions with higher gas price (or effective tip, under the EIP-1559 fee mechanism) take priority. Miners will sort the mempool to select the highest paying transactions that fit in the next block. This market mechanism encourages users to attach sufficient fees during busy periods to have their transactions confirmed faster. Low-fee transactions might remain in the mempool for an extended time if the network is congested. > **Mempool management**: Nodes typically impose limits on their mempool size > (in memory), and may drop old or low-fee transactions if the pool is full. > There are also rules to prevent spam, such as not relaying transactions with > absurdly low fees or invalid transactions that could never be mined. Some networks support transaction replacement policies (for instance, "Replace-By-Fee" in Bitcoin allows a transaction in the mempool to be replaced with a new version that pays a higher fee). In general, the mempool ensures that the network has a reservoir of ready-to-include transactions and that no valid transaction is forgotten. Once a transaction is included in a new block and that block is accepted, nodes will remove that transaction from their mempools (since it's now confirmed on-chain). The mempool serves as the buffer and waiting room for the transaction throughput of the network. ## Consensus mechanisms Consensus mechanisms are protocols that enable distributed nodes to agree on the contents of the blockchain (which block comes next) in the presence of potential faults or malicious actors. Different blockchains use different consensus algorithms, each with its own trade-offs: > **Proof of work (PoW)**: PoW is a consensus mechanism where miners compete to > solve a cryptographic puzzle. The puzzle involves finding a hash value for the > next block that is below a target threshold (the target is adjusted > periodically to control the block production rate). Miners achieve this by > varying the nonce in the block header and hashing repeatedly until a valid > hash is found. The first miner to find a valid block broadcasts it, and the network verifies it. PoW makes it extremely costly to rewrite history, because an attacker would need to redo the cumulative work (hashing computations) of the chain. It thus leverages computational difficulty to secure the chain. PoW is robust and fully decentralized (anyone with hardware can attempt to mine), but it consumes significant energy and can have relatively longer times to finality (since multiple blocks might need to pile up to consider a block settled). Bitcoin pioneered PoW, and Ethereum used PoW until it transitioned to PoS; many public blockchains still use PoW for its proven security. > **Proof of stake (PoS)**: PoS is a class of consensus algorithms where the > ability to create new blocks and secure the network is based on ownership of > the blockchain's native asset (the stake) rather than computational work. > Validators in a PoS system must lock up a certain amount of cryptocurrency as > stake. The protocol then pseudo-randomly selects a validator (or a committee of validators) to propose the next block, with probability often weighted by the amount of stake. Other validators will then validate the proposed block, and depending on the protocol, may vote or sign to finalize it. Honest behavior is encouraged by economic incentives: a validator who produces a fraudulent block or contradicts consensus can be penalized, typically by slashing (losing a portion of their staked funds). PoS can significantly reduce the resource usage compared to PoW and often achieves faster consensus (for instance, by finalizing blocks in a few network rounds). There are many PoS variants: some operate in rounds with designated leaders, others use random beacon mechanisms; examples include Casper-style finality, Ouroboros, Tendermint, and more. The security of PoS relies on the assumption that a majority (by stake weight) of validators act honestly, and that the cost of acquiring a majority stake is prohibitive. > **Byzantine fault tolerant protocols (e.g., PBFT)**: In permissioned or > consortium blockchains where participants are known, more traditional > Byzantine Fault Tolerance (BFT) algorithms can be used for consensus. > Practical Byzantine Fault Tolerance (PBFT) is a classic algorithm that allows > a network to reach agreement even if some fraction (typically up to 1/3) of > nodes are faulty or malicious. In a PBFT-like consensus, a block (or transaction batch) is proposed by a leader node, and then a series of voting rounds occur: other validator nodes will vote to accept the block in a prepare phase and a commit phase. If a sufficient supermajority (usually ≥2/3 of nodes) agree on the block, it is finalized and becomes part of the ledger. BFT protocols provide immediate finality , once a block is agreed on, it will not be reversed as long as the assumptions hold. They tend to have higher communication overhead (each node often needs to communicate with all others) and thus are used in networks with dozens of validators rather than thousands. Variants of BFT are used in various contexts: for example, Istanbul BFT (IBFT 2.0) and QBFT are used in some Ethereum-based consortium chains, and Tendermint BFT is used in Cosmos. In addition to PBFT variants, some blockchains use simplified consensus for known validators (like proof-of-authority schemes, or Raft/Kafka-based ordering in Fabric) which are not fully Byzantine fault tolerant but can be suitable when a higher level of trust exists among participants. All these consensus mechanisms aim to ensure that all honest nodes eventually agree on the same sequence of blocks, preserving a single authoritative ledger. They deter double-spending and conflicting histories through different means (economic cost, computational cost, or reliance on trust among a group), but the end result is a tamper-resistant chain agreed upon by the network. ## Forks and protocol upgrades In blockchain terminology, a "fork" can refer to a divergence in the chain's history or an update to the rules governing the system. Here we discuss protocol forks (rule changes) and their implications: > **Hard fork**: A hard fork is a change to the blockchain protocol that is not > backward compatible. This means that blocks created under the new rules are > considered invalid by nodes running the old software. To avoid a permanent > split, all participants must upgrade their software to follow the new rules. If there is disagreement or incomplete upgrade, a blockchain can split into two separate chains at the fork point: one following the old rules and one following the new rules. Each chain will continue independently, and they will not reconverge since their consensus rules differ. Hard forks are used for major upgrades or changes (for example, altering block size limits, changing consensus rules, or repairing a severe security flaw), and require coordination. After a hard fork, nodes that have not upgraded will either stop at the fork point or continue on an incompatible chain. > **Soft fork**: A soft fork is a protocol change that is backward compatible > with older nodes, typically achieved by making the new rules a strict subset > of the old rules. In a soft fork, blocks that follow the new rules also appear > valid to old nodes (because they don't violate the old rules), though the > reverse is not necessarily true (old nodes might accept some transactions that > new rules would reject). Soft forks usually rely on a majority of miners/validators enforcing the new rules; once the majority does so, the network as a whole will reject any blocks that don't conform to the new rules, effectively bringing all participants onto a single upgraded chain even if some nodes haven't updated their software. Because old nodes still accept the new blocks, a chain split is less likely (as long as the majority enforces the new rules). Soft forks have been used to add features or restrictions without splitting the network (for example, Bitcoin's Segregated Witness was deployed as a soft fork). They require careful coordination to succeed, as an unsuccessful soft fork (without sufficient support) could lead to temporary confusion or orphaned blocks. In summary, a hard fork mandates an update by all and can result in a permanent chain split if consensus isn't reached among the community, whereas a soft fork is an incremental change that can be adopted more gradually and usually maintains one chain (given sufficient support). Both mechanisms are ways a blockchain protocol can evolve over time. ## Blockchain network models Blockchain systems can be categorized by how they are governed and who is allowed to participate in the network: > **Public blockchains**: These are open, permissionless networks where anyone > can join as a node, submit transactions, and participate in the consensus > process (e.g., mining or validating). Public blockchains prioritize > decentralization and trustlessness – they assume no central authority, and > consensus mechanisms (PoW, PoS, etc.) are used to secure the network against > Sybil attacks and malicious actors. All transaction data on public chains is generally visible to any observer (though participants are usually pseudonymous, identified only by their addresses or public keys). Public networks often have a native cryptocurrency used as an incentive for participants and as a way to prevent spam (transaction fees paid in the native coin). > **Private blockchains**: A private blockchain is a closed network where write > permissions (and sometimes read permissions) are restricted to one > organization or a specific group of participants. These are permissioned > ledgers often used internally within a company or organization. In a private blockchain, nodes are known and controlled by the organization, so the consensus mechanism can be simpler (since there is a higher degree of trust internally , some private chains even use a single authority node or basic majority vote to confirm blocks). Private chains trade decentralization for speed and control – they can achieve high transaction throughput and can enforce strict privacy on the data (since access is limited). However, they rely on the trustworthiness of the controlling entity and do not have the censorship resistance or open participation features of public chains. > **Consortium blockchains**: Consortium chains (also known as federated > blockchains) are a hybrid model where the network is permissioned, but instead > of a single organization, a group of independent organizations collaboratively > maintain the blockchain. Only approved participants (the consortium members) > run nodes and validate blocks. This model is common in enterprise scenarios where multiple organizations (for example, a group of banks or supply chain partners) want to share a distributed ledger without any single party having sole control. Consensus in consortium chains might use Byzantine fault tolerant algorithms or rotating leadership, since participants are known entities (e.g., a group of validators where 2/3 agreement finalizes a block). Consortium blockchains strike a balance between decentralization and controlled access: they are more decentralized than a purely private single-owner chain, but more controlled than a completely public network. Data can be kept private to the consortium members, and performance can be optimized for the relatively smaller number of nodes. Each model has its design considerations: public blockchains for trust-minimized environments with open participation, private blockchains for fully internal use with trusted nodes, and consortium blockchains for collaborative applications among multiple organizations. Technically, the underlying blockchain data structures may be similar; the differences lie in how nodes are managed, how consensus is achieved, and what trust assumptions are made. ## Data immutability and append-only design One of the defining features of blockchain technology is the immutability of the ledger. The data structure is effectively append-only: new transactions can be added (through new blocks), but once a block is confirmed and part of the chain, its contents cannot be altered or deleted without breaking the chain's consensus. This immutability is achieved through cryptographic linking and the consensus process: > **Hash linking for integrity**: As described in the block structure, each > block header contains the hash of the previous block. This creates a chain of > hashes from the latest block back to the first block (genesis). If an > adversary attempted to change a transaction in an old block, that block's hash > would change. Consequently, the next block (which contains the previous hash) would no longer be consistent, and every subsequent block's hash would be invalid as well. The only way to make such a change "stick" would be to recompute all the subsequent blocks' hashes and, in a proof-of-work system, also redo all the computational work (and catch up and surpass the current chain length to convince others). In a well-secured blockchain, this is computationally infeasible without controlling the majority of the network's hashing power or validation power. > **Consensus and finality**: Consensus algorithms reinforce immutability by > making it extremely difficult to replace a confirmed block with an > alternative. In PoW, a malicious chain reorganization requires creating an > alternate chain with more total work – an almost impossible task if honest > miners control most of the hash power. In PoS or BFT systems, once a block is finalized by a supermajority, protocol rules will not allow reverting it without significant collusion or violation of assumptions (and in many PoS protocols, such collusion would result in the offenders' stakes being slashed). Thus, after a certain point (a number of confirmations or a finality checkpoint), a block and its transactions can be considered permanent. Blockchain's append-only nature means that to correct errors or compensate for fraud, new transactions must be issued (for example, a reversing transaction) rather than rewriting history. > **Auditability**: The immutable ledger provides a verifiable history of all > transactions. Anyone can audit the chain from the beginning and be confident > that what's recorded is exactly what occurred, since any tampering would be > evident in the broken hash links or invalid signatures. In scenarios where a blockchain is permissioned, immutability still holds within the trust assumptions of that network (the operators agree via consensus not to rewrite history arbitrarily, and the software enforces that by cryptographic checks). Some blockchains add checkpoints or use cryptographic commitments to further cement history (for example, periodically snapshotting or notarizing the blockchain state elsewhere), but the core operation remains that the ledger grows by appending blocks and previous records remain indelible. Immutability can be thought of as a spectrum depending on the threat model (e.g., a private chain controlled by one entity could technically alter history if that entity chose to, but cryptographic proofs would reveal the change to any observers with the original data). In public decentralized chains, immutability is one of the strongest guarantees, upheld by economic and computational security measures. ## Merkle trees and block integrity Merkle trees are a fundamental data structure used in blockchain to ensure the integrity of large sets of data (such as all transactions in a block) in an efficient manner: > **Merkle tree structure**: A Merkle tree is a binary tree of hashes built from > the bottom up. For a given block, each transaction is hashed (typically using > the same hash function as the block hash, e.g., SHA-256) to produce a leaf > node. These transaction hashes form the leaves of the Merkle tree. Pairs of hashes are then concatenated and hashed together to form parent nodes. This process repeats layer by layer until a single hash remains at the top , this is the Merkle root. The Merkle root, as mentioned in the block structure section, is placed in the block header. The tree structure means that the Merkle root is a cryptographic summary of all transactions in the block. If any single transaction were different, its leaf hash would change, which would change its parent hash, and so on up to the root, yielding a completely different Merkle root. Thus, the Merkle root in the header effectively seals the content of the block. > **Efficient verification (Merkle proofs)**: Merkle trees enable a feature > called Merkle proofs or Merkle paths. Suppose a node (like a light client) > wants to verify that a particular transaction is included in a block without > downloading the entire block. The node can obtain the transaction itself and a set of sibling hashes that form the path from that transaction's leaf up to the known Merkle root. By iteratively hashing the transaction with its sibling hash, then hashing that result with the next sibling, and so forth, the node can reproduce the Merkle root. If the computed Merkle root matches the one in the block header (which the light client trusts as part of the known chain), then the transaction's inclusion is verified. This way, a client does not need the full list of transactions, only a small logarithmic number of hashes relative to the total number of transactions in the block. Merkle proofs are crucial for scalability features like Simplified Payment Verification (SPV) in Bitcoin, where lightweight wallets verify transactions by relying on Merkle proofs and block headers instead of all transaction data. Additionally, Merkle trees allow quick comparisons of entire datasets , if two Merkle roots differ, one can deduce that the underlying data has differences, and by comparing branches, pinpoint which transaction(s) differ. Overall, Merkle trees contribute to blockchain integrity by making verification of contents both secure (cryptographically) and efficient. ## Chain reorganization and finality In a distributed system where multiple blocks can be proposed (especially in PoW or certain PoS chains), temporary forks in the chain may occur. A chain reorganization (reorg) is the process of the network abandoning one branch of the chain in favor of a longer or more "correct" branch. Additionally, the concept of finality relates to how confident participants can be that a given block will not be reversed. > **Chain reorganization**: A reorg typically happens when two miners find a > block at nearly the same time, causing a short-term divergence (two competing > "tips"). Nodes might temporarily disagree on the latest block. When the next > block is found, if it attaches to one of these branches, that branch becomes > longer; the network will adopt the longer chain as the canonical one (this is > part of the longest-chain rule in PoW). The transactions in the orphaned block (the block that lost the race) are not lost – if they weren't included in the winning block, they go back to the mempool to be retried in a later block. Reorgs in normal operation are usually only one or two blocks deep and resolve quickly. Longer reorgs can happen in the event of major network delays or attacks (for example, if a malicious actor had significant mining power and privately mined a hidden chain and then released it, overtaking the public chain). Reorganizations ensure that the network eventually converges on a single chain, but they imply that blockchain confirmations are not absolutely final until a block has several blocks on top of it. During a reorg, no protocol rules are violated – it's a natural outcome of decentralized block production and the rule of adopting the chain with the most work (or highest stake weight, in some PoS cases). > **Finality**: Finality is the guarantee that a block (and the transactions in > it) will not be reverted or dropped from the chain. Different consensus > mechanisms provide different notions of finality. In PoW systems, finality is > probabilistic – a block becomes more secure the more blocks are mined on top > of it. For example, after 6 confirmations in Bitcoin, the probability of a block being reversed is vanishingly small (because an attacker would need to redo the proof-of-work faster than the rest of the network). However, it's never absolute; there's always a theoretical chance if someone controls enough hashing power. In PoS systems, especially those with explicit voting and checkpoints, finality can be deterministic (or economic finality). Many modern PoS protocols have validators vote to finalize checkpoints; once a block or epoch is finalized (e.g., by 2/3 of validators voting for it), reverting it would require an extremely large collusion and typically results in severe penalties (slashing of staked funds). Thus, users can consider finalized blocks practically immutable. In pure BFT consensus used in private/consortium chains, finality is immediate – once validators reach agreement in a round and commit a block, that block is irrevocably part of the ledger (assuming less than the fault-tolerance threshold of nodes are malicious). In summary, finality means that after a certain point in time or number of blocks, participants can trust that the ledger's history will remain fixed. Blockchain designs try to minimize the uncertainty window; for instance, by aiming for fast block times and quick finality (as in many PoS networks) or by advising waiting for several confirmations (as in PoW networks) to achieve practical finality. ## Smart contracts Smart contracts are programs that run on the blockchain network, enabling automated and complex transactions beyond simple value transfers. They are an integral part of blockchain architecture on platforms that support them (like Ethereum, Hyperledger Fabric, and others), and they operate as follows: > **Embedded code execution**: A smart contract is essentially code stored on > the blockchain that executes in response to transactions. When a transaction > invokes a smart contract (for example, calling a function of a contract with > certain parameters), every node in the network will execute that code as part > of block processing. All nodes must arrive at the same result (since the code is deterministic), which then is used to update the ledger's state. This means the blockchain not only stores data but also enforces the logic defined by the contracts. In effect, the ledger becomes a state machine that is advanced by executing contract code included in transactions, with every node verifying the outcome. > **Deterministic, sandbox environment**: Smart contract execution happens in a > controlled environment (such as the Ethereum Virtual Machine for Ethereum's > contracts, or docker containers for Fabric's chaincode). The code cannot > perform disallowed or undeterministic operations (for example, it generally > cannot make external network requests or generate truly random numbers without > consensus) because all nodes need to replicate the execution exactly. Instead, contracts are limited to the data on the blockchain and the input provided. The environment ensures that the execution is deterministic and sandboxed from the node's host system. In public blockchain settings, gas or execution fees are used to meter the computation and storage usage of contracts , the sender of the transaction must pay for the operations their contract call performs. This not only prevents abuse (infinite loops or excessive computation) but also ties the execution cost to economic incentives. > **State and immutability of contracts**: Once deployed, smart contract code is > usually immutable (the code becomes part of the blockchain record). Contracts > often live at a specific address on the blockchain, and they maintain their > own persistent state (for example, a token contract keeps track of balances > mapping addresses to numbers). Every time the contract is invoked and modifies its state, those changes are recorded on the blockchain as part of the transaction results. There are patterns to introduce upgradability (such as proxy contracts that can delegate calls to a new implementation), but these must be designed intentionally; otherwise, a bug in a contract is permanent. The immutability of the code and the transparency of its logic mean that anyone can inspect how the contract will behave. The contract's state is also transparent (though it may be encoded), and all changes to it are a matter of public record on the ledger. This combination ensures that the rules set by the contract are enforced exactly and predictably, which is crucial in trustless environments. > **Trustless automation**: Smart contracts remove the need for a central or > trusted party to execute agreements or business logic. Instead of relying on a > server or an authority, the blockchain network itself enforces the execution > of the contract code. For example, a simple smart contract for an escrow will > automatically release funds to the seller when conditions are met, without > needing a bank or escrow agent. The participants trust the code and the consensus of the network rather than each other. However, this also means that errors or exploits in the code can have serious consequences, since there is no easy way to intervene once the contract is deployed (short of all nodes agreeing to a fork or upgrade, which is rare and controversial). For a technical team, it's important to follow secure coding practices and thorough testing when developing smart contracts. Nonetheless, the ability to encode arbitrary rules that will execute automatically and consistently across the network is a powerful feature that turns the blockchain into a platform for decentralized applications and protocols, not just a ledger of coin transfers. ## Enterprise blockchain platforms Not all blockchain frameworks follow the exact same design as public cryptocurrencies. Two notable enterprise-focused blockchain platforms are Hyperledger Fabric and Hyperledger Besu. These platforms incorporate the core ideas of blockchain (distributed ledger, cryptography, consensus) but make different architectural choices to suit enterprise needs. ### Hyperledger fabric Hyperledger Fabric is a permissioned blockchain framework under the Linux Foundation's Hyperledger project. It is designed for enterprise use, with a focus on modularity and flexibility. > **Architecture and roles**: Fabric's architecture divides the transaction > workflow into distinct phases and assigns different roles to different node > types. It introduces the concept of peers (nodes that maintain the ledger and > can execute smart contract code) and orderers (nodes that provide ordering > service for transactions). When a transaction proposal is initiated (for example, a user invokes a chaincode function), it is first sent to designated endorsing peers. These peers simulate the transaction by executing the chaincode with the provided input, but they do not update the ledger at this stage. Instead, each endorsing peer returns a cryptographic endorsement (essentially the proposed transaction's output and a signature) to the client. The client then collects these endorsements and sends the transaction to the ordering service. The ordering service (which can consist of multiple ordering nodes) is responsible for establishing a total order of transactions across the network. It takes endorsed transactions from clients and packages them into blocks in a sequential order. The ordered block is then disseminated to all peers. Finally, each peer will validate the block: it checks that the transactions in the block have the required endorsements (per the network's endorsement policy) and that there are no conflicts, such as double-spending or version conflicts in the state. Transactions that fail validation are marked invalid in the block. After validation, each peer appends the block to its copy of the ledger and updates the world state database with the results of the valid transactions. This design (execute first on endorsers, then order, then validate/commit on all peers) improves performance and scalability and allows for certain privacy file: ./content/docs/knowledge-bank/chaincode.mdx meta: { "title": "Chaincode development", "description": "A complete guide to writing, deploying, and managing chaincode for Hyperledger Fabric networks" } ## Introduction to chaincode Chaincode is the smart contract implementation in Hyperledger Fabric. It defines the business logic that runs on a Fabric network and is responsible for reading and writing data to the distributed ledger.
Unlike Ethereum-based smart contracts, which run on a global public chain, chaincode runs in a permissioned network and is executed by selected endorsing peers. It is deployed in isolated Docker containers and communicates with the Fabric peer nodes through well-defined interfaces.
Chaincode allows organizations in a consortium to define rules for asset exchange, access control, regulatory checks, and other workflows using trusted code. It is executed deterministically and only changes the ledger when transaction endorsement policies are met. ## Language support Chaincode can be written in several programming languages, each offering the same functionality through different SDKs.
Currently supported languages include: * Go * JavaScript (Node.js) * Java The Go language is most commonly used for production-grade chaincode due to its performance and concurrency features. Node.js is preferred for rapid prototyping or when integrating with existing JavaScript-based applications. Java is used in regulated environments where strict typing and object modeling are beneficial. ## Chaincode lifecycle overview The chaincode lifecycle defines the steps required to install, approve, and commit chaincode to a Fabric channel.
The lifecycle process is decentralized and allows each organization to participate in chaincode governance. The high-level steps are: * Package the chaincode * Install the chaincode on peers * Approve the chaincode definition for the channel * Commit the chaincode definition to the channel * Initialize the chaincode (optional) Each of these steps is executed using the peer CLI or Fabric SDKs. All actions are recorded on the blockchain and can be audited by members of the consortium. ## Project structure A chaincode project typically consists of: * Source code files (`.go`, `.js`, or `.java`) * A `go.mod` file (for Go chaincode) or `package.json` (for Node.js) * Dependency modules or imports * A defined `Init` or `InitLedger` function * Business logic functions for create, read, update, and delete operations * Utility and helper functions for serialization and validation For Go-based chaincode, the standard layout includes a `main.go` or `chaincode.go` entry point. This registers the chaincode and invokes the `shim` interface.
Node.js chaincode has an entry file like `index.js` or `chaincode.js`, which sets up the contract classes using the Fabric contract API. ## Key interfaces In Go, chaincode implements the `Chaincode` interface provided by the Fabric shim package. This interface includes two methods: * `Init` for initialization when the chaincode is instantiated * `Invoke` for handling all other function calls In newer chaincode implementations using the contract API, developers define contract classes with named transaction functions. This approach supports modularity and multiple logical contracts in one chaincode. ```go type SmartContract struct { } func (s *SmartContract) InitLedger(ctx contractapi.TransactionContextInterface) error { // initialization logic } func (s *SmartContract) CreateAsset(ctx contractapi.TransactionContextInterface, id string, value string) error { // asset creation logic } ``` This structure improves clarity, testing, and integration with Fabric’s access control and endorsement systems. ## Writing chaincode functions Chaincode functions define how a Fabric network processes input data, verifies conditions, and updates the ledger state.
Each function receives a transaction context, which provides access to APIs for reading and writing the world state, retrieving transaction metadata, and verifying identities. A typical chaincode function follows this flow: * Read input parameters using the function signature * Perform validation on inputs * Query or modify the world state using key-value operations * Return success or error based on logic outcomes The function must be deterministic and must not depend on external state, time, or randomness. All peers must reach the same result independently for endorsement to succeed. ```go func (s *SmartContract) CreateItem(ctx contractapi.TransactionContextInterface, id string, name string) error { exists, err := s.ItemExists(ctx, id) if err != nil { return err } if exists { return fmt.Errorf("item %s already exists", id) } item := Item{ ID: id, Name: name, } itemJSON, err := json.Marshal(item) if err != nil { return err } return ctx.GetStub().PutState(id, itemJSON) } ``` In this example, the function checks for duplicates, constructs a new item, marshals it into JSON, and writes it to the ledger. ## Reading and writing world state Fabric maintains a key-value database known as the world state. Each chaincode function can read and write to this store using the `stub` interface. Common operations include: * `GetState(key)` to retrieve a value by key * `PutState(key, value)` to write or update a key-value pair * `DelState(key)` to delete a key * `GetStateByRange(start, end)` to iterate over a key range * `GetQueryResult(query)` for CouchDB rich queries Data is stored as byte arrays and usually encoded in JSON for compatibility. Developers should define clear entity structures and handle serialization explicitly. ```go itemJSON, err := ctx.GetStub().GetState("item1") if err != nil || itemJSON == nil { return fmt.Errorf("item not found") } var item Item err = json.Unmarshal(itemJSON, &item) if err != nil { return err } ``` All writes to the ledger are recorded in the transaction log, and the world state reflects the latest version of each key after transaction validation. ## Using client identity and attributes Fabric supports identity-aware chaincode execution. The client identity object provides access to the invoker’s certificate, MSP ID, and attributes. This enables use cases such as: * Role-based access control * Certificate-based ownership validation * Organization-specific business logic To access the client identity: * Use `ctx.GetClientIdentity()` in Go * Use `ctx.clientIdentity` in Node.js Examples of identity operations: * `GetID()` returns the subject of the client certificate * `GetMSPID()` returns the organization MSP * `GetAttributeValue(name)` retrieves an attribute set in the certificate ```go cid, err := ctx.GetClientIdentity().GetID() if err != nil { return err } mspid, _ := ctx.GetClientIdentity().GetMSPID() if mspid != "Org1MSP" { return fmt.Errorf("unauthorized organization") } ``` These identity checks can be combined with endorsement policies to enforce multi-organization consensus. ## Error handling and validation Chaincode must return errors for invalid transactions. Errors prevent the proposal from being endorsed or committed and maintain data integrity. Typical validation checks include: * Verifying that required input parameters are present * Ensuring keys do not already exist before creating entities * Confirming keys exist before reading or updating * Validating that caller has permission to modify a record Use structured error messages and proper formatting. Avoid panics or uncaught exceptions. All error messages should be deterministic and consistent across all endorsing peers. The best practice is to define helper functions for common checks and reuse them across transaction handlers. ## Emitting chaincode events Chaincode can emit events that are captured by client applications or monitoring tools.
Events are useful for triggering off-chain workflows, synchronizing UI components, or indexing ledger activity for analytics. An event is emitted using the `SetEvent` method on the chaincode stub. It includes: * A name string that identifies the event type * A payload in bytes, typically a serialized JSON object ```go eventPayload := map[string]string{"itemId": "123", "status": "created"} eventJSON, _ := json.Marshal(eventPayload) ctx.GetStub().SetEvent("ItemCreated", eventJSON) ``` Applications can subscribe to events using the Fabric SDK and filter by event name. Events are recorded in the block that commits the transaction and are part of the transaction receipt. Events do not modify ledger state and should not be used as the sole source of truth. Their purpose is to notify off-chain systems, not to enforce logic. ## Chaincode initialization Chaincode may include an optional initialization function that is invoked once when the chaincode is committed to a channel.
This function can perform setup tasks such as: * Seeding initial records * Setting ownership * Registering system-level settings Initialization must be explicitly requested during chaincode invocation using the `--isInit` flag or its SDK equivalent. Example initialization function: ```go func (s *SmartContract) InitLedger(ctx contractapi.TransactionContextInterface) error { items := []Item{ {ID: "item1", Name: "Pen"}, {ID: "item2", Name: "Notebook"}, } for _, item := range items { itemJSON, _ := json.Marshal(item) ctx.GetStub().PutState(item.ID, itemJSON) } return nil } ``` This method is called only once and is not part of regular transaction flow. If initialization is skipped or fails, the chaincode remains inactive. ## Endorsement policies An endorsement policy defines which peers must approve a transaction before it can be committed to the ledger.
Chaincode logic enforces application-level rules, while endorsement policies enforce organizational-level trust and validation. Policies are configured during the chaincode definition phase and use logical conditions like: * `OR('Org1MSP.peer','Org2MSP.peer')` * `AND('Org1MSP.peer','Org2MSP.peer')` * Custom signature policies with nested conditions These rules determine which endorsing peers must sign off on a proposal. If the required number of signatures is not collected, the transaction fails endorsement. The endorsement policy ensures that no single organization can unilaterally update the ledger. It also enables multi-party workflows where different participants must validate the action. ## Working with private data Hyperledger Fabric allows chaincode to read and write private data collections.
Private data is not stored on the public ledger. Instead, it is distributed only to authorized peers and stored in a separate private database. This feature supports use cases where sensitive information must be hidden from certain members of the network while still being verifiable. Key methods for private data: * `GetPrivateData(collection, key)` * `PutPrivateData(collection, key, value)` * `DelPrivateData(collection, key)` ```go order := Order{ID: "order1", total: 100} orderJSON, _ := json.Marshal(order) ctx.GetStub().PutPrivateData("OrderCollection", "order1", orderJSON) ``` Collections are defined in the chaincode configuration file `collections-config.json` and include: * Collection name * Member organizations * Endorsement policy * Required and maximum peer counts Private data can also be used with hashed reads and transient data inputs, enabling zero-knowledge-style logic and selective disclosure. Access to private data is enforced at the peer level. Unauthorized peers do not receive the data and cannot query it through chaincode. ## Testing chaincode Testing chaincode is critical for ensuring correctness, security, and reliability before deployment.
Tests can be written using standard unit testing frameworks for the target language. In Go, the `testing` package is used to simulate chaincode transactions and verify expected behavior. Key testing strategies include: * Unit tests for transaction functions using mocked contexts * Integration tests using Fabric test networks * End-to-end scenario tests with CLI or SDK interactions Mock objects simulate the chaincode stub and transaction context. This allows developers to control inputs and check function outputs without running a full Fabric network. Example test in Go: ```go func TestCreateItem(t *testing.T) { ctx := new(MockTransactionContext) stub := new(MockChaincodeStub) ctx.On("GetStub").Return(stub) cc := new(SmartContract) err := cc.CreateItem(ctx, "item1", "Laptop") assert.NoError(t, err) } ``` Fabric also provides sample test networks using Docker Compose and scripts to simulate channel creation, peer joining, and chaincode deployment. ## Packaging chaincode Before deployment, chaincode must be packaged into a compressed archive format.
Packaging involves: * Creating a folder with the chaincode source and dependencies * Using the peer CLI to generate a `.tar.gz` archive * Assigning a label that includes version and metadata Packaging command: ``` peer lifecycle chaincode package mycc.tar.gz --path ./chaincode/ --lang golang --label mycc_1 ``` The label must be unique for each version and is used to identify the chaincode package during installation and approval. ## Installing and approving chaincode Once packaged, the chaincode must be installed on all endorsing peers and approved by all required organizations. Installation command: ``` peer lifecycle chaincode install mycc.tar.gz ``` After installation, each peer returns a package ID that will be used during approval. Approval command: ``` peer lifecycle chaincode approveformyorg --channelID mychannel --name mycc --version 1 --sequence 1 --package-id --init-required ``` Each organization must run this command and commit the approval to the channel. ## Committing chaincode After all required approvals, the chaincode is committed to the channel using the following command: ``` peer lifecycle chaincode commit --channelID mychannel --name mycc --version 1 --sequence 1 --init-required ``` This step activates the chaincode and allows it to begin processing transactions. If the chaincode includes an initialization function, it must be invoked with the `--isInit` flag: ``` peer chaincode invoke --channelID mychannel --name mycc -c '{"function":"InitLedger","Args":[]}' --isInit ``` Committing the chaincode broadcasts the definition to all peers in the channel and enables consistent execution. ## Upgrading chaincode Chaincode upgrades are handled by repeating the lifecycle steps with a higher sequence number.
To upgrade: * Modify the source code * Repackage the chaincode with a new label * Install the new package on all peers * Approve the new definition with `--sequence` incremented * Commit the new definition to the channel This enables version-controlled deployment and supports backward-compatible changes. Upgrade scenarios may include: * Adding new functions * Changing endorsement policy * Modifying access control logic * Migrating state formats Developers must preserve storage layout and state compatibility across upgrades. It is also recommended to document all changes and test thoroughly in a staging environment. ## Chaincode deployment strategies In production networks, chaincode should be deployed using controlled CI/CD pipelines.
Best practices for deployment include: * Automating package generation and installation steps * Using version control to track chaincode changes * Storing deployment artifacts and configurations securely * Performing dry runs on test channels * Applying environment-specific parameters for each organization Multi-org deployment requires coordination to ensure that all approvals are collected and that no inconsistent versions exist in the network. Deployment logs, peer responses, and chaincode events should be monitored to verify successful rollout. ## Multi-contract chaincode design Chaincode can contain multiple logical contracts within a single package.
This is useful when building complex applications where multiple domains or entities must be managed independently, such as in a marketplace with users, products, and transactions. Each contract is defined as a separate class and registered using the Fabric contract API. Contracts share the same chaincode but have isolated namespaces for better modularity. Example: ```go type UserContract struct { contractapi.Contract } type ProductContract struct { contractapi.Contract } func main() { chaincode, err := contractapi.NewChaincode(new(UserContract), new(ProductContract)) if err != nil { panic(err) } if err := chaincode.Start(); err != nil { panic(err) } } ``` Clients invoke specific contracts using the format `ContractName:FunctionName`. This pattern enables structured development and simplifies logic segregation across modules. ## Ledger state migration When upgrading chaincode or modifying data structures, state migration may be required.
This process involves reading old data formats, transforming them to the new schema, and saving updated versions to the ledger. Migration can be performed: * Automatically during initialization of the new chaincode version * Manually using a migration function triggered by an admin Best practices for migration: * Maintain backward compatibility for a defined period * Validate data before overwriting * Log migrated keys and results * Use a dry-run mode before full execution ```go func (s *SmartContract) MigrateState(ctx contractapi.TransactionContextInterface) error { resultsIterator, err := ctx.GetStub().GetStateByRange("", "") if err != nil { return err } defer resultsIterator.Close() for resultsIterator.HasNext() { response, err := resultsIterator.Next() if err != nil { return err } var oldRecord OldItem err = json.Unmarshal(response.Value, &oldRecord) if err != nil { return err } newRecord := NewItem{ID: oldRecord.ID, Label: oldRecord.Name} newJSON, _ := json.Marshal(newRecord) ctx.GetStub().PutState(newRecord.ID, newJSON) } return nil } ``` State migration must be tested extensively to prevent corruption or data loss. ## Performance optimization Efficient chaincode execution ensures faster transaction endorsement and lower peer load.
To improve performance: * Use simple and direct key-value access patterns * Minimize writes and avoid unnecessary `PutState` calls * Cache intermediate results in memory where possible * Avoid large objects and excessive JSON nesting * Use indexed keys for fast range queries * Avoid heavy use of private data unless needed Complex filtering should be done in the client application. Chaincode should serve as a deterministic validator and not as a data processing layer. For CouchDB-based networks, rich queries should be tested for index coverage and speed. Index definitions can be added to the collection configuration for better performance. ## Chaincode logging and auditability Chaincode logs help with debugging, compliance, and transaction tracing.
Logging is supported through standard output and is captured by peer containers. Use descriptive logs to trace function entry, key operations, and errors. Avoid logging sensitive data or large payloads in production. In Go: ```go fmt.Printf("Creating item: %s\n", item.ID) ``` In Node.js: ```js console.log(`Creating item: ${itemID}`); ``` Chaincode operations are also recorded in transaction logs and can be queried using: * Block explorer tools * SDK query APIs * Peer CLI for history inspection Audit trails include: * Proposal identities * Endorsing organizations * Read and write sets * Time of transaction * Chaincode version used These features allow organizations to verify compliance, trace business activity, and investigate disputes. ## Chaincode development summary Chaincode enables secure, decentralized business logic in Hyperledger Fabric networks.
Its deterministic nature, access control capabilities, and modular architecture make it ideal for enterprise applications in finance, supply chain, healthcare, and more. Throughout this guide, we have covered: * Core concepts and interfaces * Writing and testing transaction logic * World state management and identity enforcement * Event emission and chaincode lifecycle operations * Deployment, upgrades, and migration * Performance tuning and audit mechanisms Successful chaincode projects follow a disciplined approach, including version control, peer review, CI pipelines, and thorough testing.
With the right patterns and tooling, chaincode becomes a powerful foundation for trusted workflows and collaborative networks. file: ./content/docs/knowledge-bank/fabric-transaction-flow.mdx meta: { "title": "Fabric transaction cycle", "description": "Hyperledger fabric transaction cycle" } ## Hyperledger Fabric Transaction Lifecycle ### Identity and Membership Setup The transaction lifecycle in Hyperledger Fabric begins with identity management through X.509 certificates issued by a Certificate Authority (CA). Each network participant - whether an organization, peer node, or user - receives a unique digital identity. These identities are managed through Membership Service Providers (MSPs), which define the rules for authentication and authorization within each organization. The MSP contains cryptographic materials including CA certificates, admin certificates, and node-specific signing keys that enable secure participation in the network. ### Network Architecture Components Fabric's modular architecture consists of several key components working together. Organizations join the network with their own peers (which maintain the ledger), CAs (for identity management), and client applications. The ordering service (comprised of orderer nodes) forms the backbone of the network, responsible for creating the immutable sequence of transactions blocks. This separation of concerns between execution (peers), ordering (orderers), and identity (CAs) provides Fabric with its flexible and scalable architecture. ### Chaincode Development Process Smart contracts in Fabric, called chaincode, contain the business logic that governs transactions. Developers write chaincode in general-purpose languages like Go or JavaScript, defining functions that interact with the ledger state. The chaincode specifies how assets are created, modified, or queried, with functions like InitLedger for initialization and custom functions like TransferAsset for business operations. Chaincode is versioned and can be upgraded without losing the existing ledger state. ### Chaincode Deployment Lifecycle Before execution, chaincode goes through a rigorous four-stage deployment process: 1. **Packaging** - The code is bundled with its dependencies into a deployable package 2. **Installation** - The package is installed on all endorsing peers across organizations 3. **Approval** - Required organizations approve the chaincode definition based on policy 4. **Commitment** - The chaincode becomes active on the channel after orderer verification ### Transaction Endorsement Flow When a client submits a transaction, it first creates a proposal that is sent to endorsing peers. These peers simulate the transaction by executing the chaincode against their current state, generating a read/write set that shows what would change. The peers then cryptographically sign these results if the simulation meets policy requirements. This endorsement process ensures transactions are validated before being committed to the ledger. ### Ordering and Finalization Endorsed transactions are sent to ordering service nodes, which: * Gather transactions from across the network * Arrange them into blocks * Establish the definitive order of transactions * Distribute blocks to all peers Peers then validate each transaction in the block against endorsement policies and current state before appending it to their copy of the ledger and updating the world state. ### Advanced Features Fabric supports sophisticated enterprise requirements through: * **Private Data Collections**: Enables confidential transactions between specific organizations * **Access Control**: Attribute-based rules govern who can invoke chaincode functions * **Versioning**: Chaincode can be upgraded while preserving ledger state * **Plugable Components**: Supports different consensus mechanisms and databases ### Consensus and Finality Fabric achieves finality through execute-order-validate architecture: 1. Transactions are first executed and endorsed 2. Then ordered into blocks with deterministic sequencing 3. Finally validated against current state before commitment This three-phase approach provides high throughput while preventing double-spending and other inconsistencies. ### World State Management The ledger maintains two components: * **Blockchain**: Immutable sequence of transaction blocks * **World State**: Current value database (LevelDB/CouchDB) for efficient queries This separation allows for efficient access to current values while maintaining complete transaction history. ### Security Model Fabric's security derives from: * PKI-based identity with certificate revocation * Configurable endorsement policies * Channel-based data isolation * Cryptographic hashing of all transactions * Byzantine fault tolerant ordering These features combine to create an enterprise-grade permissioned blockchain suitable for business networks. ## Hyperledger Fabric Transaction Lifecycle ## 1. Identity Creation and MSP Configuration **What is happening?** Fabric uses X.509 certificates for identity. These certs are issued by a Certificate Authority (CA) and represent different users, peers, and orderers in the network. Each organization defines a Membership Service Provider (MSP) to manage these identities. **Technical Components:** * MSP folder structure (per org): ``` msp/ ├── cacerts/ # CA root cert ├── keystore/ # Private ECDSA key ├── signcerts/ # X.509 signing cert ├── admincerts/ # Org admins ``` **Layman Explanation:** Think of MSP like your "organizational passport system". The CA is like a passport office, and your certificates are digital passports proving who you are in the network. *** ## 2. Network Map and Actor Roles **What is happening?** Fabric has a modular architecture. Every participant plays a role: | Org | Peers | CA | Orderer | MSP | | ---------- | ---------- | ---------- | ------------------- | ---------- | | Org1 | peer0.org1 | ca.org1 | - | Org1MSP | | Org2 | peer0.org2 | ca.org2 | - | Org2MSP | | OrdererOrg | - | ca-orderer | orderer.example.com | OrdererMSP | **Layman Explanation:** Imagine Org1 and Org2 are banks. Each has a "teller" (peer), a "notary" (CA), and a way to validate and store transactions. The orderer is like a shared accountant who logs all entries in a common ledger. *** ## 3. Chaincode (Smart Contract) Development **hello.go (written in Go):** ```go type HelloWorldContract struct { contractapi.Contract } type Message struct { Text string `json:"text"` } func (c *HelloWorldContract) InitLedger(ctx contractapi.TransactionContextInterface) error { return ctx.GetStub().PutState("message", []byte(`{"text":"Hello Fabric!"}`)) } func (c *HelloWorldContract) UpdateMessage(ctx contractapi.TransactionContextInterface, newMsg string) error { msg := Message{Text: newMsg} data, _ := json.Marshal(msg) return ctx.GetStub().PutState("message", data) } ``` **Layman Explanation:** This is the program logic deployed to the blockchain. It initializes a message and lets users update it. *** ## 4. Package, Install, Approve, Commit (Chaincode Lifecycle) **What is happening?** Fabric separates chaincode deployment into lifecycle phases. ### 4.1 Package Chaincode ```bash peer lifecycle chaincode package hello.tar.gz \ --path ./hello --lang golang --label hello_1 ``` ### 4.2 Install on Peers ```bash peer lifecycle chaincode install hello.tar.gz ``` ### 4.3 Approve by Each Org ```bash peer lifecycle chaincode approveformyorg ... ``` ### 4.4 Commit Chaincode Definition ```bash peer lifecycle chaincode commit ... ``` **Layman Explanation:** Imagine writing a company policy, getting department heads to sign off (approve), and then publishing it to everyone (commit). *** ## 5. Endorsement Policy (Who Must Approve Transactions?) **Examples:** ```sh OR('Org1MSP.peer','Org2MSP.peer') # Allow either org AND('Org1MSP.peer','Org2MSP.peer') # Require both orgs ``` **Layman Explanation:** It's like saying: "For payments, either the manager or finance must sign" vs "Both manager and finance must sign." *** ## 6. InitLedger Transaction ```bash peer chaincode invoke -C mychannel -n hello -c '{"function":"InitLedger","Args":[]}' ... ``` *** ## 7. Submit UpdateMessage("Goodbye Fabric!") **Proposal Payload:** ```json { "txID": "f9d7...", "args": ["UpdateMessage", "Goodbye Fabric!"], "creator": "user1@Org1MSP", "endorsers": ["peer0.org1", "peer0.org2"] } ``` *** ## 8. World State Update **Before:** ```json {"message": {"text": "Hello Fabric!"}} ``` **After:** ```json {"message": {"text": "Goodbye Fabric!"}} ``` *** ## 9. Block Structure **Example:** ```json { "number": 7, "data": { "transactions": [ { "txID": "f9d7...", "chaincode": "hello", "rwSet": { "writes": [ {"key": "message", "value": "{\"text\":\"Goodbye Fabric!\"}"} ] }, "status": "VALID" } ] } } ``` *** ## 10. Chaincode Upgrade (v1 → v2) ```bash peer lifecycle chaincode package hello_v2.tar.gz ... peer lifecycle chaincode install hello_v2.tar.gz peer lifecycle chaincode approveformyorg --version 2 --sequence 2 peer lifecycle chaincode commit --version 2 --sequence 2 ... ``` *** ## 11. Private Data Collection (PDC) **collections\_config.json:** ```json [ { "name": "msgCollection", "policy": "OR('Org1MSP.member')", "requiredPeerCount": 1, "maxPeerCount": 2, "blockToLive": 100, "memberOnlyRead": true } ] ``` *** ## 12. Access Control via Attributes (ABAC) **Chaincode Example:** ```go val, ok, _ := ctx.GetClientIdentity().GetAttributeValue("role") if val != "auditor" { return fmt.Errorf("unauthorized") } ``` *** ## Fabric Ledger Internals | Component | Description | | -------------- | ---------------------------------------- | | Ledger | Immutable sequence of blocks | | Block Store | Stores header, data, metadata | | State Database | Current values only (LevelDB or CouchDB) | *** ## Summary Table | Category | Details | | ------------------- | ------------------------------------ | | Identity & MSP | X.509 + CA + ECDSA keys | | Chaincode Lifecycle | Package → Install → Approve → Commit | *** ## Ethereum vs Hyperledger Fabric - Comparison ## Technical Comparison Table | Category | Ethereum (EVM-Based Chains) | Hyperledger Fabric | | ---------------------------------- | ------------------------------------------------------------ | --------------------------------------------------------------- | | **1. Identity Model** | ECDSA secp256k1 key pair; address = Keccak256(pubkey)\[12:] | X.509 certificates issued by Membership Service Providers (MSP) | | **2. Network Type** | Public or permissioned P2P (Ethereum Mainnet, Polygon, BSC) | Fully permissioned consortium network | | **3. Ledger Architecture** | Global state stored in Merkle Patricia Trie (MPT) | Channel-based key-value store (LevelDB/CouchDB) | | **4. State Model** | Account-based: balances and storage in accounts | Key-value database with versioned keys per channel | | **5. Smart Contract Format** | EVM bytecode; written in Solidity/Vyper/Yul | Chaincode packages in Go, JavaScript, or Java | | **6. Contract Execution** | Executed in deterministic sandbox (EVM) | Executed in Docker containers as chaincode | | **7. Contract Invocation** | `eth_sendTransaction`: ABI-encoded calldata | SDK submits proposals → endorsers simulate | | **8. Transaction Structure** | Nonce, to, value, gas, calldata, signature | Proposal + RW Set + endorsements + signature | | **9. Signing Mechanism** | ECDSA (v, r, s) signature from sender | X.509-based MSP identities; multiple endorsements | | **10. Endorsement Model** | No built-in multi-party endorsement (unless multisig logic) | Explicit endorsement policy per chaincode | | **11. Consensus Mechanism** | PoS (Ethereum 2.0), PoW (legacy), rollup validators | Ordering service (Raft, BFT) + validation per org | | **12. Ordering Layer** | Implicit in block mining / validator proposal | Dedicated ordering nodes create canonical blocks | | **13. State Change Process** | Contract executes → SSTORE updates global state | Endorsers simulate → Orderer orders → Peers validate/commit | | **14. Double-Spend Prevention** | State root update + nonce per account | MVCC: Version check of key during commit phase | | **15. Finality Model** | Probabilistic (PoW), deterministic (PoS/finality gadget) | Deterministic finality after commit | | **16. Privacy Model** | Fully public by default; private txs via rollups/middleware | Channel-based segregation + Private Data Collections (PDCs) | | **17. Data Visibility** | All nodes hold all state (global visibility) | Per-channel; only authorized peers see data | | **18. Data Storage Format** | MPT for state; key-value in trie; Keccak256 slots | Simple key-value in LevelDB/CouchDB | | **19. Transaction Validation** | EVM bytecode + gas + opcode checks | Validation system chaincode enforces endorsement policy + MVCC | | **20. Gas / Resource Metering** | Gas metering for all computation and storage | No gas model; logic must guard resource consumption | | **21. Events and Logs** | LOGn opcode emits indexed events | Chaincode emits named events; clients can subscribe | | **22. Query Capability** | JSON-RPC, The Graph, GraphQL, custom RPC | CouchDB rich queries, GetHistoryForKey, ad hoc queries | | **23. Time Constraints** | Optional: `block.timestamp`, `validUntil` for EIP-1559 txs | Custom fields in chaincode; no native tx expiry | | **24. Execution Environment** | Global EVM sandbox; each node runs all txs | Isolated Docker container per chaincode; endorsers simulate | | **25. Deployment Flow** | Deploy via signed transaction containing bytecode | Lifecycle: package → install → approve → commit | | **26. Smart Contract Upgrade** | Manual via proxy pattern or CREATE2 | Controlled upgrade via chaincode lifecycle & endorsement policy | | **27. Programming Languages** | Solidity (primary), Vyper, Yul | Go (primary), also JavaScript and Java | | **28. Auditability & History** | Full block-by-block transaction trace, Merkle proof of state | Immutable ledger + key history queries | | **29. Hashing Functions** | Keccak256 (SHA-3 variant) | SHA-256, SHA-512 (standard cryptographic primitives) | | **30. zk / Confidentiality Tools** | zkRollups, zkEVM, TornadoCash, Aztec | External ZKP libraries; no native zero-knowledge integration | *** ## Execution Lifecycle Comparison | Stage | Ethereum (EVM) | Hyperledger Fabric | | ----------------- | -------------------------------------------- | -------------------------------------------------------- | | **1. Initiation** | User signs tx with ECDSA and submits to node | Client sends proposal to endorsing peers via SDK | | **2. Simulation** | EVM runs the tx using opcode interpreter | Endorsing peers simulate chaincode, generate RW set | | **3. Signing** | Sender signs tx (v, r, s) | Each endorser signs the proposal response | | **4. Ordering** | Block produced by validator | Ordering service batches txs into blocks | | **5. Validation** | Gas limit, signature, nonce, storage check | Validation system checks endorsement + MVCC versioning | | **6. Commit** | State trie updated, new root in block header | Valid txs update state in DB; invalid txs marked as such | | **7. Finality** | Final after sufficient blocks (PoW/PoS) | Final immediately after block commit | *** ## Summary Insights * **Ethereum** offers a globally synchronized, public execution model with gas metering and strong ecosystem tooling. It emphasizes decentralization, programmability, and composability. * **Fabric** is a modular enterprise-grade DLT with configurable privacy, endorsement policies, and deterministic execution. It separates simulation from ordering, enabling fine-grained control. file: ./content/docs/knowledge-bank/industrial-usecases.mdx meta: { "title": "Industrial use cases", "description": "Comprehensive guide to blockchain applications across manufacturing, logistics, energy, and industrial supply chains" } ## Introduction to blockchain in the industrial sector The industrial sector spans a wide array of activities including manufacturing, logistics, energy production, industrial equipment, aerospace, and raw material sourcing. These processes rely on multi-tier supply chains, coordinated operations, extensive compliance requirements, and large-scale data management. Industrial systems face ongoing challenges such as fraud in procurement, limited traceability, inefficient maintenance, counterfeiting, and siloed data. Blockchain introduces a shared, decentralized infrastructure that enhances trust, transparency, and efficiency across industrial ecosystems. By enabling a single source of truth that is tamper-evident, blockchain allows multiple stakeholders—including suppliers, manufacturers, regulators, logistics providers, and end customers—to coordinate processes, verify records, and enforce rules without relying on a central authority. As industrial systems evolve toward smart manufacturing and Industry 4.0, blockchain acts as a complementary layer to IoT, automation, and AI. It strengthens data provenance, streamlines compliance, and automates workflows in environments that demand precision, auditability, and resilience. ## Key benefits of blockchain for industrial applications Blockchain enables industrial ecosystems to become more secure, auditable, and digitally synchronized. Its core value propositions include: * Immutable, timestamped records of material flow, production events, and inspections * Distributed visibility across multi-tier suppliers and logistics partners * Automation of trust-based processes through smart contracts * Secure integration with industrial IoT sensors and devices * Authenticity verification for components, documents, and certifications * Real-time tracking of asset condition, ownership, and maintenance status These capabilities help industrial firms reduce operational risks, prevent fraud, improve compliance, and increase agility in fast-moving production environments. ## Supply chain traceability and material provenance Modern industrial supply chains involve multiple layers of sourcing, processing, assembly, and distribution. Tracking the provenance of materials and finished goods is critical for quality control, compliance, and sustainability. However, traditional supply chain systems are fragmented and opaque. Blockchain offers a unified, verifiable record of product history from raw material origin to final delivery. Each event—such as shipment, inspection, or transformation—is recorded on-chain, linked to specific parties, timestamps, and documents. Example scenario: * A manufacturer sources titanium from a certified mining firm * The shipment is registered on a blockchain with certificate of origin and environmental compliance data * As the titanium is transformed into components, each processing step is logged and linked to machines, operators, and quality data * The final aerospace part carries a digital passport that buyers and regulators can verify on-chain Benefits include: * Instant authentication of product origin, quality, and sustainability claims * Easier compliance with industry regulations and audits * Improved recall and defect tracing capabilities * Better visibility for downstream partners and customers Industries such as aerospace, automotive, defense, and semiconductors are adopting blockchain to manage complex, high-stakes supply chains with zero-defect tolerance. ## Digital twins and asset lifecycle management Industrial assets such as turbines, vehicles, machines, and equipment have lifecycles that span decades. Managing the maintenance, usage, upgrades, and ownership of these assets requires a secure, verifiable record system. Blockchain supports the concept of a digital twin—a digital representation of a physical asset that evolves over time with usage and service data. Blockchain-powered digital twins can store: * Initial manufacturing specifications and certifications * Operating hours, performance logs, and sensor data * Maintenance schedules and service history * Ownership transfers, inspections, and incidents These records are accessible to asset owners, service providers, insurers, and regulators, creating a reliable audit trail for the full asset lifespan. Example: * A power plant turbine is manufactured and its serial number registered on-chain * During each maintenance cycle, the service team logs parts replaced, technician ID, and test results * If the asset is sold or relocated, the transaction is recorded as an ownership transfer * In case of a failure, stakeholders can analyze the complete lifecycle without relying on fragmented paper records This approach reduces downtime, supports predictive maintenance, simplifies audits, and increases resale value through verified maintenance history. ## Counterfeit prevention and product authentication Counterfeiting is a major challenge across industrial domains, particularly for spare parts, pharmaceuticals, electronics, and branded components. Blockchain allows manufacturers to uniquely identify and track every unit produced, ensuring that only genuine items are recognized and accepted in the market. Blockchain-based anti-counterfeit solutions include: * Serializing each item with a tamper-evident QR code or RFID tag linked to a blockchain record * Verifying each scan or checkpoint with geolocation and timestamp * Allowing customers and partners to verify authenticity via mobile apps * Detecting duplicate or suspicious items through anomaly detection on the ledger Example: * A machinery manufacturer issues digital certificates for each gear unit it produces * Each unit is scanned and verified at installation, service, and return * Any attempt to insert counterfeit units into the supply chain is detected due to missing or mismatched blockchain entries This protects brand reputation, ensures warranty enforcement, and reduces safety risks posed by inferior counterfeit parts. ## Industrial automation and smart contracts Industrial environments are increasingly reliant on automation—from robotics to machine-to-machine communication. However, many automation workflows still depend on centralized logic and manual verification. Blockchain enables decentralized automation through smart contracts that enforce rules and interactions between machines, sensors, and enterprise systems. Examples of smart contract-based automation: * Automatically triggering procurement orders when inventory falls below a threshold * Releasing payments upon verified delivery and quality inspection * Locking down equipment until required safety checks are confirmed * Updating compliance status when calibrated sensors transmit verified readings A typical workflow could involve: * A smart sensor detects that a part is nearing end-of-life * The sensor emits a signal recorded on the blockchain * A smart contract evaluates warranty status and initiates a service request * Upon technician confirmation, a replacement part is ordered and payment scheduled Smart contracts reduce delays, eliminate redundant approvals, and ensure consistent enforcement of rules across distributed sites. ## Logistics, shipping, and freight management Logistics and shipping are integral to industrial operations, but they often involve paper documents, handoffs, and delays. Blockchain introduces transparency and automation into freight tracking, customs clearance, warehouse transfers, and cross-border shipments. Blockchain use cases in logistics include: * Digital bills of lading that are tamper-proof and instantly transferrable * Smart contract coordination between carriers, ports, customs, and buyers * Real-time shipment status with geofencing and condition data * Dispute resolution through shared access to delivery records and timestamps Example: * A container carrying raw materials is loaded at the port of origin * Its bill of lading is recorded on blockchain, accessible to the shipper, port authority, and receiving manufacturer * If the container is delayed or rerouted, the smart contract adjusts delivery deadlines and penalty clauses automatically Projects like TradeLens (Maersk and IBM), GSBN (Global Shipping Business Network), and CargoSmart are already transforming global trade using blockchain-enabled logistics platforms. ## Collaborative manufacturing and industrial consortia Industrial production increasingly involves collaboration across multiple entities—contract manufacturers, OEMs, component suppliers, and logistics partners. Blockchain provides a shared data layer that facilitates secure collaboration without exposing proprietary data. Blockchain-based collaboration features: * Shared bills of materials (BOMs) with component tracking * Access-controlled data exchange between supply chain participants * Automated fulfillment verification and payment settlement * Joint IP registration and licensing enforcement Example: * A group of suppliers work together to produce parts for an electric vehicle * Each supplier logs their contribution and quality certification on-chain * The OEM receives the final assembly with verified provenance, pricing, and terms * Royalties or incentives are distributed automatically via smart contracts Blockchain enhances trust in multi-party workflows, supports co-innovation, and aligns incentives through transparent logic and immutable logs. ## Decentralized energy grids and industrial utilities Energy production, distribution, and consumption play a critical role in industrial operations. Traditional energy grids are centralized and limited in flexibility, especially as demand increases for renewable energy, prosumer participation, and real-time monitoring. Blockchain supports decentralized energy markets and transparent grid management. Key applications include: * Tokenized energy units for peer-to-peer electricity trading * Smart contract-based billing based on actual usage * Transparent recording of generation, storage, and grid balancing * Verifiable carbon offset credits and emissions tracking * Integration with industrial IoT devices and smart meters For example, an industrial park using solar panels can generate excess energy and sell it to neighboring facilities or contribute to the grid. Each transaction is recorded on a blockchain, and payments are automatically routed through smart contracts. A regulator or utility company can audit generation and consumption in real time. Projects like Power Ledger, Energy Web Foundation, and LO3 Energy are enabling blockchain-powered microgrids and energy marketplaces that reduce dependence on centralized utilities and promote sustainable energy management in industrial zones. ## Mining, metallurgy, and raw material provenance Mining operations face scrutiny around environmental impact, labor practices, and conflict minerals. Downstream industries in automotive, electronics, and aerospace must validate the source of critical raw materials. Blockchain enables transparent tracking of mined materials from extraction to refinement and manufacturing. Use cases in mining include: * Digital records of extraction permits, inspections, and environmental audits * Blockchain-tagged containers for ore and refined metal shipments * Verification of certifications for conflict-free or ethically sourced materials * Integration with trade documents and customs declarations For example: * A lithium mining company registers its extraction permits and environmental impact assessments on-chain * Each batch of extracted ore is tagged and logged with location, time, and handler details * Refiners, transporters, and battery manufacturers access this data to verify supply chain ethics and compliance Blockchain ensures that sustainability claims are verifiable, prevents greenwashing, and builds trust with regulators, investors, and global buyers. ## Predictive maintenance and asset reliability Industrial machinery requires regular maintenance to prevent unplanned downtime and safety risks. Maintenance schedules are often based on fixed intervals or reactive monitoring, leading to inefficiencies. By combining blockchain with IoT and analytics, predictive maintenance can be logged, verified, and coordinated across stakeholders. Blockchain use cases in predictive maintenance: * Immutable logs of vibration, temperature, or load anomalies * Smart contract rules to trigger alerts or work orders based on thresholds * Equipment maintenance history shared across departments or vendors * Automated part ordering and technician scheduling Example: * A wind turbine’s sensor detects irregular blade vibration * Data is recorded on the blockchain with timestamp and location * A smart contract evaluates the reading, matches it against past patterns, and issues a maintenance request * Upon resolution, the event is closed with digital signature and part verification Blockchain creates a shared memory for all maintenance actions, helping reduce mean time to repair (MTTR), increasing uptime, and enabling insurance or warranty integration based on verified asset history. ## Industrial financing and invoice tokenization Manufacturing and logistics firms depend on working capital financing, often delayed by slow invoice processing or lack of visibility into order fulfillment. Blockchain supports invoice tokenization and supply chain finance by enabling real-time proof of delivery, service, and acceptance. Applications include: * Tokenized invoices that can be traded or financed on marketplaces * Smart contracts that release payments upon confirmed milestones * Real-time visibility for lenders and auditors into invoice status * Embedded insurance and factoring linked to verified supply data Example: * A parts supplier delivers equipment to a factory and receives confirmation via a blockchain-registered RFID scan * The delivery smart contract marks the invoice as eligible for early payment * The supplier lists the tokenized invoice on a financing platform * A fund advances capital at a discount and receives repayment when the OEM pays the invoice This reduces financing friction, supports MSMEs, and eliminates disputes over invoice authenticity or terms. ## Environmental, social, and governance (ESG) compliance Industrial firms are under growing pressure to demonstrate ESG compliance across their operations and supply chains. Traditional sustainability reporting relies on self-disclosed data and unauditable declarations. Blockchain enables trustworthy ESG tracking, verification, and reporting. Blockchain in ESG compliance includes: * Tamper-proof logs of emissions, energy usage, and waste disposal * Smart contract-based enforcement of emission caps or offset purchase * Third-party audit trails linked to certification events * Supply chain labor and sourcing practices recorded on-chain Example: * A factory publishes monthly energy consumption and waste output on blockchain * Carbon offset purchases are recorded with verified credits and retirement proof * External auditors review compliance via shared dashboards, eliminating document submissions Blockchain improves transparency, allows real-time ESG scoring, and enables data-driven investment and procurement decisions based on actual impact, not just claims. ## Circular economy and recycling systems Industrial manufacturing creates waste, obsolete parts, and scrap materials that can be reclaimed or reused. Implementing circular economy principles requires traceability and verification of reused components, remanufacturing cycles, and recycling outcomes. Blockchain supports closed-loop systems through digital records and incentives. Key use cases: * Registering parts with lifecycle and material composition metadata * Logging disassembly, refurbishing, and recycling events * Smart incentives for customers who return used equipment * Marketplace coordination for recycled raw materials For example, a consumer electronics company can track returned devices using blockchain-registered IDs. Each disassembled component is logged and routed to approved recyclers. Materials that meet quality standards are reintroduced into the production supply chain. Carbon credits or product discounts are issued automatically. This ensures compliance with extended producer responsibility laws and supports sustainability goals while building trust among consumers and regulators. ## Industrial certification and compliance documentation Certifications are critical in industrial sectors for safety, quality, and legal compliance. These include ISO standards, equipment testing, safety audits, and regulatory approvals. Paper-based certificates are easy to forge or lose. Blockchain enables permanent, verifiable certification records. Blockchain-powered certification registries support: * Issuance of digital certificates linked to verified credentials * Public and permissioned access to certification history * Expiry tracking and renewal workflows * Cross-border verification for international operations Example: * A factory installs a new high-pressure boiler * The installation certificate, safety test results, and operator training logs are registered on-chain * Inspectors and buyers verify these credentials before approving production or insurance Blockchain reduces certificate fraud, simplifies compliance audits, and supports long-term traceability for sensitive equipment and processes. ## Industrial intellectual property and R\&D protection Innovation in the industrial sector often involves patented designs, proprietary formulas, and confidential specifications. Protecting these assets requires secure timestamping, controlled disclosure, and licensing transparency. Blockchain helps organizations manage IP across collaborative and competitive environments. Applications: * Proof of invention timestamps for patent protection * Smart contract licensing with automated royalty tracking * Secure sharing of technical documents with audit logs * IP provenance for compliance with trade or export controls Example: * An engineering firm develops a new process for aluminum alloy treatment * The initial idea, test data, and process specifications are hashed and recorded on blockchain * Collaborators access a redacted version under a usage license governed by smart contract * If the patent is later contested, the timestamped blockchain records serve as legal evidence This approach supports open innovation while preserving IP rights, managing risk, and enabling monetization of R\&D outputs. ## Auditability and industrial insurance Insurers in the industrial sector require extensive documentation of assets, processes, risk controls, and loss history. Blockchain enables insurers and clients to share a common view of asset status, incidents, and mitigation efforts, reducing delays and disputes. Blockchain enables: * Real-time risk profiles based on verified data * Smart contracts for parametric insurance (e.g., temperature, downtime) * Instant claim filing with verified incident records * Secure access for underwriters, adjusters, and reinsurers Example: * A fire suppression system fails in a warehouse, triggering a sensor * The incident is logged with temperature data, camera footage, and inspection records * The insurance contract validates the conditions and releases a payout based on predefined criteria * The insurer audits all inputs via blockchain without needing physical inspection Blockchain lowers claims processing time, improves fraud detection, and provides transparent risk modeling for actuarial analysis. ## Global standards and industrial interoperability Industries operate globally, but regulatory frameworks, certifications, and data formats often differ between countries and regions. Blockchain helps bridge this gap by standardizing how data, contracts, and credentials are exchanged across borders. Examples of cross-border industrial interoperability include: * Shared supply chain compliance records accessible to customs, regulators, and buyers * Recognition of safety or quality certifications across jurisdictions * Data-sharing agreements that enforce legal and privacy requirements using smart contracts For instance, an EU-based automotive OEM sourcing parts from multiple countries can use a blockchain-based compliance ledger to verify that each component meets emissions and safety standards. Suppliers, customs authorities, and logistics providers all access the same real-time data, reducing errors and shipment delays. This supports smoother trade, faster product launches, and better collaboration in complex, multi-national supply networks. ## Aerospace manufacturing and component integrity The aerospace sector involves some of the most demanding engineering standards in any industry. Aircraft components require detailed documentation, traceability, and regulatory approval throughout their lifecycle. A single non-compliant or counterfeit part can compromise safety and lead to substantial liability. Blockchain is well suited to address these concerns through: * Immutable records of part manufacturing, certification, and test results * Chain-of-custody logging during transportation and storage * Maintenance and retrofit history linked to specific components * Shared compliance access for manufacturers, regulators, and airlines Example: * A turbine blade manufactured in Germany is registered with production batch, quality assurance results, and engineer sign-off * During global transportation, temperature and vibration sensors log conditions, submitting data to the blockchain * Upon installation on an aircraft, its maintenance record is updated and shared with the aviation authority This system eliminates manual reconciliation of maintenance logs, improves regulatory oversight, and prevents the introduction of faulty or untraceable components into high-risk machinery. ## Construction, infrastructure, and modular builds The construction industry faces challenges such as delays, material mismanagement, and lack of documentation around inspections and certifications. Blockchain provides transparency, auditability, and automation across the lifecycle of construction and infrastructure projects. Blockchain-enabled construction platforms support: * On-chain issuance of permits, licenses, and inspection results * Smart contracts for subcontractor payments tied to milestone completions * Inventory tracking for modular parts, concrete usage, or steel placement * Equipment rental history and usage validation for billing A large-scale project such as a hospital or airport could benefit from: * Digital contracts with contractors where payment is released only after certified inspections are submitted to blockchain * A shared ledger of project milestones, site activities, and budget expenditures * Auditable logs of safety checks, worker access control, and resource consumption Governments and construction consortia are increasingly exploring these models to reduce corruption, eliminate disputes, and enable more reliable delivery of public infrastructure. ## Manufacturing-as-a-service platforms Digital manufacturing platforms now offer distributed access to 3D printing, CNC machining, and tooling services across geographies. These platforms coordinate orders, specifications, delivery, and quality assurance among independent manufacturers. Blockchain helps validate each transaction, ensure fair compensation, and provide traceability. Key blockchain roles in distributed manufacturing include: * Upload and hash of CAD files with access logs * Smart contracts for job assignment, completion validation, and payment * Certification of output quality and machine performance * Record of who produced what, when, and using which materials Example: * An automotive company uploads a design file for a custom metal part * The file is hashed and permissions granted to an approved workshop * Once printed and quality-tested, the results are recorded on-chain and payment is released * All interactions are stored immutably to support dispute resolution or warranty claims Blockchain adds trust and structure to decentralized, on-demand production ecosystems, enabling global scale while preserving traceability and IP integrity. ## Worker safety and compliance monitoring In industrial environments such as factories, mines, and construction sites, worker safety is a top priority. Ensuring that safety protocols are followed, certifications are updated, and incidents are reported accurately is essential for legal compliance and operational reliability. Blockchain provides secure logging and real-time verification. Examples of blockchain in worker safety: * Digital certificates for safety training, licenses, and hazard briefings * Smart PPE (personal protective equipment) integration with access control systems * Incident reporting and resolution timelines with immutable records * Incentive programs for safety compliance linked to verifiable behavior For example, a mining company may require all personnel entering a site to scan their digital ID. A smart contract verifies whether the individual has completed necessary training and logged equipment checks. If any requirements are missing, access is denied and a record is created. In case of accidents, blockchain-logged sequences provide trusted data for analysis, legal inquiry, or insurance evaluation. Worker unions and safety regulators also benefit from shared access to verified safety compliance data. ## Labor certification and ethical sourcing Global industrial supply chains often face scrutiny over ethical labor practices, including forced labor, underage workers, and poor workplace conditions. Regulatory and corporate social responsibility frameworks require proof of ethical sourcing and labor certification. Blockchain supports ethical labor tracking through: * Verification of worker identities, contracts, and training logs * On-chain audit reports from third-party certifiers * Smart contract enforcement of fair wage payment terms * Incident reports and whistleblower protections with anonymous proofs Example: * A textile supplier in Southeast Asia registers employees on a blockchain-based labor compliance registry * Auditors upload periodic reviews and findings * Brands sourcing from the supplier access this data to ensure alignment with ethical trade requirements * Payments are structured to ensure no deduction below agreed wages, verified by blockchain entries This builds consumer trust, supports international labor laws, and protects vulnerable workers by establishing accountability across industrial supply networks. ## Industrial IoT and sensor integration Industrial automation depends heavily on sensors, actuators, and edge devices that monitor everything from temperature and pressure to machine vibration and location. Integrating these IoT systems with blockchain ensures that sensor data is tamper-evident, shareable, and usable in smart contract workflows. Blockchain + IoT capabilities include: * Real-time telemetry that triggers alerts or contract execution * Verifiable data feeds to oracles for compliance and process validation * Audit logs for calibration, signal loss, or device errors * Maintenance optimization using predictive analytics and on-chain diagnostics Example: * A refrigerated shipping container logs internal temperature at one-minute intervals * This data is hashed and submitted to the blockchain during transit * If a reading crosses the allowed threshold, a smart contract triggers an alert and possible route adjustment * If a shipment is rejected due to spoilage, the blockchain record helps assign liability based on exact failure time and conditions Combining IoT and blockchain improves data integrity, enables distributed control, and strengthens accountability across automated industrial systems. ## Warehouse automation and inventory reconciliation Warehouses play a crucial role in industrial distribution, housing raw materials, spare parts, and finished goods. Managing stock levels, reconciliation, and routing requires integration between sensors, ERP systems, and logistics networks. Blockchain helps streamline warehouse operations through immutable tracking and cross-stakeholder access. Warehouse blockchain solutions may include: * Real-time inventory visibility for suppliers, buyers, and auditors * QR or RFID-based asset movement tracking with timestamped events * Condition monitoring of sensitive goods such as chemicals or electronics * Smart restocking logic based on blockchain-validated levels Example: * A warehouse receives 500 units of precision components and logs receipt on-chain * As parts are picked for delivery, each movement is recorded with location, handler, and destination * A smart contract reconciles available stock with expected demand and places automatic reorders * Auditors verify movement logs without physical inventory checks Blockchain ensures that warehouse records match physical reality, improves transparency for stakeholders, and reduces disputes over missing or damaged items. ## Construction equipment and fleet management Industrial equipment and vehicles such as cranes, loaders, and transport fleets are high-value assets with intensive usage, maintenance, and rental records. Blockchain enables trusted tracking of equipment condition, availability, and service history for better planning and ROI. Applications in fleet and equipment management: * Digital logbooks of usage hours, fuel consumption, and job assignments * Verification of inspection reports and operator certification * Rental contracts with usage-based billing and insurance integration * Predictive replacement scheduling and downtime tracking Example: * A construction company rents heavy equipment from a third-party vendor * The rental contract is encoded in a smart contract, with daily logs uploaded from onboard telematics * Fuel usage, work hours, and location are tracked and shared with all parties * Any damage, late returns, or usage anomalies trigger automated clauses Blockchain reduces administrative load, provides precise billing, and protects both owners and renters from disputes or hidden liabilities. ## Industrial auctions and asset liquidation Surplus industrial equipment, materials, or production capacity are often resold through auctions or liquidation platforms. Blockchain ensures that auctions are transparent, fair, and tamper-resistant. It also supports traceability of ownership and conditions for sensitive or regulated assets. Blockchain-enabled auctions provide: * Timestamped, irreversible bids with verified user identities * Smart contract resolution of winners, pricing, and payment deadlines * Asset condition metadata linked to inspections and prior usage * On-chain transfer of ownership and delivery confirmation Example: * A steel manufacturer lists surplus rolling stock on a blockchain auction site * Interested buyers submit sealed bids before a deadline * The auction smart contract reveals bids, determines the winner, and issues payment instructions * Once confirmed, the ownership record is updated and logistics is initiated This approach prevents last-minute manipulation, reduces administrative costs, and increases buyer trust in industrial resale markets. file: ./content/docs/knowledge-bank/keys-and-security.mdx meta: { "title": "Private keys and security", "description": "A comprehensive guide to private key management in blockchain" } ## Introduction to private keys Private keys are the cornerstone of blockchain security. They serve as proof of ownership and control over digital assets and smart contract interactions.
A private key is a randomly generated number that allows its holder to sign transactions, access wallets, and interact with the network. Without the correct private key, no one can move funds or authorize changes tied to a blockchain address. Every blockchain account is derived from a key pair. The private key is kept secret, while the public key or derived address is used for receiving assets or verifying signatures.
If a private key is lost, access to the associated funds is permanently lost. If it is stolen, the attacker gains full control. This makes private key handling a critical responsibility in any blockchain-based system. ## Cryptographic foundations Private keys rely on public-key cryptography, also known as asymmetric encryption.
In this system, each user generates a key pair consisting of: * A private key, which is kept secret * A public key, which is shared openly Blockchain systems such as Ethereum and Bitcoin use elliptic curve cryptography to generate keys and validate transactions. The commonly used curve is `secp256k1`, which offers strong security with efficient computation. The core principles include: * Only the holder of the private key can generate a valid signature * Anyone with the public key can verify the signature’s authenticity * The key pair ensures non-repudiation, integrity, and authentication Private keys are never transmitted during a transaction. Instead, they are used to generate a signature, which is included in the transaction payload and verified by network validators. ## Generating private keys Private keys are 256-bit numbers that must be chosen with high entropy. They can be generated using secure cryptographic libraries or hardware devices. Key generation approaches include: * Cryptographically secure pseudorandom number generators (CSPRNGs) * Hardware wallets with built-in secure elements * Operating system entropy pools (e.g., `/dev/random`) * Browser-based generators with added caution Generated keys are typically encoded in hexadecimal, WIF (Wallet Import Format), or Base58 for ease of storage and transport. Example Ethereum private key (hex): ``` 0x4c0883a69102937d6231471b5dbb6204fe512961708279f2a41e2eaed2931c0e ``` A good key generation tool ensures randomness, prevents key reuse, and never exposes the key to insecure memory or external APIs. ## Storing private keys Storage is the most vulnerable aspect of private key management.
If keys are stored improperly, they can be leaked, corrupted, or lost. Secure storage methods are essential for both individual users and enterprise systems. Key storage options include: * Hardware wallets (e.g., Ledger, Trezor) for physical isolation * Encrypted keystore files (e.g., JSON-V3 for Ethereum) * Secure elements in mobile devices (e.g., iOS Secure Enclave, Android Keystore) * Custodial wallets with trusted third-party key management * HSMs (Hardware Security Modules) in enterprise infrastructures * Cold storage using air-gapped systems or paper wallets Best practices for key storage: * Use hardware devices where possible * Encrypt keys at rest using strong passphrases * Backup keys securely in multiple locations * Avoid storing plain-text keys on disk or in source code * Rotate keys periodically if applicable Loss of private keys leads to irreversible loss of funds. Multiple layers of protection and redundancy should always be considered. ## Using private keys to sign data Signing is the main operation performed with private keys in blockchain systems.
A digital signature proves that a transaction or message originated from the private key holder and has not been tampered with. The signature process includes: * Hashing the transaction data using a secure hash function (e.g., Keccak256) * Signing the hash with the private key using ECDSA * Producing a signature composed of values `(r, s, v)` for Ethereum or `(r, s)` for Bitcoin Signature verification is done by nodes using the corresponding public key or address. If the signature is invalid, the transaction is rejected. Example in Ethereum: ```js const message = "Transfer 100 tokens"; const hash = keccak256(message); const signature = sign(hash, privateKey); ``` Signatures are also used in off-chain authentication, multisig wallets, permit functions (EIP-2612), and decentralized identity systems. ## Key recovery and backups Key recovery is essential to protect against accidental loss or device failure.
A well-designed recovery strategy ensures that keys can be restored without compromising their secrecy or availability. Common key recovery methods include: * Mnemonic phrases based on BIP-39 (12 or 24 words) * Shamir’s Secret Sharing to split a key into multiple parts * Encrypted backups stored in separate secure locations * Hardware wallet seed recovery using offline procedures Mnemonic phrases convert a binary seed into a set of easily writable words. The same seed always produces the same key pair. These phrases must be protected like the key itself. Best practices for recovery: * Write seed phrases on physical paper or metal backups * Store in fireproof and waterproof containers * Do not store recovery data online or in cloud services * Test recovery procedures before going live For organizations, backup keys may be held by compliance officers, escrow providers, or board members under strict policies. ## Threats and attack vectors Private keys are targeted by a range of threats. Understanding these helps define stronger defenses.
Key threats include: * Malware and keyloggers on infected devices * Phishing attacks that trick users into revealing keys * Memory dumps or side-channel attacks on hot wallets * Insider threats within organizations * Compromised browser extensions or dApps * Insecure random number generators or reused entropy * Clipboard hijacking or exposed keystrokes Even small mistakes can lead to total loss. Attackers often automate discovery of leaked private keys across GitHub, cloud logs, or system files. Mitigation strategies: * Use hardware wallets that isolate key operations * Run key-handling apps in sandboxed environments * Monitor processes and file access for anomalies * Apply least-privilege access to signing systems * Educate users against phishing and social engineering Security posture must evolve continuously, especially in high-value environments. ## Multisignature and threshold schemes Multisignature schemes offer a powerful way to secure private key usage.
Instead of relying on a single key, multisig requires multiple parties to approve an action. This reduces the risk of compromise and supports distributed governance. In Ethereum, multisig is implemented through smart contracts such as Gnosis Safe. In Bitcoin, native multisig is supported via `m-of-n` scripts. Common use cases: * Treasury and fund control * DAO governance approvals * Enterprise key custody * Shared wallets for partnerships Multisig types: * Standard multisig (e.g., 2-of-3) * Threshold signatures (e.g., BLS or FROST) * Hierarchical structures (e.g., role-based access) Benefits of multisig: * Reduced single point of failure * Transparent approval flows * Configurable access control and time delays Multisig setups require clear policies, signer coordination, and robust auditing. The key principle is that no single party can act unilaterally. ## Enterprise key management strategies Enterprises managing digital assets need rigorous key management architectures.
Enterprise solutions may include: * Hardware security modules (HSMs) for isolated key signing * Multi-party computation (MPC) for collaborative key operations * Key management services integrated with compliance controls * Role-based access and transaction approval workflows * Audit trails, policy engines, and emergency lockdowns MPC allows parties to sign a transaction without any party ever having the full private key. This approach is gaining popularity among custodians and exchanges. Integration with existing security systems such as LDAP, HSMs, or SIEM tools enables seamless control and visibility. Enterprises must enforce: * Segregation of duties * Key rotation policies * Incident response for key exposure * Regular audits and pen-testing Institutional-grade security is critical in contexts such as fund custody, token issuance, or regulated DeFi platforms. ## Secure user onboarding User onboarding is the first point of contact where private keys are generated or introduced.
A secure onboarding flow must ensure that users understand their responsibility and that no third party intercepts the key or recovery material. Methods for onboarding include: * Generating keys locally in the browser with no network exposure * Allowing users to bring their own keys via hardware devices * Presenting mnemonic phrases with forced manual backup * Integrating with secure authentication modules on mobile Usability should never compromise security. Developers must: * Explain what the key or phrase means * Warn that recovery is not possible without a backup * Block screenshots or clipboard access during key display * Offer guided verification by asking users to re-enter selected words The onboarding design directly affects user retention and security posture. A poor experience leads to either user drop-off or mismanaged keys. ## Wallet management best practices Wallets are interfaces to private keys and blockchain interactions. They can be hot, cold, custodial, or self-managed.
Best practices for wallet management include: * Using separate wallets for savings and daily use * Keeping large balances in cold wallets disconnected from the internet * Using multisig wallets for organizational funds * Avoiding browser extensions for sensitive storage * Setting transaction limits, alerts, and withdrawal delays Hardware wallets offer the best balance of usability and security for individuals. They support signing without revealing the private key to the host device. Mobile wallets benefit from secure enclaves but are exposed to more threats. They should use biometric locks, OS-level key storage, and encrypted local backups. Custodial wallets shift the key responsibility to a third party. This may be acceptable for regulated exchanges or financial institutions but should come with SLAs, audits, and transparency. ## Biometric login and passkey systems Modern devices support biometric authentication, which can replace traditional key management for consumer dApps.
Biometrics include: * Face ID or fingerprint readers * Device-level passkeys * WebAuthn and FIDO2 standards Instead of storing private keys directly, wallets can wrap the key using a secure enclave and decrypt it only with biometric confirmation. Passkeys allow cross-device login without revealing credentials. They bind the user to the device and browser, offering phishing resistance and ease of use. Benefits: * No need to remember or store seed phrases * Fast and seamless login experience * Compatible with mobile-first dApps Challenges: * Recovery is tied to device backup or platform ecosystem * May not offer true self-custody * Limited support across decentralized systems Biometric and passkey-based flows are ideal for onboarding new users who are not yet familiar with Web3 but want a secure experience. ## Trends in private keyless cryptography Private keyless systems are an emerging class of identity models where users don’t need to manage cryptographic keys directly.
Approaches include: * Social recovery wallets (e.g., Argent) * Session-based ephemeral keys (e.g., Lit Protocol) * Delegated signer protocols (e.g., Biconomy, Account Abstraction) * Zero-knowledge login using zk-proof of identity * Encrypted key fragments managed by guardians Account abstraction in Ethereum (EIP-4337) decouples private key signatures from transaction authorization. This opens the door to: * Smart contract wallets that define custom access logic * Recovery methods based on biometrics or guardians * Bundled transactions and gasless operations Private keyless systems aim to solve Web3’s largest UX barrier: secure key handling. By abstracting keys away from users, these systems offer convenience without sacrificing control. Private keys define access, control, and value in the blockchain world. Managing them properly is critical to protect both individual assets and institutional trust.
A secure key strategy includes: * Strong cryptographic generation * Encrypted and redundant backups * Segmented usage for different roles or balances * Education on threat models and phishing * Use of hardware devices or secure computation As the ecosystem matures, key handling will become safer, smarter, and more user-friendly. From multisig to MPC and passkeys, the future of blockchain security will balance cryptographic rigor with human usability. file: ./content/docs/knowledge-bank/private-blockchains.mdx meta: { "title": "Private blockchains", "description": "Understanding private and permissioned blockchain networks" } import { Callout } from "fumadocs-ui/components/callout"; import { Card } from "fumadocs-ui/components/card"; # Private blockchain networks Private blockchains are permissioned networks where participation is controlled and restricted to authorized participants. ## Major private networks
### Enterprise Solutions * **Hyperledger Besu** * Enterprise Ethereum * EVM compatible * Proof of Authority * **Quorum** * JP Morgan fork of Ethereum * Privacy features * Enterprise focused ### Consortium Networks * **Hyperledger Fabric** * Modular architecture * Channel-based privacy * Chaincode smart contracts * **Corda** * Financial services focus * Point-to-point transactions * Privacy by design
## Technical deep dive Blockchain technology, at its core, provides a decentralized digital ledger that records transactions in a secure and transparent manner . While public blockchains offer open access and broad participation, private permissioned blockchains represent a distinct category tailored for controlled environments, often operating within or between organizations . The increasing interest from businesses in private permissioned blockchains stems from their potential to offer the benefits of distributed ledger technology while addressing specific enterprise needs for data privacy, access control, and regulatory compliance . This emergence signifies a recognition that a one-size-fits-all approach to blockchain may not suit every organizational context. ## Defining Characteristics of Private Permissioned Blockchains A private blockchain, frequently termed a "trusted" or "permissioned" blockchain, operates as a closed network accessible exclusively to authorized or select verified users . This fundamental characteristic is underpinned by an additional access control layer, ensuring that only users with explicit permissions can interact with the blockchain . Furthermore, the actions that permitted users can perform are strictly defined and granted by the administrators of the ledger . To gain access and execute these authorized operations, participants are typically required to authenticate themselves through methods such as digital certificates or other digital identifiers . Participation in a private permissioned blockchain network is restricted, with network administrators holding the authority to determine who can join . Access often involves a formal invitation process where the identity and other pertinent information of potential participants are authenticated and verified by the network operator(s) . Moreover, the system allows for the assignment of different levels of user permissions or roles, providing granular control over network interactions . These blockchains are frequently owned and operated by specific companies or organizations for the purpose of managing sensitive data and internal information . In some cases, a single private organization may wield complete authority over the network, dictating the participants and their roles . The owner or operator may also retain the privilege to override, edit, add, or even delete records on the blockchain, depending on the network's governance model . The degree of decentralization in a private permissioned blockchain is not a fixed attribute and can vary significantly, ranging from highly centralized systems controlled by a single entity to partially decentralized networks operating among a consortium of authorized participants . The network members typically decide on the level of decentralization and the specific mechanisms used for achieving consensus .
Transparency, a hallmark of many public blockchains, is not a mandatory feature of private permissioned blockchains and is often considered optional to enhance security . The level of transparency is usually determined by the objectives of the organization managing the blockchain network . However, regardless of the chosen level of transparency for general users, the ledger itself maintains a comprehensive record of every transaction along with the identities of the participating parties . In contrast to the anonymity often associated with public blockchains, private permissioned blockchains generally lack anonymity. Access to the identity of each participant involved in a transaction is frequently a critical requirement for private entities seeking accountability and a verifiable chain of custody . Every modification or transaction is linked to a specific user, enabling network administrators to have immediate insight into who made a change and when .
The fundamental aspect that distinguishes these blockchains is the controlled access and the presence of an entity or group responsible for managing permissions. This fundamentally alters the trust model compared to public blockchains, where trust is distributed across a large, anonymous network. The flexibility in decentralization and transparency allows private permissioned blockchains to be adapted to specific organizational needs and regulatory requirements, offering a key advantage over the more standardized structures of public blockchains. The capability of a central authority to potentially modify the ledger introduces a trade-off between immutability and control, a balance that must be carefully considered based on the intended application. ## Private Permissioned vs. Public Blockchains: A Detailed Comparison The fundamental difference between private permissioned and public blockchains lies in their approach to access control. Private permissioned blockchains restrict participation to authorized entities who have been granted permission by a central authority or through a predefined protocol . Conversely, public blockchains are permissionless, allowing anyone to join and participate in the network's core activities .
In terms of anonymity, private permissioned blockchains generally do not offer it, as participants' identities are known and tracked to ensure accountability . Public blockchains, on the other hand, provide a degree of anonymity through the use of pseudonymous addresses, although the transactions themselves are publicly viewable .
Governance also differs significantly. In private permissioned blockchains, decisions are authorized by a specific group or the network owners through a centralized, predefined structure . Governance in these networks is often customizable . Public blockchains operate under a decentralized governance model, where no single entity controls the network or its protocols, and changes typically require consensus from the community . The level of decentralization varies considerably. Private permissioned blockchains can range from centralized systems controlled by a single organization to partially decentralized networks managed by a consortium of authorized participants . Public blockchains are inherently decentralized, distributed across a vast network of nodes, which makes them highly resilient to single points of failure or control . Transparency is another key differentiator. In private permissioned blockchains, transparency is optional and often limited to authorized participants, with the level being customizable . Public blockchains are highly transparent, with all transactions recorded and publicly accessible on the blockchain .
Security approaches also differ. Private permissioned blockchains rely on access control mechanisms, encryption, and potentially consensus protocols. However, they can be vulnerable if the controlling entity's systems are compromised or due to a limited number of validators . Public blockchains derive their security from the large number of participants, cryptographic hashing, and the distributed nature of the network, making them highly resistant to attacks, although this can sometimes impact speed .
Transaction speed and throughput are generally higher in private permissioned blockchains due to the smaller number of participants and the use of potentially more efficient consensus mechanisms . These networks can often be configured for high transaction throughput and even zero transaction fees . In contrast, transaction processing in public blockchains can be slower due to network congestion and the need for broad consensus among numerous participants , often involving transaction fees . Use cases for each type of blockchain also vary. Private permissioned blockchains are well-suited for enterprise applications requiring data privacy, accountability, and controlled access, such as supply chain management, internal financial systems, healthcare data management, and collaborations between businesses . Public blockchains are ideal for applications that demand transparency, trustless environments, and broad participation, such as cryptocurrencies, decentralized finance (DeFi), and open-source projects .
Identity management is typically built into private permissioned blockchains, allowing for the definition of roles and permissions for participants . Authentication often occurs through certificates or digital identifiers . Public blockchains generally lack built-in identity management, with transactions being linked to pseudonymous wallet addresses . Scalability in terms of transaction throughput is generally better in private permissioned blockchains compared to public blockchains due to the limited number of participants . Public blockchains can face significant scalability challenges when dealing with a high volume of transactions .
The decision of whether to use a private permissioned or a public blockchain is fundamentally driven by the specific requirements of the application, particularly the desired balance between control, privacy, transparency, and trust. Organizations must carefully assess their needs and priorities to determine which type of blockchain aligns best with their objectives. ### Table 1: Comparison of Private Permissioned and Public Blockchains | Feature | Private Permissioned Blockchain | Public Blockchain | | ------------------- | ---------------------------------------------------------- | ------------------------------------------------------ | | Access Control | Restricted, permissioned | Open, permissionless | | Anonymity | Generally lacks anonymity | Offers pseudonymity | | Governance | Centralized or controlled by authorized group | Decentralized, community-driven | | Decentralization | Variable, can be centralized or partially decentralized | Inherently decentralized | | Transparency | Optional, customizable, often limited to participants | High, all transactions publicly viewable | | Security | Relies on access control, encryption, fewer validators | Relies on a large number of participants, cryptography | | Transaction Speed | Fast, high throughput potential | Can be slower, lower throughput potential | | Use Cases | Enterprise applications, supply chain, internal systems | Cryptocurrencies, DeFi, open-source projects | | Identity Management | Built-in, role-based access control | Typically lacks built-in identity management | | Scalability | Generally more scalable in terms of transaction throughput | Can face scalability challenges | ## Architecture of Private Permissioned Blockchain Networks The architecture of a private permissioned blockchain network comprises several key components working in concert. Nodes are the participants in the network, each typically holding a copy of the ledger . In this controlled environment, these nodes are usually known and authorized entities . It's common to find different types of nodes within the network, each with specific roles and permissions, such as validator nodes responsible for confirming the validity of transactions .
Clients serve as the applications or interfaces that participants use to interact with the blockchain network . These clients enable users to submit transactions, query the data stored on the ledger, and potentially execute smart contracts . The ledger is the foundational element – a distributed, immutable record that chronologically captures all transactions that have occurred on the blockchain . In private permissioned blockchains, access to view or modify the ledger is strictly controlled based on the permissions assigned to each user .
Smart contracts, which are self-executing agreements with the terms directly encoded in the program, play a crucial role in automating processes, enforcing predefined rules, and managing assets within the permissioned environment . Platforms like Hyperledger Fabric and Quorum provide robust support for the development and deployment of smart contracts . The network structure, or topology, that connects the various nodes can vary depending on the specific design of the blockchain. Common structures include peer-to-peer networks and hub-and-spoke models . In many private permissioned blockchains, a "trusted intermediary" or a consortium of organizations might manage the core network infrastructure, overseeing the operation and governance of the blockchain . Some architectural designs involve a distinction between validator nodes, operated by the trusted intermediary, and participant nodes that may have more limited capabilities .
A critical component for managing participation and access is the identity management layer. This layer is responsible for verifying the identities of participants and managing their associated permissions within the network . It handles authentication processes, determines authorization levels for various actions, and may also include mechanisms for revoking access when necessary .
The architecture of these networks is carefully crafted to strike a balance between security, control, efficiency, and performance, leading to diverse implementations based on the specific use case and the governing entity. Unlike the more standardized architecture observed in public blockchains, private permissioned blockchains offer greater flexibility in their design to cater to the unique needs of organizations. The central role of the "trusted intermediary" or the governing consortium significantly shapes the architecture, particularly concerning the distribution of responsibilities for transaction validation and overall network maintenance. This central entity introduces a degree of centralization but also establishes a clear point of accountability and control within the network.
## Consensus Mechanisms in Private Permissioned Blockchains While highly centralized private blockchains might forgo traditional consensus mechanisms, most distributed private permissioned networks rely on them to ensure agreement among authorized participants regarding the state of the ledger . Several consensus algorithms are commonly employed in these settings, each with its own technical details and trade-offs.
**Raft** is a consensus algorithm favored for its understandability and performance, making it suitable for permissioned environments. It operates through a leader election process where one node is chosen as the leader, responsible for proposing new blocks to the network. Follower nodes then replicate these proposals, and a block is committed to the ledger only when a majority of followers agree. Raft's primary focus is on maintaining consistency of the transaction log across all participating nodes.
**Paxos** represents a family of consensus algorithms renowned for their robustness and fault tolerance, even in asynchronous networks where message delivery times are not guaranteed. While more complex to understand and implement than Raft, Paxos involves distinct roles of proposers, acceptors, and learners to achieve agreement on a specific value, such as a transaction or a block. It is designed to tolerate a certain number of faulty processes within the network.
The **Practical Byzantine Fault Tolerance (PBFT)** algorithm is specifically engineered to tolerate Byzantine faults, where nodes can exhibit arbitrary behavior, including malicious actions . In PBFT, a round of communication occurs between a primary node and backup nodes to reach consensus. The system can guarantee safety and liveness as long as a supermajority of nodes are behaving honestly (typically 2f+1 honest nodes out of a total of 3f+1 nodes, where 'f' represents the number of potentially faulty nodes). PBFT is frequently used in permissioned blockchains where the participants might not all be fully trusted.
**Federated Byzantine Consensus (FBFT)** is a variation of the BFT algorithm where each node in the blockchain designates a set of trusted transaction validators who receive and order transactions . Consensus is achieved when a predefined minimum number of these validators reach an agreement. FBFT offers a compromise between full decentralization and trust by relying on a federation of known and trusted validators.
**Round-Robin Consensus** presents a simpler approach where nodes take turns in proposing and validating new blocks . This mechanism is particularly well-suited for highly controlled environments where all participants are considered trustworthy. While it can be very efficient in such settings, it typically offers less fault tolerance compared to BFT-based algorithms.
Some private blockchain platforms also utilize **multi-party voting schemes** to achieve consensus . In these systems, authorized participants cast votes on proposed transactions or blocks, and consensus is reached when a predefined threshold of votes is met. The specific voting rules and thresholds can be customized based on the network's requirements.
The selection of a particular consensus mechanism is largely dictated by the level of trust that exists among the participants and the desired degree of fault tolerance and performance for the network. In environments where participants are known and trusted, simpler and more efficient algorithms like Raft or Round-Robin may be sufficient. However, in scenarios involving potentially less trusted entities, more robust mechanisms such as PBFT or FBFT are often preferred. The emphasis on efficiency and reduced computational overhead in private permissioned blockchains often leads to the adoption of consensus mechanisms that are less resource-intensive compared to the Proof-of-Work (PoW) algorithm commonly used in many public blockchains. This contributes to the faster transaction speeds and potentially lower energy consumption observed in private networks. ## Protocols in Private Permissioned Blockchains Protocols form the backbone of any blockchain network, defining the rules and procedures that govern how participants interact and how the system operates. In private permissioned blockchains, these protocols are often tailored to meet specific organizational requirements and security considerations.
**Communication protocols** dictate how nodes within the network exchange information. This includes the dissemination of details about new transactions, newly formed blocks, and updates to the overall state of the ledger. While fundamental networking protocols like TCP/IP provide the underlying infrastructure, specific blockchain platforms may implement their own optimized communication protocols to enhance efficiency and security within their particular architecture and consensus framework. These protocols ensure that message passing between nodes is both secure and reliable.
**Transaction processing protocols** outline the precise steps involved in submitting, verifying, and ultimately committing transactions to the blockchain. This encompasses the format in which transactions are structured, the methods used for digitally signing them to ensure authenticity, and how they are propagated across the network to other participating nodes. These protocols also establish the rules for validating transactions, which may include verifying digital signatures, ensuring sufficient account balances, and confirming adherence to the logic defined within smart contracts.
**Data sharing protocols** are particularly important in private permissioned blockchains, where controlling access to information is a primary concern. These protocols govern how data stored on the ledger is shared among authorized participants. They can enforce granular access control policies at the level of individual data elements, ensuring that only users with the appropriate permissions can view specific pieces of information. Techniques such as state channels or private data collections might be employed to facilitate confidential data sharing within the network while still leveraging the benefits of a shared ledger.
**Smart contract interaction protocols** define how users and external applications can interact with smart contracts that have been deployed on the blockchain. This includes the protocols for invoking specific functions within a contract, passing the necessary parameters, and receiving the results of the contract's execution. Standardized APIs and interfaces are often used to simplify and streamline the process of interacting with smart contracts.
The protocols employed in private permissioned blockchains are carefully selected and often customized to prioritize efficiency, maintain security within a controlled environment, and ensure strict adherence to predefined access policies. Unlike the more open and standardized protocols found in public blockchains, private networks have the flexibility to implement bespoke protocols that are finely tuned to their specific use cases and the characteristics of their participants. The emphasis on data sharing protocols underscores the critical importance of granular control over information access in enterprise settings, where confidentiality and compliance with regulations are paramount. These protocols enable organizations to harness the advantages of a shared, distributed ledger while simultaneously maintaining the necessary levels of data privacy and security. ## Identity Management and Access Control In the realm of private permissioned blockchains, robust identity management and access control mechanisms are paramount for ensuring the security, integrity, and proper governance of the network . These systems control who can participate in the network and precisely define the actions each participant is authorized to perform. This is crucial for establishing accountability and maintaining a clear audit trail of all activities within the blockchain .
Permissions within these networks are typically granted by the network administrators or through the enforcement of predefined rules that are often embedded within smart contracts . A common approach involves defining different roles, each associated with a specific set of access privileges and capabilities . Access can be granted based on various criteria, including the participant's identity, their organizational affiliation, or other relevant attributes that align with the network's policies.
The enforcement of these permissions occurs at multiple layers within the blockchain infrastructure. This includes controlling access to the network itself, regulating the submission of transactions, restricting the visibility of certain data on the ledger, and governing the execution of smart contracts. Authentication mechanisms, such as digital certificates and API keys, are employed to verify the identity of each participant attempting to interact with the network . Once a user is authenticated, authorization policies are then applied to determine whether that user possesses the necessary permissions to perform the specific action they are attempting.
Private permissioned blockchains often integrate with existing enterprise-level identity management systems, allowing organizations to leverage their current infrastructure and processes for managing user identities . Additionally, some blockchain platforms offer built-in identity management features that can be configured to meet the specific needs of the network . The modular nature of many blockchain architectures also facilitates the integration of various third-party identity management solutions, providing flexibility and customization options .
Commonly used mechanisms for managing permissions within these networks include Access Control Lists (ACLs) and Role-Based Access Control (RBAC). ACLs explicitly specify which users or groups have access to particular resources within the blockchain. RBAC, on the other hand, assigns permissions to predefined roles, and users are then assigned to these roles based on their responsibilities and requirements within the network. This approach simplifies permission management and ensures consistency across the network.
The presence of strong identity management and access control is a fundamental aspect of private permissioned blockchains, distinguishing them from their public counterparts. This controlled environment ensures that the network operates according to its intended design and that sensitive data is protected from unauthorized access or modification. The ability to precisely define and enforce who can do what within the blockchain network is a key factor driving the adoption of this technology by enterprises seeking secure and auditable solutions. Furthermore, the seamless integration with existing identity management systems can significantly streamline the process of onboarding and managing users for organizations deploying private permissioned blockchains, reducing administrative overhead and leveraging existing expertise.
## Scalability and Performance Considerations Private permissioned blockchains generally exhibit higher transaction throughput and lower network latency compared to public blockchains, primarily due to the limited number of participants and the potential for employing more efficient consensus mechanisms . The absence of open competition for transaction validation and the utilization of voting-based or leader-based consensus protocols can significantly enhance processing speeds. Moreover, because these networks typically involve a smaller and often geographically localized set of participants, the time it takes for information to propagate across the network, known as network latency, tends to be lower .
Despite these inherent advantages, private permissioned blockchains are not immune to scalability challenges. As the number of participants and the volume of transactions increase, these networks can still encounter limitations. The specific consensus mechanism employed and the underlying network architecture play a crucial role in determining the scalability of a given private blockchain. For instance, some consensus algorithms, like PBFT, can experience performance degradation as the number of participating nodes grows significantly.
When compared directly with public blockchains, the differences in scalability and performance become more pronounced. Public blockchains often face scalability bottlenecks due to the sheer number of participants and the computationally intensive nature of some of their consensus mechanisms, such as Proof-of-Work . In contrast, private permissioned blockchains prioritize efficiency and immutability within a controlled environment, often at the expense of the high degree of decentralization found in public chains. This trade-off typically results in superior performance in enterprise-focused applications .
Several factors can influence the overall performance of a private permissioned blockchain. The choice of consensus algorithm is critical, as different algorithms have varying performance characteristics under different network conditions. The underlying network infrastructure, including the bandwidth and connectivity between nodes, also plays a significant role. The complexity of the smart contracts being executed on the blockchain can impact processing times, as can the hardware and software resources available to each node in the network.
The generally better scalability and performance characteristics of private permissioned blockchains make them particularly attractive for enterprise use cases where high transaction volumes and low latency are often critical requirements. This makes them well-suited for applications such as supply chain tracking, real-time payment processing, and efficient asset management within organizations or among trusted consortia. However, while generally more scalable than public chains, careful design and ongoing optimization are still essential to ensure that private permissioned blockchains can effectively handle the anticipated workload as adoption expands. Factors such as the selection of an appropriate consensus mechanism and the design of an efficient network architecture must be carefully considered to avoid potential performance bottlenecks as the network evolves.
## Real-World Use Cases of Private Permissioned Blockchains Private permissioned blockchains are finding increasing adoption across various industries, demonstrating their versatility and suitability for specific enterprise needs. In supply chain management, these blockchains enable the tracking of goods and their provenance throughout the supply chain, fostering transparency and accountability among all participating organizations . This can lead to improved efficiency, reduced instances of fraud, and enhanced visibility into complex supply networks .
The financial services sector is exploring and implementing private permissioned blockchains for several applications, including facilitating secure and efficient interbank payments and settlements . They are also being used to streamline trade finance processes, reducing the reliance on cumbersome paperwork, and for managing digital assets and tokens within a regulated framework.
In healthcare, private permissioned blockchains offer a secure and auditable way to store and share patient data among authorized healthcare providers, ensuring both privacy and interoperability . They can also be used to track the provenance of pharmaceuticals, helping to combat the issue of counterfeit drugs.
For identity management, these blockchains can be used to create secure and verifiable digital identities for both individuals and organizations, simplifying processes that require identity verification and facilitating secure access to various services and data.
Organizations are also leveraging private permissioned blockchains for internal voting systems, providing a transparent and auditable platform for decision-making within the enterprise . Similarly, they are being integrated into Enterprise Resource Planning (ERP) systems to enhance data integrity and automate various business processes .
Beyond these specific examples, private permissioned blockchains are proving valuable in logistics and accounting, improving efficiency and transparency in logistics operations and automating accounting processes while ensuring data immutability . They are also being used for securing and streamlining payroll and internal financial transactions within organizations . The ability to track the movement and ownership of various assets beyond just supply chains makes them ideal for a wide range of track and trace applications .
The suitability of private permissioned blockchains for these diverse applications stems from their fundamental ability to provide a shared, auditable ledger with strictly controlled access and robust identity management capabilities. This addresses key challenges related to data security, transparency, and operational efficiency within and between organizations. The capacity to tailor these blockchain solutions to the specific requirements of different industries makes them a highly adaptable technology for enterprise adoption.
Private permissioned blockchains offer a compelling solution for organizations seeking to leverage the benefits of distributed ledger technology within a controlled and secure environment. Their defining characteristics, including restricted access, variable decentralization, and customizable transparency, make them distinct from public blockchains and well-suited for a wide range of enterprise applications. The ability to precisely manage participant identities and permissions ensures accountability and data privacy, while the selection of efficient consensus mechanisms contributes to high transaction throughput and low latency.
These blockchain networks are particularly advantageous in scenarios where control, privacy, and performance are paramount, such as supply chain management, financial services, healthcare, and internal enterprise systems. Their real-world applications continue to expand as organizations recognize their potential to enhance efficiency, security, and transparency in various operational aspects.
However, it is important to acknowledge the trade-offs associated with deploying private permissioned blockchains. The reliance on a trusted intermediary or consortium introduces a degree of centralization, and the security of the network is heavily dependent on the robustness of the access control mechanisms and the integrity of the participating nodes. Improper implementation can lead to security vulnerabilities. file: ./content/docs/knowledge-bank/public-blockchains.mdx meta: { "title": "Public blockchains", "description": "Understanding public blockchain networks and their characteristics" } import { Callout } from "fumadocs-ui/components/callout"; import { Card } from "fumadocs-ui/components/card"; # Public blockchain networks Public blockchains are permissionless networks where anyone can participate in the network operations. ## Major public networks
### Layer 1 Networks * **Ethereum** * Smart contract platform * EVM compatibility * Large developer ecosystem * **Bitcoin** * First blockchain * Store of value * Limited programmability ### Layer 2 Solutions * **Polygon PoS** * Ethereum sidechain * Fast transactions * Low fees * **Optimism & Arbitrum** * Optimistic rollups * EVM compatible * Scalability focused
## Public blockchain architecture deep dive: bitcoin, ethereum, and polygon ## Bitcoin: architecture and core components Bitcoin is the original public blockchain, designed as a decentralized ledger of transactions. Its architecture is relatively simple and highly robust, optimized for security and censorship-resistance. Bitcoin uses a UTXO (Unspent Transaction Output) model and Nakamoto Proof-of-Work (PoW) consensus to append new blocks to its chain. Key technical components of Bitcoin include the block structure, transaction format, mining mechanism, and peer-to-peer networking. ## Block structure and composition in bitcoin Each Bitcoin block consists of a block header and a list of transactions (the block body). The header is 80 bytes and contains several fields critical to linking blocks and proving work: * Version: A 4-byte field indicating the software/protocol version and consensus rule set used by the miner. * Previous Block Hash: A 32-byte hash pointer referencing the prior block in the chain, establishing the chain continuity. * Merkle Root: A 32-byte hash of the root of the Merkle tree of all transactions in this block. Every transaction's hash is combined pairwise up the tree to produce this single root, which allows efficient verification of any transaction's inclusion. * Timestamp: A 4-byte timestamp (Unix epoch format) roughly indicating when the miner created the block (to the nearest second). It helps in ordering blocks and is used in difficulty adjustment calculations. * Difficulty Target (nBits): A 4-byte encoded target threshold that the block's hash must be below for the PoW to be valid. This represents the mining difficulty for that block. * Nonce: A 4-byte arbitrary number that miners vary to find a hash below the target. Together with other fields (and extra nonce data in the coinbase transaction), the nonce is what miners adjust in brute-force to produce a valid block hash. Following the header, a block includes a variable number of transactions. The first transaction is always the coinbase transaction, which has no inputs and creates new bitcoins (the block reward) to pay the miner. The coinbase also often contains extra data (like the miner's signature or signal flags for upgrades) and, since Segregated Witness, commits to an additional witness Merkle root for SegWit data. All other transactions are user-generated transfers of bitcoins. Bitcoin's use of a Merkle tree for transactions means that one can prove a particular transaction is in a block by supplying an authentication path (the neighboring hashes up the tree). The block header alone (which is just 80 bytes) is enough for light clients (SPV clients) to verify chain proof-of-work and transaction inclusion via Merkle proofs, without downloading full transactions. Block Size and Weight: In Bitcoin's original design, blocks were limited to 1 MB in size. The Segregated Witness (SegWit) upgrade in 2017 introduced the concept of block weight, allowing up to 4 million weight units (WU), roughly equating to 4 MB of data when counting witness (signature) data separately. This increased throughput modestly while maintaining compatibility. The block header itself remains constant in size; the number of transactions per block depends on their size and the current block weight limit. ## Transaction format and utxo model Bitcoin transactions are structured around the UTXO model. Each transaction consumes some existing unspent outputs as inputs and creates new outputs: * Inputs: Each input references a previous transaction's output by txid and output index, and provides an unlocking script (scriptSig) that satisfies the conditions set by that previous output's locking script. Typically, the previous output's script requires a signature from a certain public key; the input therefore contains a digital signature (and public key) proving the spender's authorization. If the input is from a SegWit output, part of the unlocking script is instead provided in a separate witness field. * Outputs: Each output contains a value (amount of BTC in satoshis) and a locking script (scriptPubKey) that specifies the conditions required to spend this output in the future. The most common locking script is a public key hash (Pay-to-Pubkey-Hash, or P2PKH) which means the output can only be spent by presenting a corresponding signature and public key. Other types include P2SH (Pay-to-Script-Hash), multisig, or newer ones like P2WPKH (native SegWit) and Taproot outputs. * Transaction Metadata: Bitcoin transactions also include a version number, a locktime (which can specify the earliest time or block height when it can be included in the chain), and sequence numbers on inputs (used for relative timelocks or to signal replacement policies like RBF). When a Bitcoin transaction is created, it must obey the rule that the sum of inputs ≥ sum of outputs. The difference (inputs minus outputs) is the transaction fee paid to the miner. Because Bitcoin uses UTXO, each output can only be spent once; once consumed as an input in a new transaction, that UTXO is considered spent and is no longer valid. The set of all unspent outputs in the system forms the UTXO set, which is the core of Bitcoin's state. Unlike an account model, there are no balances stored for addresses – only UTXOs that any given address can spend. Bitcoin's scripting language is deliberately simple and not Turing-complete. It's a stack-based bytecode that enables basic conditions (hash locks, signature checks, timelocks, multisignature, etc.). This simplicity enhances security and predictability. Scripts execute during transaction validation: each input's unlocking script is combined with the referenced output's locking script to form a complete script which the Bitcoin node executes. If the script returns true (valid signature, etc.), the input is considered valid. If any input's script fails, the entire transaction is invalid. Taproot and Upgrades: In recent upgrades (like Taproot in 2021), Bitcoin has improved its script capabilities and privacy. Taproot outputs allow complex spending conditions (multi-signatures, alternative scripts) to remain hidden unless used, and use Schnorr signatures which enable batching and more flexible scripting (MAST – Merklized Abstract Syntax Trees). These upgrades are part of Bitcoin's slow but steady evolution while preserving the fundamental architecture. ## Transaction lifecycle: from creation to finality in bitcoin Bitcoin transactions pass through several stages from the moment a user initiates a payment to final settlement: 1. Creation and Signing: A user's wallet application selects one or more UTXOs that the user controls (has keys for) as inputs, specifies one or more outputs (addresses and amounts to pay, plus change back to themselves if any), and then signs the inputs. The result is a complete, serialized transaction ready for broadcast. Each input is signed with the owner's private key, and the signature proves authorization to spend the referenced UTXO. The wallet will also calculate an appropriate fee to include, based on the transaction size in bytes and current fee rates needed for timely mining. 2. Broadcast to Network: The signed transaction is sent to a nearby Bitcoin node (often the user's own full node or a connected node). That node will validate the transaction: checking signatures, ensuring inputs exist and are unspent, and that it abides by consensus rules (no overspending, proper format, etc.). If valid, the node accepts it into its mempool (the in-memory pool of valid but unconfirmed transactions) and then propagates it to its peers. Bitcoin's peer-to-peer network uses a gossip protocol – each node relays new transactions to other nodes, spreading quickly across the global network. Nodes announce transactions by their hash (inv messages), and peers request full details (via getdata) if they haven't seen it. 3. Mempool and Waiting: Once in the mempool, the transaction waits to be included in a block. Each node's mempool might hold thousands of transactions. Miners (which are specialized full nodes) are constantly looking at their mempool to select transactions for the next block. Typically, miners prioritize by fee rate (satoshis per byte) to maximize their revenue. Users can increase fees to get faster confirmation, especially in times of congestion. 4. Mining and Inclusion in a Block: A miner assembles a candidate block: it picks a set of transactions from its mempool (up to the block weight limit, and usually maximizing total fees), and then builds the Merkle tree of transactions to set the Merkle root in the block header. It sets the other header fields (pointing to the tip of the chain the miner is extending, current timestamp, the target difficulty from the network, etc.), and puts the coinbase transaction as the first transaction (paying themselves the block subsidy plus the sum of selected transaction fees). Now the miner begins the PoW hashing process: varying the nonce (and if needed, modifying extra data in the coinbase to extend the search space) and hashing the header to find a hash below the target. This is essentially a brute-force race performed by mining hardware (ASICs) across the network. 5. Block Propagation: When a miner finally finds a valid hash meeting the difficulty target, it has successfully mined a new block. The miner immediately broadcasts this new block to its peers. Just like transactions, blocks propagate via gossip: nodes announce the new block hash to peers, who then request the block if they don't have it. Efficient relay protocols (like Compact Blocks and Graphene) compress the data by assuming peers have most transactions already, further speeding up propagation. The goal is to spread a new block to the majority of nodes (and miners) within a few seconds, so the network can start building the next block on top of it. 6. Validation and Chain Update: Each node that receives the new block will validate it thoroughly. This includes verifying the block header's PoW (hash meets target), checking that the block's transactions are all valid (no double spends, signatures correct, scripts run to true, no inflation beyond block reward, etc.), and that the block follows consensus rules (size/weight limits, correct coinbase reward, valid Merkle root, etc.). If everything checks out, the node links the block to its existing chain. This extends the main chain (the node's best chain tip). 7. Confirmations and Finality: The user's transaction is now confirmed in that block. The block that contains it becomes part of the blockchain. However, at this point, the confirmation is still probabilistic – there is a chance (albeit small) that another competing block could appear (a chain fork) and override this block if it gets more PoW work. Nakamoto consensus, which Bitcoin uses, prioritizes the longest (heaviest) chain. Finality in Bitcoin is not instant; instead, the probability of reversal decreases as more blocks are added on top. A common best practice is waiting for 6 confirmations (6 additional blocks) for high-value transactions, which takes on average \~60 minutes. Six blocks deep, a transaction is extremely unlikely to be reversed barring an immense and infeasible reorganization attack. Practically, for lower-value payments or everyday use, fewer confirmations (or even one confirmation) are acceptable risk in most cases, given Bitcoin's hashrate and security. Bitcoin's consensus mechanism, Nakamoto Consensus, relies on this probabilistic finality and economic incentives. Miners are incentivized by block rewards and fees to follow the rules and extend the longest valid chain. If they try to cheat (e.g., double spend or create an invalid block), honest nodes will reject those blocks and they will have wasted their energy. Approximately every 10 minutes a new block is mined on average, by design. The network automatically adjusts the difficulty every 2016 blocks (\~ every 2 weeks) to maintain that cadence, increasing difficulty if blocks came in too fast (hash power increased) or decreasing it if blocks were too slow (hash power lost). ## Mining and proof-of-work consensus Proof-of-Work is the heartbeat of Bitcoin's security. In PoW, miners compete to solve a computationally difficult puzzle: find a block header whose SHA-256 hash is below a target value. This target is adjusted so that, statistically, the entire network will find a valid block about every 10 minutes. The puzzle's difficulty ensures that no single party can dominate block creation without commanding enormous computational resources, and it ties the creation of blocks to a real-world cost (energy expenditure). Mining Process Details: Bitcoin mining today is performed by specialized hardware (ASICs) that can compute SHA-256 hashes trillions of times per second. Miners typically join mining pools, where many miners share work and split rewards, smoothing out the variance of finding blocks. Within a pool or solo, the process is: * Construct the block header (as described earlier), including the Merkle root of chosen transactions and the reference to the previous block. * Set the nonce to an initial value (and adjust extraNonce in the coinbase if needed for more range). * Hash the block header (essentially performing double SHA-256 per attempt). * Check if the resulting 256-bit hash interpreted as a number is less than the target (which is stored in the block header as nBits). * If not, modify the nonce (or extraNonce) and hash again. Repeat rapidly. This is a brute force search in a vast space. The target is inversely related to difficulty: a lower target means fewer acceptable hashes and thus more work on average to find one. The current Bitcoin difficulty makes the target so low that miners must perform on the order of 2^\[\[70+]] hashes on average to find a valid block. This enormous number is what secures the chain, an attacker would need at least 51% of the global hash power to consistently outcompete honest miners, which is economically and physically prohibitive at Bitcoin's scale. Chain Reorganization: If two miners happen to find a block at nearly the same time (a race condition), the network could temporarily see a fork (split brain) where some nodes have one block as tip and others have the competing block. This is resolved when the next block is found: whichever chain becomes longer (i.e., gains the next block) will be accepted as the main chain, and the other block becomes an "orphaned" block. Bitcoin's consensus dictates that all miners should switch to mining on the longest valid chain. This mechanism, simple but effective, eventually converges all honest nodes on a single chain. Orphaned blocks are rare and transactions in them return to the mempool to await inclusion in a later block. ## Network topology and message propagation Bitcoin's network is a peer-to-peer unstructured mesh. Nodes in the network connect to a random set of peers (by default, up to 8 outbound connections for a full node, and accepting inbound connections from others). There is no centralized node; any node can join and leave, and discovery is done through a mix of DNS seed servers and peer exchanges. The design goal for the P2P layer is to reliably broadcast transactions and blocks to all participants in a timely manner, despite the network's decentralized nature and latency. Propagation Mechanisms: Bitcoin nodes use an "inv" (inventory) message system to announce new objects (transactions or blocks) by their hashes. Peers that don't have the object can request it with a "getdata" message. To avoid flooding the network with large data, Bitcoin employs strategies like: * Gossip with random delays: Nodes will announce new transactions to a subset of peers with a slight delay and not to everyone at once, to reduce redundant traffic. * Relay Policies: A transaction must pass certain checks (minimal fees, standard script forms, etc.) for a node to relay it (this prevents spam and malicious data from propagating). * Compact Block Relay: When propagating new blocks, instead of sending full blocks (which might be large), nodes often send a "compact" block message which contains the block header and short hashes of transactions. Peers reconstruct the block from their mempool for any known transactions, and only ask for missing ones. This dramatically cuts down block propagation time and bandwidth. Latency and Throughput: Bitcoin's design prioritizes decentralization over performance. The 10-minute block interval helps ensure that propagation and validation of blocks (which could be up to \~4MB of data with SegWit) is easily done within that time by nodes globally, even with modest network connections. The trade-off is higher latency (it takes minutes to confirm transactions). However, this is an acceptable cost to achieve a permissionless system with thousands of nodes reaching eventual agreement. ## State management: utxo set Bitcoin's global state at any point in time can be thought of as the set of all unspent transaction outputs (UTXOs). Maintaining this UTXO set is crucial for validating new transactions (to check if inputs are unspent and amount balances). Full nodes keep an indexed database of UTXOs in memory or on disk for quick lookup. Each new block updates the UTXO set by removing spent outputs and adding new outputs from transactions in that block. This model has implications: * Scalability: The UTXO set grows over time as more transactions create outputs. Nodes need to manage this state efficiently. Pruning spent outputs is straightforward (they're removed once spent), but the set can still grow large. Bitcoin full nodes currently handle a UTXO set containing many millions of entries. * Parallelization: Transactions that spend distinct UTXOs can theoretically be processed in parallel, since there are no global balances to update – just individual outputs being consumed. In practice, Bitcoin validates transactions mostly sequentially within a block, but the UTXO model lends itself to easier sharding or parallel processing attempts because state is fragmented among outputs. * Simplicity: There is no notion of accounts or contract storage – just discrete coins moving around. This makes Bitcoin's state model simpler but also limits expressiveness for complex applications (hence why Bitcoin's on-chain scripting is intentionally limited). ## Smart contract capabilities (or lack thereof) Bitcoin does not have a general-purpose smart contract platform akin to Ethereum's EVM. Its Script language enables only rudimentary smart contract-like functionality (conditional spending). Examples include multi-signature wallets, hash-time locked contracts (HTLCs) for payment channels (the basis of the Lightning Network), and other simple constructs. Scripts are not Turing-complete (no loops, for instance), which means you cannot implement arbitrary logic or complex decentralized applications directly on Bitcoin's base layer. This is by design, focusing Bitcoin on being sound digital cash and leaving more expressive smart contracts to layer-2 solutions or other blockchains. That said, off-chain or layer-2 protocols (like the Lightning Network for micropayments, sidechains like Rootstock or Liquid, etc.) extend Bitcoin's functionality by using on-chain scripts as anchors or adjudication mechanisms, while doing more complex logic off-chain. This preserves Bitcoin's base layer stability and simplicity. ## Summary (bitcoin): Bitcoin's architecture emphasizes security, consistency, and decentralization. Blocks link via hashes and PoW, transactions rely on UTXOs and simple scripts, and consensus is maintained through miners expending real-world resources. Its limitations in throughput and expressiveness are a trade-off for being the most battle-tested, decentralized value settlement layer. ## Ethereum: architecture and innovations Ethereum is a public blockchain designed not only for cryptocurrency transactions but also for general-purpose computation via smart contracts. Launched in 2015, Ethereum introduced an account-based model and the Ethereum Virtual Machine (EVM), enabling Turing-complete scripts on-chain. Over time, Ethereum's architecture has evolved , most notably transitioning from Proof-of-Work to Proof-of-Stake (PoS) in 2022 (the event known as The Merge). Ethereum's design is more complex than Bitcoin's, featuring a richer transaction and state model, gas metering for computation, and different block structure and consensus details. ## Account model and global state Unlike Bitcoin's UTXOs, Ethereum uses an account-based state model. The global state is a mapping of accounts (identified by 20-byte addresses) to their current state. There are two types of accounts: * Externally Owned Accounts (EOAs): Regular user accounts controlled by private keys. They have a balance of Ether and a nonce (transaction count), but no associated code. * Contract Accounts: Accounts that have associated smart contract code and persistent storage. Contracts also have balance (they can hold Ether) and a nonce (number of contract-creations from that account), and importantly, code that executes when they receive a transaction or message call. The entire world state (all account balances, nonces, contract code and storage) is stored in a data structure called the Merkle-Patricia Trie, which is a cryptographic trie (prefix tree) that is also a Merkle tree. Ethereum's state trie root hash is part of each block header, meaning that each block commits to a specific world state after applying that block's transactions. This allows a client to verify any account's state with a Merkle proof against the state root in a trusted block header. In fact, Ethereum uses three interrelated Merkle tries: * State Trie: Mapping account addresses to account state objects (balance, nonce, code hash, storage root). * Storage Trie: For each contract account, its storage (a key-value store) is itself stored as a Merkle trie, the root of which is stored in the account's state object. * Transaction Trie and Receipt Trie: Each block has a trie of transactions included and a trie of receipts (outcomes of each transaction). The roots of these tries are in the block header as well (transactionsRoot and receiptsRoot). This trie structure makes verifying parts of the state possible without having the entire state (useful for light clients). However, maintaining these tries is heavy for full nodes, as the state can grow large and changes every transaction. In Ethereum, each transaction directly updates the global state by debiting one account and crediting another (for value transfers) or modifying contract storage and code (for contract calls). This is a more fluid model than Bitcoin's; it's easier to query an account balance or send funds from one account to another without managing multiple UTXOs. But it also means that validating transactions requires knowing and updating shared global state, which can be more complex to scale. ## Ethereum block structure Ethereum blocks contain a header, a list of transactions, and a list of ommers (uncles). The block header in Ethereum (pre-Merge, in PoW) includes: * Parent Hash: Hash of the previous block's header. * Ommers Hash: Hash of the list of ommer headers (ommer is Ethereum's term for a stale block, analogous to Bitcoin's orphan, that can be included for a minor reward). * Miner (Beneficiary) Address: The Ethereum address of the miner (block proposer) to receive block rewards (mining reward and gas fees). * State Root: The Merkle root of the state trie after all transactions in the block are executed. * Transactions Root: Merkle root of the transactions list. * Receipts Root: Merkle root of the receipts (each transaction's execution result: logs, status, gas used, etc.). * Logs Bloom: A 256-byte bloom filter aggregating all logs (events) generated by transactions in the block. This allows quick filtering for particular log topics without scanning every transaction. * Difficulty: The PoW difficulty level for this block (makes sense only in PoW era). * Number: Block number (height in the chain). * Gas Limit: The maximum amount of gas that all transactions in the block combined can consume. This parameter is set by the miner within protocol constraints and can adjust slowly over time. * Gas Used: Total gas consumed by all transactions in this block. * Timestamp: When the block was mined (seconds since Unix epoch). * Extra Data: An optional 0–32 byte field for arbitrary data (mining pools often used this for tagging blocks with an identifier). * MixHash: A field from PoW (Ethash) mining, part of the proof that a sufficient amount of work was done (it's a hash output from the mining algorithm). * Nonce: An 8-byte PoW nonce (combined with MixHash and block header, proves the miner did enough work). This block header is much larger than Bitcoin's (over 500 bytes due to trie roots and the bloom filter). After The Merge (when Ethereum moved to PoS), some fields lost significance: * Difficulty is no longer used (replaced internally by a 'terminal total difficulty' check at the merge transition). * Nonce and MixHash are no longer updated by mining, so they became essentially constant placeholders (Nonce is now fixed at 0x0000000000000000 in PoS blocks, and MixHash (renamed in code to "prevrandao") now contains a random value contributed by the beacon chain for randomness in contracts). * Ommers/Uncles no longer exist in PoS (because block proposals are not competing like in PoW, so no stale blocks are produced under normal conditions). The block body in Ethereum contains: * Transactions: Each transaction (details below) is executed in order. The results of these executions update the state trie. By the end of processing all txs, the final state root must match the header's stateRoot. If a block's state root doesn't match the result of executing its transactions on the parent state, the block is invalid. * Ommers (Uncle) List: In PoW Ethereum (pre-Merge), miners could include up to 2 uncle blocks – these are headers of blocks that were mined almost concurrently but did not make it into the main chain (maybe because another miner's block at the same height was chosen). Including them gives a small reward to the miner of the uncle and the including miner, and helps decentralization by compensating miners with slightly slower block propagation. Uncles had to be recent (within 6 blocks or so) and valid but not in the main chain. In PoS Ethereum, the concept of uncles is obsolete. One notable aspect of Ethereum blocks is the Gas Limit. Unlike Bitcoin which has a block size limit, Ethereum limits computational work per block via gas. Miners (now validators) can slightly adjust this gas limit target, voting it up or down by a bounded amount each block, which allows the network to adapt throughput based on capacity. Historically, the gas limit has grown from \~5 million in early days to about 15 million, and after EIP-1559 it's somewhat elastic around a target (with a hard cap at 2x target for temporary spikes). This gas limit translates to a variable number of transactions per block because some transactions use more gas (complex smart contract calls) and some use less (simple ETH transfers). Block Time: Ethereum blocks were targeted at \~15 seconds during the PoW era. Under PoS, blocks are produced in fixed 12-second slots. Generally, one block per slot (some slots can be empty if a validator misses their turn). This regularizes block times a bit more. A 12-second block time means Ethereum confirms transactions much faster than Bitcoin's 10 minutes, but it also means more potential forks in PoW (which was mitigated by the uncle mechanism). Under PoS, the protocol assigns a unique validator to propose each block, reducing collision. ## Transaction lifecycle in ethereum Ethereum transactions are more complex than Bitcoin's, as they can encode not just value transfers but also contract calls and creation of new contracts. A transaction in Ethereum includes: * Nonce: A sequence number for the sender account, which ensures each transaction can be processed once and in order. The first transaction from an account has nonce 0, then 1, and so on. This prevents replay and double-spend by ordering the transactions from an account. * Gas Price (or Max Fee): In the legacy model, each transaction specified a gas price (in gwei per gas unit) that the sender is willing to pay. After EIP-1559 (August 2021), the model changed: now each transaction includes a max fee per gas and a max priority fee. The protocol sets a base fee per gas (which rises and falls with congestion), and the user can add a tip (priority fee) to incentivize inclusion. The effective gas price paid is base fee + priority (capped by the max fee). * Gas Limit (per tx): The maximum gas the sender allows this transaction to consume. This protects against buggy or malicious contracts running infinitely – if gas runs out, the transaction is reverted (but still fees are paid for gas used). * To: The recipient address (20 bytes), which could be an EOA for a simple payment or a contract address to invoke, or empty if the transaction is creating a new contract. * Value: Amount of Ether (in wei) to send to the recipient (can be zero for pure contract calls). * Data: An arbitrary-length byte field. For contract calls, this holds the function signature and parameters; for contract creation, it contains the compiled bytecode of the contract; for simple ETH transfers, data can be empty or any message. * v, r, s (Signature): The Elliptic Curve digital signature components proving the transaction is authorized by the private key of the sender's address. Ethereum uses secp256k1 like Bitcoin, but signs over the transaction data (including the chain ID for replay protection since EIP-155). When a user sends an Ethereum transaction: 1. Creation and Signing: The user's wallet (or dApp via web3) constructs the transaction object with the fields above. It must get the current nonce for the sending account (by querying a node) and decide on fee parameters (base fee is known from the last block, and a tip is chosen). The user signs the transaction with their private key, producing v, r, s. 2. Broadcast to Network: The signed transaction (commonly RLP encoded) is sent to an Ethereum node. The node verifies the signature (recovers the sender address and checks it matches the nonce/account), checks that the sender has enough Ether balance to cover the value + gas\_limit \* max\_fee, and that the nonce is correct (next one in sequence). If valid, the node adds it to its local mempool. 3. Mempool and Propagation: Similar to Bitcoin, Ethereum nodes gossip transactions to peers. There isn't a global "mempool" but each node maintains its own set of pending txns. The transactions are sorted mainly by fee priority (especially post EIP-1559, miners choose transactions giving the highest priority fee first, since base fee is fixed per block). Under high load, users must pay higher tips to get priority. 4. Block Inclusion (Mining/Validation): In PoW Ethereum (before Merge), miners would pick the highest-paying transactions fitting in the block's gas limit. In PoS Ethereum, the chosen validator of the slot will do similarly. Transactions are executed sequentially in the block – the state is updated for each. If a transaction runs out of gas or otherwise fails (reverts), it still consumes the gas (the block includes it and the failure is recorded in the receipt, and the state is unchanged by that tx except gas deduction). Because failed transactions waste gas, miners usually still include them if they pay fees, since the miner gets the gas fee even for reverted tx. Once the block is filled up to the gas limit (or the available transactions are exhausted or not worth the lower fees), the block is sealed. 5. Consensus and Execution: The new block, once proposed, is broadcast and validated by other nodes. Each node will re-execute every transaction in the block to ensure the resulting state matches the block header's stateRoot and that no rules were broken (correct gas computation, no invalid opcodes, sender had enough balance, etc.). Ethereum's consensus rules are essentially "the canonical chain is the one with valid blocks that the consensus mechanism (PoW longest chain or PoS fork choice) dictates". 6. Confirmation and Finality: Under PoW, Ethereum's block confirmations were probabilistic like Bitcoin (though with faster blocks, forks occurred more often, which is why even 12 confirmations (\~3 minutes) were often considered safe for Ethereum transactions). The uncle mechanism reduced the risk for miners but from a user perspective finality was still probabilistic – albeit on the order of minutes instead of an hour. Under PoS (after The Merge), Ethereum now has a notion of finality at the protocol level: validators vote on checkpoints (every 32-slot epoch) using Casper FFG (Friendly Finality Gadget). When two-thirds of validators attest to a checkpoint and then again to a subsequent one, the earlier checkpoint is finalized. In practice, this means Ethereum blocks reach absolute finality typically within 2 epochs (64 slots, which is about 12–13 minutes). In normal operation, finality happens regularly and automatically; if the network is partitioned or many validators are offline, finality could delay, but the design strongly incentivizes liveness. Thus, Ethereum offers faster confirmation and deterministic finality within minutes – a major improvement for high-value settlements, where waiting an hour on Bitcoin might be impractical. Until finality, Ethereum blocks are still somewhat tentative, but the chain uses a fork-choice rule (LMD-GHOST) that makes reorgs after even a few blocks deep extremely rare barring an attack. ## Proof-of-work (ethash) to proof-of-stake transition Ethereum originally used a PoW algorithm called Ethash. Ethash was a memory-hard hash algorithm (based on DAG lookups and Keccak hashing) designed to be ASIC-resistant (though ASICs were eventually developed). Block time \~15s, and difficulty adjusted with each block to target that interval. Ethereum's PoW had one twist: the difficulty bomb, a mechanism intended to exponentially increase difficulty at a certain block number to "freeze" PoW and force the transition to PoS (this bomb was postponed several times until the Merge). Ethash Mining: Similar to Bitcoin's mining, Ethash miners would assemble blocks and try varying a nonce (and an additional field called nonce2 in the mix-hash calculation) to find a hash below target. Ethash required computing a pseudo-random dataset (the DAG, about 4+ GB in size) each epoch and using it in hashing, making memory bandwidth the bottleneck (to discourage pure ASIC advantages). The mining reward in Ethereum included a static block reward (which changed over time, e.g., 2 ETH per block in recent years) plus all gas fees from transactions (minus the portion burned by EIP-1559 base fee after that upgrade – post EIP-1559, the base fee is destroyed, only the tip goes to miner). By 2022, Ethereum developers launched the Beacon Chain (a PoS chain running in parallel) and then merged it with the main chain, turning off PoW entirely. Now Ethereum's consensus is pure PoS with no mining at all. Proof-of-Stake (Casper and Beacon Chain): Ethereum's PoS is implemented via the Beacon Chain, which manages validators and coordinates block production and finality: * Validators join by staking 32 ETH into a deposit contract on Ethereum (this was done on the PoW chain and continues on the PoS chain for new entrants). * Validators are pseudo-randomly assigned to propose blocks or attest (vote) on blocks. Every 12-second slot, one validator is the proposer who creates a block (now just an "execution payload" plus consensus info) and others are attesters. * Attesters are organized into committees per slot that vote on the block of that slot and also on checkpoint epochs. If a validator misses their turn or votes contrary to the majority, they get minor penalties; if they try to attack (e.g., double sign or surround votes), they can be slashed (losing a portion of their stake and being ejected). * Finality via Casper FFG means once supermajority votes checkpoint, it's irreversible unless 1/3 of validators are slashed (which is extremely costly for an attacker, in the billions of USD at today's stake). * The fork-choice rule is "latest message driven GHOST" (LMD-GHOST), which means nodes consider the chain with the most aggregated weight of attestations supporting it, favoring the heaviest attested chain head between finality checkpoints. Under PoS, Ethereum's block time remains \~12s, but the variance is nearly zero (no more block time variability due to PoW luck). Transactions are still processed by each block's proposer in the execution layer (the EVM chain as before), so from the user perspective, nothing changed in how transactions look or what the block contains; only how the block creator is chosen and how consensus is reached has changed. The removal of mining drastically cuts Ethereum's energy usage (over 99% reduction) and also changed the economic issuance (no more large block rewards, only small issuance to validators and fee burn often exceeds issuance, making ETH possibly deflationary at times). ## Smart contract execution: the ethereum virtual machine - EVM One of Ethereum's core innovations is the Ethereum Virtual Machine. The EVM is a stack-based virtual CPU that executes contract bytecode. Every Ethereum full node runs the EVM as part of transaction processing, to determine the outcome of contract calls. Key aspects of the EVM and execution environment: * Smart Contracts: Contracts are stored on-chain as deployed bytecode (a series of EVM opcodes). Each contract has its own persistent storage (a key-value store mapping 256-bit keys to 256-bit values), which is part of the global state trie. When a contract's code executes, it can read and write its storage, send internal transactions (calls) to other contracts or accounts, perform arithmetic, logic, control flow, etc., subject to gas limits. * Gas and Fees: To prevent infinite loops and hogging of resources, Ethereum introduces gas, a unit of computation. Every EVM instruction has a fixed gas cost (e.g., an ADD might cost 3 gas, an SSTORE (storing to contract storage) costs 20,000 gas or more, etc.). When a transaction is sent, the sender must provide a gas limit and will pay fees for each gas unit consumed. If execution exhausts the gas before finishing, it's halted and reverted. If it finishes with gas left, the unused gas is refunded (and the sender isn't charged for those). Gas ensures Turing-completeness doesn't come at the cost of halting problem – the fact that you have to pay for every step guarantees eventual completion or termination of execution. * EVM Model: The EVM is stack-based (with 1024-slot deep stack), operates on 256-bit words for all operations (which makes arithmetic easier for cryptographic operations but somewhat inefficient for typical 32-bit/64-bit tasks). It has a memory (volatile, not persisted, used for holding data during execution) and the aforementioned storage (persisted between calls for that contract). Contracts can call other contracts or create new contracts; these actions consume additional gas (and form an internal call stack). * Messages and Calls: A contract invocation (either from an EOA or contract-to-contract) is called a message call. It's like a transaction initiated internally. The EVM handles these calls by creating a new execution context for the callee, with its own gas allotment (which can be limited by the caller). This is how contracts interact – they call functions of other contracts. * Deterministic Execution: All nodes execute the same code with the same initial state, so they should all get the same result and state root. Non-deterministic actions (like accessing real time, randomness, etc.) are either done via special opcode that draws from known values (block timestamp, or now beacon chain randomness via PREVRANDAO opcode) or via oracles (external data fed on-chain) – but the EVM itself is deterministic. * Logs: Contracts can emit log events (which do not affect state but are recorded in transaction receipts and indexed by the bloom filter in block header). These logs are not used by the consensus, but they're useful for off-chain listeners (dApps) to watch for events. * Reentrancy and Security: Because contracts can call each other, care must be taken (the infamous DAO hack was due to reentrant calls). Ethereum's execution model allows complex interactions, which also opens up a surface for bugs. Over time, best practices and patterns (and new features like reentrancy guards or shifts to languages like Vyper or use of the Checks-Effects-Interactions pattern) have evolved to mitigate common pitfalls. EVM Compatibility: Ethereum's EVM became a sort of standard for many other blockchains (like Binance Smart Chain, Avalanche C-Chain, Polygon, etc.), because it allows reuse of the vast ecosystem of developer tools and contract code. The downside is the EVM wasn't designed for extreme throughput – it's single-threaded and all nodes execute all transactions, which can be a bottleneck. Efforts to evolve the EVM or replace it (e.g., Ethereum's planned move to eWASM which was later deprioritized, or other chains using WebAssembly VMs) stem from the need for more performance. Still, as of 2025 Ethereum's main execution engine remains the EVM, now running under PoS consensus. ## Networking and propagation in ethereum Ethereum's peer-to-peer network is similar in spirit to Bitcoin's but has its own protocol (devp2p with the ETH subprotocol). Key points: * Ethereum nodes gossip transactions and blocks across the network. The propagation of blocks, due to faster cadence, had to be optimized early: Ethereum used a protocol for propagating blocks quickly (including techniques like the Forwarding via Relay and "FruityMesh"-like random topologies). In recent years Ethereum also adopted the concept of block gossip and perhaps versions of compact block or delta propagation to handle the high tx volume. * The network also must propagate attestations and consensus votes in the PoS era. That is handled by the beacon chain's networking (often using libp2p gossipsub topics for different message types like blocks, attestations, sync committee signatures, etc.). * Uncles (Ommer) propagation: In PoW, nodes would also propagate uncle blocks. Now in PoS, there's basically no such concept aside from maybe handling if a validator proposes after missing a slot (but then it's just a normal chain fork scenario, resolved by fork-choice quickly). * Transaction Propagation: Ethereum historically had large mempools and needed to propagate lots of transactions. The concept of gossip with certain rules (don't spam low-fee tx to everyone, etc.) and possibly filtering by min gas price are used to manage propagation. Given Ethereum's higher TX volume, its networking layer is designed to handle many more messages per second than Bitcoin's. It achieves this in part by the lighter weight of messages (Ethereum uses a binary protocol over TCP, with RLP encoding), and in part by allowing nodes to specialize (some might not keep full tx gossip if they're archival nodes, etc.). The upcoming protocol upgrades like EIP-4844 (Proto-Danksharding) will introduce new message types (blobs for data availability) and rely on the P2P layer to broadcast large blobs efficiently. ## Scalability approaches: layer 2 and sharding While Ethereum is not yet sharded at the base layer (original Ethereum 2.0 plans for execution sharding have shifted toward a rollup-centric roadmap), it heavily relies on Layer-2 scaling solutions. These include: * Rollups: Both Optimistic Rollups (like Optimism, Arbitrum) and ZK-Rollups (like zkSync, StarkNet, Polygon zkEVM) that execute transactions off-chain (or off-mainchain) and post succinct proofs or summaries on Ethereum. Ethereum's base layer is evolving to support these via data sharding (eventually providing lots of space for rollup data). * State Channels and Payment Channels: Generalized state channels or specific payment channels (e.g., Raiden Network, similar to Bitcoin's Lightning) allow users to transact off-chain with only occasional settlements on-chain. * Sidechains: Independent chains like Polygon's PoS chain (discussed below) or xDai/Gnosis Chain, which use their own validators but connect to Ethereum, are another approach to scaling out transactions without burdening L1. Ethereum's ethos is now to keep the L1 as a secure, decentralized base (with moderate capacity) and let most transactions happen on L2, inheriting security from L1 but not congesting it. This contrasts with some other chains that try to scale on the base layer via different consensus or architecture choices, which we'll explore. ## Polygon (matic pos chain): hybrid layer-2 architecture Polygon (formerly Matic Network) is a platform aimed at scaling Ethereum. The Polygon PoS chain is a prominent public blockchain that operates as a commit-chain (often considered a sidechain) to Ethereum. It uses a Proof-of-Stake based consensus with a large set of validators, while periodically committing checkpoints to Ethereum for finality and security. Polygon's design is a hybrid of a sidechain and a plasma-like framework, combining the speed of a separate chain with the security assurances of Ethereum as a base layer. The architecture is tiered, with a dual consensus mechanism (Bor and Heimdall layers) and interoperability with Ethereum. ## Architecture overview Polygon's PoS chain architecture can be thought of in three layers: * Ethereum Layer (Mainchain): Polygon relies on Ethereum as the ultimate source of truth. A set of smart contracts on Ethereum manages the validator staking, checkpoint submission, and dispute resolution (for plasma exits). Validators stake the Polygon's token (originally MATIC, now upgraded to a token called POL) on Ethereum to secure the PoS chain. This means Polygon's validator set and root of trust is anchored in Ethereum – if something goes wrong on the Polygon sidechain, transactions can potentially be settled or exited via Ethereum. * Heimdall (Consensus) Layer: Heimdall is the layer of validators running a consensus protocol (based on Tendermint, a BFT consensus engine) to manage the PoS mechanism and handle periodic checkpointing of sidechain state to Ethereum. Heimdall nodes track the state of the sidechain, collect signatures from validators, and produce a checkpoint (basically a Merkle root of all blocks produced in a span) that is then submitted to the Ethereum contracts. This provides finality for batches of Polygon blocks once a checkpoint is accepted on Ethereum. Heimdall is also responsible for validator set management (updating who is active, based on stake and Ethereum contract info) and slashing misbehaving validators. * Bor (Block Producer) Layer: Bor nodes are the block producers that actually create the blocks on the Polygon sidechain. Bor is essentially a modified Ethereum client (a fork of Geth) that is optimized for fast block production and uses a simpler consensus, relying on validator selection from Heimdall. A subset of the validators (the block producer set) is selected in rounds to create blocks using a lightweight consensus (which is often a simpler authority or committee-based protocol, since the security is backed by the higher-level BFT checkpointing). Bor layer runs an EVM-compatible chain – meaning it functions much like Ethereum (same transaction format, uses gas, runs EVM smart contracts), so developers can deploy solidity contracts on Polygon just as they would on Ethereum, but with faster and cheaper transactions. This dual-layer approach allows Polygon to have rapid block times (on the order of 2 seconds) and high throughput on the Bor chain, while Heimdall's periodic checkpoints (for example, every few minutes or after a certain number of blocks) anchor the sidechain state to Ethereum. If an invalid state were somehow introduced on the sidechain (e.g., through a malicious majority on Polygon), users could potentially challenge or exit via the Ethereum contracts (this is the Plasma aspect: the ability to exit funds from the sidechain by providing proof of their coins in the last valid checkpointed state). ## Consensus mechanism: tendermint-based pos and plasma checkpoints Polygon's consensus on the Heimdall layer uses a BFT algorithm derived from Tendermint. Tendermint provides instant finality assuming a supermajority of validators are honest. In Polygon: * Validators stake tokens on Ethereum and run Heimdall nodes. * Heimdall (Tendermint) organizes validators in a rotating leader schedule (Tendermint's round-robin). For each checkpoint interval, one validator is the proposer to initiate the checkpoint, and others sign off on it. If the proposer fails or a checkpoint submission doesn't succeed, Tendermint rounds handle a new proposer. * A checkpoint consists of the Merkle root of all blocks since the last checkpoint and some metadata (e.g., range of block numbers, etc.). The selected proposer validator packages this and actually sends a transaction to the Ethereum contract with that data (along with aggregated signatures of many validators to prove consensus). * The Ethereum contract verifies the signatures and the included state root. Once accepted, that batch of Polygon blocks is considered finalized with the security of Ethereum – it would require a fraudulent checkpoint (which would require a large share of validators to sign, who would then get slashed by Ethereum if proven invalid) to undo it. Between checkpoints, the Polygon chain's blocks are not finalized in the BFT sense (depending on the exact implementation). However, because the same validators are typically following a consensus on the sidechain blocks as well, they usually won't revert unless there's a serious issue. In practice, Polygon's Bor chain often uses a simpler Proof-of-Stake consensus where a single block producer (from the validator set) creates blocks in sequence (possibly somewhat like a round-robin leader sequence or a small committee). The block producers are periodically shuffled (the shuffle uses on-chain randomness from Ethereum or some decentralized source to prevent predictability). This is akin to a delegated PoS or round-robin PoA on the block layer, which is very fast but by itself not super decentralized if considered alone. The decentralization and security comes from the larger Heimdall validator set overseeing and checkpointing it. Hybrid PoS+Plasma Design: The term "Plasma" in Polygon's context refers to the ability to fall back to mainchain security. Plasma is a design for child chains that rely on mainchain fraud proofs to secure funds. Polygon's chain borrows some Plasma concepts: * Users can choose to use the Plasma bridge for certain assets, which means their withdrawals from Polygon require a waiting period and proof (in case of fraud). Plasma mode is more secure (robust against even some sidechain failures) but has restrictions (only simple transfers of assets, no generalized state). * Or users can use the PoS bridge, which trusts the validator signatures on checkpoints for faster withdrawals and supports arbitrary state (like NFTs, smart contracts interactions). The PoS bridge assumes >2/3 of validators are honest to be secure (just like the sidechain itself). This flexibility allows developers to pick stronger security or more functionality as needed. In summary, Polygon's consensus is effectively Proof-of-Stake with 100+ validators (anyone can stake and become a validator, though often delegated staking occurs), running a BFT consensus (instant finality) for checkpoints and governance, and a faster block producer sub-protocol for block-by-block production. It's a layered consensus: fast blocks on Bor, periodic BFT finality on Heimdall. This contrasts with Ethereum's single-layer PoS where every slot is finalized later, or Bitcoin's PoW where finality is probabilistic. ## Block production and structure on polygon Blocks on the Polygon PoS chain (Bor chain) look much like Ethereum blocks. Since Bor is a fork of Geth, an Polygon block contains: * A header (with parent hash, state root, tx root, receipts root, etc.), though consensus fields differ because Polygon doesn't do PoW. Instead, there might be a slot number or something to indicate sequence. It might not include difficulty or nonce in any meaningful way. * A list of transactions (which are Ethereum-format transactions, using gas, etc.). * Possibly a list of "guard" or consensus info (but likely not explicitly, since consensus is off-chain in Tendermint signatures, not recorded in each block header like Ethereum's attestations). The block time on Polygon is much shorter than Ethereum mainnet. Often 2 seconds per block is cited. This means each block has far fewer transactions than an Ethereum block might (due to time), but overall throughput can be higher given many more blocks per minute. The gas limit per block on Polygon is also high (potentially similar or higher than Ethereum's, since they aimed for high throughput). Because the Bor chain is permissioned to a set of known validators (even if open to join via staking, at any epoch the set is fixed), block propagation and validation can be faster, each node might connect more directly to all block producers or have optimized gossip. Finality of Blocks: Within the Polygon chain, the Bor layer might not have immediate finality (if it's just one producer after another, a rogue producer could equivocate and cause a fork). However, since the producers are validators under watch, and every few minutes the checkpoint locks in the history, the chain is generally run as if finalized by social consensus unless a serious issue arises. The Tendermint consensus on Heimdall could, in theory, also sign off on each block for instant finality, but that would be slower for block production. Instead, they trade off some temporary forkability for speed, knowing that finality comes with checkpoints. ## Transaction lifecycle on polygon pos chain From a user's perspective, using Polygon's PoS chain is similar to using Ethereum, with some additional steps for bridging: 1. Moving Assets to Polygon: Typically, a user locks tokens (like ERC-20 or ERC-721 assets, or ETH) in a smart contract on Ethereum and an equivalent amount is minted or made available on Polygon (via the PoS bridge or Plasma bridge). This initial deposit and final withdrawal are where the hybrid security comes into play. 2. Transacting on Polygon: Once funds are on Polygon, the user can send transactions on the Polygon network just like on Ethereum: they have a Polygon address (same keys as their Ethereum address), send transactions with nonce, gas price (on Polygon paid in MATIC/POL token as gas), etc. The transaction gets broadcast to Polygon nodes and lands in a Bor block usually within a few seconds. Gas fees on Polygon are very low due to lower demand and higher throughput (plus their token value differences). 3. Block Confirmation: Within a couple seconds the transaction is in a block. Polygon's chain may have confirmations akin to Ethereum's (next blocks on top). But soon, a checkpoint will include this block hash. Checkpoints might be created, say, every 30 minutes or when 100–200 blocks have been produced (specific parameters can vary). When the checkpoint that covers this block is submitted and finalized on Ethereum, that transaction effectively has the security of Ethereum backing it. 4. Withdrawing / Finalizing back to Ethereum: If the user wants to withdraw assets back to Ethereum, if using the PoS bridge, they rely on validator signatures (which are assumed honest after checkpoint finality) to unlock funds after a short delay. If using the Plasma bridge, they might wait a challenge period (e.g., 7 days) to be sure no invalid state was pushed. During normal operation, users simply see near-instant transactions and a degree of finality after maybe a minute or so (once a checkpoint is created and signed, even before it's submitted, validators consider those blocks final). The experience is high-speed, leveraging the trust that validators will behave (due to stake at risk). ## State management and EVM compatibility The Polygon PoS chain is fully EVM-compatible. It maintains an account-based state model nearly identical to Ethereum's: * Accounts (EOA and contracts) exist with balances in MATIC, storage for contracts, etc. * It has its own set of ERC-20 tokens, NFTs, etc., which often mirror Ethereum assets via bridges. * The state is managed in a trie (since it's a fork of Geth, it likely uses similar data structures for state). * It supports the same JSON-RPC APIs as Ethereum, so Ethereum tooling (Metamask, Truffle, Hardhat) works on Polygon with just a network config change. This compatibility was a huge factor in Polygon's adoption: developers can deploy existing Ethereum contracts with minimal changes to get much better performance for their dApps. One difference is scale: Because Polygon can push more transactions, the state can grow faster in size than Ethereum's, but since it's not as decentralized (in terms of hardware requirements and number of full nodes), they can handle higher state growth at the cost of centralization pressures. There may also be differences in chain parameters (like block gas limit, etc.), but logically it functions the same as Ethereum's execution layer. Data Availability: One risk in sidechains is data availability – if the chain validators went rogue and withhold blocks, users could have difficulty proving things to exit. Polygon's design, by checkpointing only the Merkle root, doesn't put all transaction data on Ethereum (unlike a rollup). So it does rely on the assumption that the majority of validators keep the data available and honest. If a situation occurred where a bad block was checkpointed, users would need those block details to prove fraud (which is why the Plasma bridge only works for limited transactions where proofs are easier). The trade-off is that Polygon can have cheaper transactions since it doesn't publish all data to expensive L1, but it introduces a bit more trust in validators for data availability. Newer solutions (like Validiums or some sidechains) focus on this distinction, but Polygon's approach is to lean on economic incentives and Ethereum anchoring to strike a balance. ## Network topology and cross-chain bridge The Polygon network's P2P layer is similar to an Ethereum-like network, with nodes gossiping blocks and transactions. However, since it is effectively permissioned (only validators produce blocks), many nodes in the network are either validators or observer nodes. In practice, many users rely on public RPC endpoints (hosted by services) to interact, rather than running full nodes, given it's semi-centralized. Bridge: The bridge between Polygon and Ethereum is essentially a set of smart contracts: * On Ethereum: contracts for staking (managing validators), deposit/withdraw for assets, and checkpoint management. * On Polygon: corresponding logic to manage incoming deposits (mint tokens or release funds) and to freeze assets when moving back. Validators play a role in the bridge: for the PoS bridge, a quorum of them signs off on withdrawals. For the Plasma bridge, fraud proofs could be submitted if needed. ## Polygon's proof-of-stake (pos) vs "proof-of-l" (hybrid approach) The prompt references "Polygon's PoL". While not a standard term, it likely refers to Polygon's unique approach to consensus. One could interpret Proof-of-Lock (PoL) – the idea that validators lock up stake on Ethereum and thus secure the sidechain. Or generally, Polygon's combination of Proof-of-Stake and Plasma as a hybrid. In practice: * Polygon uses staked tokens (locked on Ethereum) to determine validators (so the security comes from a proof-of-stake system). * It leverages Ethereum's finality by writing checkpoints (so finality is insured by Ethereum's proof-of-work/now proof-of-stake security). * It also inherits some Plasma characteristics for security of funds (users can exit with proof of funds if validators misbehave). This hybrid model is different from a pure L1 PoS chain that doesn't rely on any external chain. Polygon sacrificed some decentralization (smaller validator set than Ethereum, and reliant on Ethereum itself) to gain immediate scalability and to bootstrap security via Ethereum. ## Summing up polygon: It achieves fast block times and high throughput via a sidechain that's run by its own set of validators under a PoS consensus, yet it periodically defers to Ethereum for final checkpoints. It's an interesting middle ground between a pure sidechain and a full L2 rollup. Developers and users liked it because it offered the Ethereum experience (same technology stack) with much better performance, suitable for gaming, NFTs, DeFi without worrying about mainnet gas fees. The cost is a bit more trust in validators (though that trust is economically reinforced by their stake and Ethereum's oversight). Polygon has since expanded beyond the PoS chain, working on true layer-2s like Polygon zkEVM (a ZK-rollup) and others, but the PoS chain remains a major hub and a good example of a public blockchain with a novel consensus design. ## Comparisons with other public blockchains Beyond Bitcoin, Ethereum, and Polygon, there are several other prominent public blockchains, each taking different approaches to consensus, finality, and scalability. We will compare a few: Solana, Avalanche, Cardano, and Polkadot, focusing on their consensus mechanisms, block times, finality guarantees, and scaling strategies. These networks illustrate the spectrum of design trade-offs in the blockchain space. ## Solana: high-throughput via proof of history and tower bft Consensus Mechanism: Solana is a high-performance blockchain that uses a unique combination of Proof of Stake (PoS) with an innovation called Proof of History (PoH) and a consensus algorithm named Tower BFT (a variant of Practical Byzantine Fault Tolerance tuned for PoH). In Solana: * Proof of History serves as a cryptographic clock. It's essentially a continuously running verifiable delay function (a sequence of SHA-256 hashes) that all nodes follow. These hashes, with timestamps, create a ledger of time. This allows nodes to agree on an ordering of events (transactions, votes) without having to communicate constantly about time – they trust the timeline encoded by the PoH sequence. * Tower BFT builds on a PBFT-like consensus but leverages the PoH clock to reduce the communication overhead. Validators can vote on blocks and use the PoH ticks to impose timeouts and leader rotations deterministically. Each validator has a vote locking mechanism: once they vote on a version of the ledger, they can't easily revert without waiting out an exponentially increasing delay. This mechanism prefers liveness – the chain continues producing blocks rapidly, and finalization of a block grows more certain as more votes are stacked on top of it with increasing lockouts. * Leader Rotation: Solana elects leaders (block producers) for short intervals (a slot). Because of PoH, each slot is a fixed number of PoH ticks (e.g., 400ms worth of hashing). The schedule of which validator is leader for which slot is decided in advance (pseudo-randomly, based on stake weight and a VRF), so each validator knows when it's their turn to produce a block. Leaders produce blocks in rapid succession. Block Time and Throughput: Solana's block time is extremely fast – on the order of 400 milliseconds per block (one slot). This is much lower than Ethereum's 12s or Bitcoin's 10min. With such a short block time, Solana can process a continuous stream of transactions. The network has demonstrated high throughput, theoretically up to 50,000+ TPS in optimal conditions (and often thousands of TPS in practice), thanks to optimizations like parallel transaction processing (Solana's runtime can process non-conflicting transactions in parallel, using a runtime called Sealevel that identifies which accounts are read/written by each transaction). Finality: Solana's finality is not instant, but it's fast. Typically, within a couple of seconds, a block can be considered finalized for practical purposes. The protocol doesn't mark an explicit "final" state like Casper, but because of the vote lockouts in Tower BFT, the probability of a fork beyond a certain depth becomes negligible after some slots. Many references cite around \~1 to 2 seconds for confidence or sometimes about \~32 confirmations (\~12.8 seconds) to be safe. In the context of Solana, even 1 confirmation (0.4s) could be considered, but most will wait a handful of blocks. The Zebpay comparison (for example) lists Solana finality at \~12.8s, likely being conservative. In essence, Solana sacrifices some decentralization (it requires powerful hardware and a limited, though growing, validator set) to achieve this speed. Scalability Approach: Solana's approach is to scale vertically and in parallel on a single global state: * No sharding: Solana keeps one giant state and one ledger, avoiding the complexities of cross-shard communication. Instead, it demands validators to run beefy hardware (high-end CPUs, GPUs for signature verification, lots of RAM and fast SSDs for the ledger). * Parallel processing: By carefully planning which transactions can run together (transactions must specify which state (accounts) they will read/write), Solana's runtime can execute many transactions at the same time on different threads or GPU cores, maximizing throughput on modern hardware. * Network optimizations: Solana introduced concepts like Turbine, a UDP-based block propagation protocol that breaks blocks into small pieces and scatter-gathers them across the network (similar to erasure coding), and Gulf Stream, a mempool-less forwarding protocol where validators send upcoming transactions to the expected leader in advance, smoothing block production. * These innovations allow Solana to reduce latency throughout the system: from networking to consensus to execution. Smart Contract Environment: Solana does not use the EVM. Instead, it uses eBPF (Berkeley Packet Filter bytecode) as the execution format for on-chain programs. Developers typically write smart contracts in Rust (or C, C++) and compile to BPF bytecode. Solana's model is different: contracts are not autonomous accounts with storage as in Ethereum; rather, state is held in designated accounts and passed into programs. A program on Solana can be thought of as a deployed contract code (identified by a program ID), and it operates on provided account data. This model is more explicit about what data is touched by each call (which enables the parallelism). It also means the contract logic and contract data are separate. Use Cases: Solana's speed and low fees (fractions of a cent per tx) make it attractive for high-frequency trading, gaming, and other use cases that demand throughput. The trade-off is that running a Solana validator is resource-intensive, so the network tends to be more "heavy" and may centralize in data centers. Nonetheless, it represents one extreme of the design space: maximize performance by leveraging current hardware and clever protocol design. ## Avalanche: sub-second finality with avalanche consensus and subnets Consensus Mechanism: Avalanche introduced a novel consensus family often referred to as the Avalanche consensus (also "Snowball"/"Snowflake" algorithms). It's neither classical BFT nor Nakamoto PoW, but a metastable consensus achieved by repeated random subsampling of validators: * In Avalanche, when a validator sees a transaction or block, it queries a small random subset of other validators about their preference (which conflict do you prefer, A or B?). It then adjusts its own preference based on the majority of responses. This query process is repeated in rounds (with different random samples) until the network gravitates to a unanimous decision. The process leverages probability and randomness to achieve consensus quickly with extremely low communication overhead compared to PBFT (not every validator talks to every other, only random subsets). * The result is a consensus that is leaderless (no single proposer that everyone follows each round) and highly robust. It can achieve consensus with high probability in just a couple of network round trips. * Avalanche consensus is used to decide which transactions (or blocks) are accepted. It's fast – finality on the order of one second or even sub-second is common because after a few polling rounds, confidence is very high that the decision won't change. Avalanche's platform actually consists of multiple chains: * The X-Chain (Exchange chain) which uses a DAG ledger (directed acyclic graph of transactions) and Avalanche consensus to manage asset transfers (UTXO-based, used for native asset management). * The C-Chain (Contract chain) which is an instance of the EVM (account-based) and uses a modified Avalanche consensus (called Snowman) that is optimized for totally ordered blocks (Snowman is basically Avalanche consensus but with linear block production, suitable for smart contract execution). C-Chain is where Ethereum-compatible dApps run, so it behaves much like an Ethereum clone but using Avalanche consensus rather than PoW/PoS. * The P-Chain (Platform chain) which handles staking, validator membership, and coordination of subnets (it also uses Snowman consensus). Block Time and Finality: Avalanche blocks (particularly on the C-Chain) are quite fast. The network commonly achieves block times of around 1 second, and importantly finality is typically achieved within \~1-2 seconds. This means that when a transaction is included in a block, within a second or two it is irreversible with extremely high confidence. There is no concept of a long confirmation wait; Avalanche offers near-immediate finality akin to classical BFT systems, but with a much larger validator set (hundreds or thousands of validators) due to its efficient consensus. In practice, Avalanche's time-to-finality is one of the best among major chains – often cited as sub-second in ideal conditions and around 1-2 seconds under load. Scalability Approach: Avalanche's approach to scaling is two-fold: * Efficient Consensus: Its consensus can accommodate a high number of validators without a massive performance penalty. Communication complexity is low (probabilistic gossip), so it can maintain decentralization (anyone can be a validator by staking a modest amount of AVAX and running a node) while still achieving high throughput and low latency. This is in contrast to Solana which restricts validator count by hardware demands, or to Ethereum which restricts throughput to maintain decentralization; Avalanche tries to get both via algorithmic efficiency. * Subnets: Avalanche is built as a platform for launching interoperable blockchains. The default set (X, P, C chains) is known as the Primary Network, which all validators validate. But Avalanche allows the creation of subnets – a set of validators that can run one or more custom blockchains with their own rules (could be permissioned chains, or chains optimized for specific applications, possibly using different virtual machines). This is a sharding-like approach: each subnet can be considered an independent shard with its own state and execution, and subnets can be heterogeneous (not all have to run EVM; one could run a different VM or application-specific chain). * Subnets can communicate via the Primary Network or via bridges, though native interoperability is still evolving. * This approach means Avalanche can scale by adding more subnets to handle new workloads, rather than piling everything on one chain. However, the default C-Chain itself can handle a significant load (several thousand TPS) given the consensus performance. * Avalanche essentially offers an infrastructure where many blockchains (even with different designs) share a common security model if they are validated by a common validator set. It's up to the creators whether to require all Avalanche validators or a subset. Smart Contract Environment: The primary smart contract platform on Avalanche is the C-Chain, which is EVM-compatible. It mirrors Ethereum's capabilities (solidity contracts, same API). This was a strategic choice to attract Ethereum developers to easily deploy on Avalanche. The Avalanche C-Chain benefits from Avalanche consensus, so you get Ethereum-like smart contracts with much faster finality and higher throughput. The downside might be slightly less mature tooling or the need to use the Avalanche-specific endpoints, but generally it's very close to Ethereum. Avalanche also supports other VMs via subnets (for example, there is a subnet running a Bitcoin-like UTXO chain, and others planned with native Rust or Move VMs). Finality Guarantees: Because Avalanche's consensus doesn't rely on chain depth and probabilistic confirmation, once a transaction is confirmed and finalized, it's done. Avalanche provides deterministic finality. The probability of reversal after finality is essentially zero unless an attacker controls a majority of validators (and even then the consensus protocol doesn't create typical forks; an attacker would likely have to pause consensus or break it rather than secretly create a conflicting history). Comparative Notes: Avalanche's block time (\~1s) and finality (1-2s) are much faster than Ethereum's (\~12s, \~6-12min finality) and Bitcoin's (10min, 60min+ finality). It's closer to Solana's in speed, though using a very different approach (gossip vs leader-based). Avalanche doesn't reach the raw TPS of Solana in one chain (Solana's claimed 50k vs Avalanche maybe a few thousand on C-Chain), but Avalanche can scale out with subnets and keep adding more chains if needed. Avalanche is also lighter on hardware than Solana; running an Avalanche validator is more feasible on consumer hardware (though it still benefits from good networking and CPU for cryptographic operations). ## Cardano: ouroboros proof-of-stake and eutxo model Consensus Mechanism: Cardano is a blockchain platform that emphasizes academic research and formally verified security. Its consensus algorithm is a family of PoS protocols named Ouroboros. Unlike Ethereum's Casper FFG or Avalanche's BFT, Ouroboros is a chain-based Proof-of-Stake similar in spirit to Nakamoto consensus but using stake-weighted lottery for block leaders. Key points: * Ouroboros Praos (current version): Time is divided into epochs (e.g., 5 days long) and each epoch is subdivided into slots (each slot \~1 second according to some sources, though not every slot will have a block). For each slot, the protocol randomly selects a stakeholder (could be a stake pool representative) to be the block producer for that slot, with probability proportional to the amount of stake they control (either themselves or delegated to them). * If a slot has a leader, that leader can produce a block. There might be slots with no leader (no block in that slot), which introduces some expected gap between blocks. In practice, Cardano's block time (the average interval with a block) is about 20 seconds. This is because not every one of the 1-second slots results in a block, roughly 5% of slots produce blocks if parameters yield \~20s block time. * Slot leader election uses a VRF (Verifiable Random Function) where each potential leader privately checks if they won their slot by inputting some seed and their stake, yielding a proof if yes. * Ouroboros, being chain-based, means forks can occur if two leaders are elected close or network delays cause two different blocks for the same slot or adjacent slots. The chain selection rule in Ouroboros is similar to Bitcoin's longest chain (or rather the chain with highest accumulated stake-signed blocks), albeit with tweaks to ensure honest majority of stake leads to eventual convergence. * Cardano evolves Ouroboros with versions like Ouroboros Genesis, Ouroboros Omega, each improving aspects like flexibility in offline periods or better random selection. But importantly, it's not instant finality. It inherits a probabilistic finality like Bitcoin: the deeper a block is in the chain, the more secure it is considered. Finality: As a result of the above, Cardano's transactions have probabilistic finality. The network does not have a finality gadget yet (though there are future plans to incorporate one possibly, or Ouroboros Leios/chronos might improve time consensus). It's often said that a transaction on Cardano is considered final after about 10-15 blocks (which at 20s each is a few minutes) for practical security, but to be extremely safe (like 99.999% certain), it might require on the order of 100 blocks or more. In fact, Cardano's documentation suggests that due to the nature of Ouroboros, absolute finality "cannot happen in less than one day" in a theoretical sense – implying after an epoch boundary, the chain is pretty set. This is far slower finality compared to BFT chains, and even slower than Ethereum's finality. However, significant rollbacks on Cardano are extremely unlikely unless someone controls a majority of stake and can orchestrate a deep reorg. Scalability Approach: Cardano's base layer scalability relies on protocol refinements and on-chain parameter increases: * It uses eUTXO (Extended UTXO) as its transaction model, not accounts. eUTXO is like Bitcoin's UTXO but with the ability for outputs to carry attached data and scripts (Plutus scripts) that must be satisfied to spend them. This model enables local verification of contract logic and more parallelism (since independent UTXOs can be processed in parallel), but it also means something like a single contract state is more cumbersome to update (it's broken into UTXOs). * Cardano has been gradually increasing parameters like block size, script memory limits, etc., to allow more transactions per block. However, on-chain throughput remains moderate (in the order of a few dozen transactions per second at most currently). They haven't pushed base layer throughput to extremes yet. * The major scalability plans for Cardano involve layer 2 solutions and sidechains: * Hydra Head Protocol: State channels that allow a group of users to do fast off-chain transactions and only settle the net result to the chain. Hydra could allow many local off-chain ledgers operating for quick interaction (e.g., gaming or fast payments) and leveraging Cardano for security when closing the channel. * Sidechains: Cardano is developing sidechains that could connect to the main chain and use ADA for staking but have different parameters (for example, a sidechain for EVM compatibility or one optimized for privacy). A recently discussed sidechain is Midnight (privacy-focused) and Milkomeda (EVM sidechain) already operates connected to Cardano. * Input Endorsers: A future upgrade in Ouroboros might separate transaction propagation from block confirmation by introducing input endorsers that pre-validate transactions and then include references in blocks, increasing throughput. * Cardano's approach is often to research and slowly deploy upgrades, prioritizing correctness. It may not be the fastest to scale, but it aims to do so methodically. Smart Contract Environment: Cardano's smart contracts run on a platform called Plutus, which uses the eUTXO model. Contracts are written in a Haskell-based language (or another high-level language that compiles to Plutus Core). The model is quite different from Ethereum's: * Because of eUTXO, a contract state is represented as UTXOs that a script can spend and produce new UTXOs. All conditions must be satisfied in one transaction, which encourages a style of contracts where logic is applied in the transaction construction and the chain simply verifies it. * This makes certain things efficient (parallelism, since independent UTXOs = independent transactions, no global mutex on a contract's storage) but others more complex (composing contracts or doing something like "all participants agree" might require more careful orchestration). * Cardano also focuses on formal verification; the Plutus language and the overall design aim to reduce smart contract vulnerabilities (though it's still possible to write bad logic, of course). Comparative Notes: Cardano tends to have longer latency (20s blocks, no quick finality) compared to others. Its throughput has been lower, but with improvements and Hydra, it may increase. It trades off raw performance in favor of a conservative, research-driven approach. Where Solana and Avalanche push the envelope on raw TPS and finality, Cardano emphasizes security proofs and novel L2 scaling. In a sense, Cardano aligns closer to Bitcoin's philosophy among these, but with PoS and smart contracts. ## Polkadot: heterogeneous sharding with npos and grandpa finality Consensus Mechanism: Polkadot is a sharded multi-chain network designed to connect multiple specialized blockchains (parachains) under one security umbrella. Its consensus has two layers: * Block Production – BABE: Polkadot uses a variant of Ouroboros called BABE (Blind Assignment for Blockchain Extension) for selecting block authors on the relay chain (the main chain). Similar to Cardano, validators are randomly assigned slots to produce relay chain blocks, in a decentralized lottery fashion. BABE runs continuously creating blocks (Polkadot's block time is about 6 seconds). * Finality – GRANDPA: Complementing BABE, Polkadot has a finality gadget called GRANDPA (GHOST-based Recursive ANcestor Deriving Prefix Agreement). GRANDPA is a BFT algorithm where validators vote on the chain's state. It doesn't run every block, but when it does run (it can finalize many blocks in one round), it finalizes the longest chain that has 2/3 votes. In practice, GRANDPA might finalize blocks every few seconds or every few rounds depending on network conditions. This means Polkadot blocks get finalized (irreversible) typically within half a minute or less – often a batch of recent blocks are finalized together. * Because Polkadot separates block production from finality, it achieves both good throughput (continuous 6s blocks even if finality lags a bit) and deterministic finality eventually. If the network is under heavy load, blocks might still be produced but finality might catch up with a slight delay; if finality is working faster than production, it might finalize every block almost immediately as they come. Nominated Proof-of-Stake (NPoS): Polkadot's PoS system involves nominators (who stake DOT tokens and back certain validators) and validators (who actually run nodes and produce/validate blocks). This is an iteration on Delegated PoS, but with some differences like nominator's stake being split among possibly several validators, and an algorithm to choose a diverse set of validators maximizing stake decentralization. Polkadot typically has on the order of a few hundred validators (perhaps \~300–1000) in its active set, and many nominators who stake behind them. Sharding via Parachains: Polkadot's big scalability approach is parallel chains (parachains). The relay chain (Polkadot main chain) itself doesn't do much in terms of smart contracts or heavy transactions; its job is to coordinate and finalize states of parachains. Each parachain is a blockchain with its own state transition function (it could be a smart contract platform, a runtime for identity, a DeFi chain, an IoT chain, etc.). Validators in Polkadot are grouped into rotating subsets to validate parachain blocks (they act as collators or check the collators' work). * Each parachain produces blocks in parallel, and those blocks are checked by a subset of validators, then the results (state transitions) are posted to the relay chain as candidates. * The relay chain block includes the certified parachain blocks' state roots. GRANDPA finality then finalizes the relay chain block, which means all parachain states in that block are finalized. * This architecture allows Polkadot to process many chains' transactions at once, theoretically scaling linearly with the number of parachains. Initially, Polkadot might support e.g. 100 parachains, effectively meaning 100 parallel throughput lanes. * Parachains can even have their own consensus if they want (but they rely on Polkadot validators for final approval). Polkadot ensures security via shared staking – an attack on one parachain would require attacking the whole network's validator set. Block Time and Throughput: The relay chain's 6-second block time means the system is fairly responsive. Parachains also effectively follow that tempo (each parachain might produce a block each relay chain block or at least have the opportunity to). Polkadot's design goal is high aggregate throughput through parallelism, although any single parachain might still have limits (depending on its own config, e.g., Moonbeam parachain (an Ethereum-like chain on Polkadot) might have a block time of 12s and certain gas limit). Finality: With GRANDPA, Polkadot achieves finality in roughly 1-2 relay chain blocks in many cases. For example, it might finalize every second block, or finalize a batch after 4 blocks if network is slower. Empirically, Polkadot often has finality within \~12 to 30 seconds. In a demonstration, Polkadot has achieved finalizing 51 parachains in 30 seconds (as one Reddit mention noted). This is far quicker than probabilistic finality and comparable to other BFT-style chains. The advantage is this finality covers the entire sharded system at once. Scalability and Upgrades: Polkadot can increase its throughput by: * adding more parachains (there is a mechanism to auction parachain slots, etc.), * using parathreads (pay-as-you-go parachains for lower throughput chains), * or future upgrades like asynchronous backing, which pipeline parachain block production more efficiently. Polkadot's architecture is forward-looking; it intends to incorporate further optimizations (for instance, there's work on increasing the number of parallel threads or improving how parachains hand off data). Smart Contract Environment: Polkadot itself doesn't have a native smart contract VM on the relay chain (no user contracts on the relay chain). Instead, smart contracts live on parachains. Polkadot provides a framework called Substrate to build parachains. Substrate is very flexible; you can compose pallets (modules) for governance, balances, etc., and also include a smart contract pallet if you want your chain to support contracts. Many parachains exist: * Moonbeam/Moonriver: EVM-compatible parachains (so essentially an Ethereum-like environment on Polkadot/Kusama). * Acala: DeFi focused with its own stablecoin and also EVM compatibility. * Parallel, Astar, etc.: Some support EVM, some support WebAssembly smart contracts (Substrate has a WebAssembly VM for smart contracts called ink!/pallet-contracts). * Unique Network: NFT-focused chain with custom logic. This heterogeneous approach means Polkadot doesn't enforce one execution environment – each chain can optimize for its use case. However, one downside is that achieving cross-chain interoperability (beyond what Polkadot provides via XCMP – cross-chain message passing – among parachains) is more complex for developers, and liquidity or state is fragmented across chains. Polkadot's protocol handles cross-chain messages trustlessly, which is powerful (an asset can move from one parachain to another under the same security, unlike bridging across totally separate L1s which require external trust). This is one of its selling points: a foundation for a multi-chain ecosystem with shared security and trust-minimized interoperability. Comparative Notes: Polkadot stands out for its sharding (multiple parallel chains) which neither of the others (Solana, Avalanche, Cardano) do in the same unified way (Avalanche has subnets but they are not as tightly coupled; Ethereum is planning data sharding but currently relies on L2; Solana is monolithic, Cardano primarily monolithic + L2). Polkadot's 6s block and \~finality under 1 minute put it in a similar league with Avalanche in terms of user experience quickness (though Avalanche is a bit faster). Polkadot's security relies on a robust validator set and the slashing of misbehavior like any PoS, but it hasn't faced major attacks. Also noteworthy is Polkadot's on-chain governance which can upgrade the protocol quite flexibly (the network has self-amendment features). Finally, Polkadot's model means if one parachain congests itself, others are not directly slowed (except if it saturates shared resources on the relay chain, but they're isolated to a degree). This is a different approach than scaling a single chain to handle everything; it aligns with the idea that different applications may be better on different specialized chains, but all tied together. ⸻ Each of these platforms – Solana, Avalanche, Cardano, Polkadot – showcases different design philosophies: * Solana: maximize performance on one chain, hardware-scale, at the cost of high requirements and more complex networking. * Avalanche: invent new consensus to get both speed and decentralization, allow many chains but keep default one chain easy to use (with EVM). * Cardano: prioritize security proofs and gradual decentralization, use novel PoS, accept slower finality, and scale through off-chain means. * Polkadot: embrace multi-chain from the start, with strong finality and the ability to run many types of blockchains under one network. These trade-offs reflect the blockchain trilemma (decentralization, security, scalability). No single approach is definitively "best" – each is optimizing for certain use cases and assumptions. file: ./content/docs/knowledge-bank/public-sector-usecases.mdx meta: { "title": "Public sector use cases", "description": "A comprehensive guide to blockchain applications across government, infrastructure, citizen services, and public sector modernization" } ## Introduction to blockchain in the public sector Governments and public institutions around the world are under increasing pressure to deliver efficient, transparent, and citizen-friendly services. These organizations manage a vast array of responsibilities including public records, identity management, taxation, procurement, welfare programs, infrastructure, elections, and more. However, many of these systems are built on outdated technologies and siloed processes that limit interoperability, trust, and real-time decision-making. Blockchain presents an opportunity to reimagine how public services are delivered, by enabling secure, decentralized, and auditable infrastructure that supports data integrity, automation, and collaboration. At its core, blockchain offers a shared ledger across multiple parties where records are tamper-evident, smart contracts enforce logic without intermediaries, and identities can be verified without centralized databases. In the public sector, blockchain is not a replacement for existing systems but a foundational layer that can connect departments, institutions, and citizens in a more trusted and efficient digital ecosystem. This guide explores practical and emerging use cases across a wide range of public domains where blockchain has the potential to transform processes and improve outcomes for citizens and governments alike. ## Benefits of blockchain for public institutions Public sector entities face unique challenges including accountability to taxpayers, the need for transparency, compliance with legal frameworks, and the expectation of universal service access. Blockchain provides benefits that align directly with these imperatives: * Tamper-evident records that improve accountability and reduce fraud * Shared data layers that break down silos between departments and agencies * Cryptographic proof of actions and approvals for audit and compliance * Automation of multi-party workflows through smart contracts * Permissioned access control and data sharing with privacy protections * Immutable registries for assets, entitlements, and rights * Real-time traceability for funds, goods, and documents These benefits translate into faster service delivery, lower administrative costs, improved trust in government, and better visibility into how public resources are managed. ## Land and property registration Property ownership is one of the most fundamental public services provided by governments. Traditional land records are prone to forgery, manual error, missing documents, and disputes over ownership. Blockchain enables secure, digital property registries where every transaction involving a land parcel is recorded immutably and transparently. In a blockchain-based land registry, each plot of land is assigned a unique digital identifier that maps to its physical location and legal metadata. Ownership transfers are executed through smart contracts that validate the identity of the parties, update the registry, and store proof of transaction. Benefits of this approach include: * Elimination of duplicate titles and fraudulent claims * Transparent historical record of all ownership changes * Instant verification of ownership and encumbrances * Reduction in legal disputes and due diligence time for banks * Integrated workflows between land departments, municipal agencies, and financial institutions Several countries including Sweden, Georgia, and India have piloted blockchain-based land registries to simplify title management and increase public confidence in property rights. ## Public procurement and government tenders Public procurement is a critical function for governments but is often marred by lack of transparency, corruption, and inefficiencies. Blockchain enables a transparent and auditable procurement system where every step—from tender creation to bid evaluation and contract fulfillment—is recorded on-chain and accessible for review. Key features of blockchain in procurement include: * Timestamped publishing of tenders with immutable parameters * Confidential, encrypted bid submissions that can only be opened after the deadline * Smart contract logic for evaluating bids against predefined criteria * Automatic selection of the winning bidder and generation of contract terms * On-chain performance monitoring and milestone-based payments This system increases trust among vendors, reduces bid manipulation, ensures compliance with procurement rules, and enables real-time oversight by anti-corruption bodies and auditors. Countries like Colombia and Chile have experimented with blockchain in public procurement to enhance transparency, lower corruption risk, and improve competitiveness in public bidding. ## Digital identity and citizen credentials A foundational identity is required for citizens to access nearly every public service—healthcare, education, taxation, social benefits, and voting. Traditional identity systems are centralized, fragmented, and lack portability across institutions. Blockchain introduces self-sovereign identity models where citizens own and control their credentials while government entities issue verifiable proofs. In this model: * Citizens receive a digital wallet that stores verifiable credentials issued by various government agencies * Each credential is anchored on a blockchain with cryptographic signatures * Citizens can present zero-knowledge proofs to verify claims (e.g., age, residency, qualification) without revealing sensitive information * Agencies and private service providers can instantly verify the validity of credentials without accessing underlying databases The benefits include streamlined onboarding for services, reduced identity fraud, simplified interagency coordination, and enhanced citizen privacy. The European Union’s EBSI initiative and projects in Canada and Singapore are advancing blockchain-based digital identity ecosystems for public use. ## Education credentials and academic records Educational certificates and degrees are prone to forgery and often difficult to verify across institutions, employers, or borders. Blockchain provides a trusted, digital credential registry where academic achievements are issued as verifiable credentials by authorized institutions. Once recorded on-chain: * Degrees and diplomas can be validated instantly by employers or government bodies * Students can carry their credentials in a digital wallet and share only when needed * Verifiers can confirm authenticity without contacting the issuing authority * Records remain intact, even if the issuing institution shuts down or loses data Governments can use this model for national credential registries, professional licensing boards, or skill development programs. Countries such as Malta, Singapore, and India have implemented blockchain for issuing diplomas, vocational certificates, and academic transcripts. ## Social welfare and benefit disbursement Governments deliver a wide range of subsidies and benefits to citizens, including food rations, pensions, housing support, unemployment insurance, and disaster relief. These programs often struggle with inefficiencies, delays, leakage, and fraud. Blockchain enables conditional, transparent, and automated disbursement of welfare benefits through smart contracts. Key components of blockchain-based welfare delivery include: * Registration of beneficiaries using verified digital identity * Smart contracts that release payments or entitlements based on eligibility conditions * Real-time tracking of disbursements and consumption at point of delivery * Citizen-facing dashboards for grievance redressal and entitlement history This system reduces administrative overhead, ensures that funds reach the intended recipients, and enables data-driven policy design based on actual consumption trends. Countries including Kenya, the Philippines, and South Korea have explored blockchain pilots for pension disbursement, conditional cash transfers, and humanitarian aid distribution. ## Healthcare records and vaccine traceability Healthcare systems rely on accurate, timely access to patient data and medical histories. Yet in many jurisdictions, health records are fragmented across hospitals, clinics, and labs. Blockchain creates a unified patient-centric health record where access is controlled by the patient and verified by cryptographic signatures. Use cases include: * Cross-provider health record access with patient consent * Tamper-proof storage of vaccination records and test results * Public health dashboards based on anonymized and aggregated blockchain data * Pharmaceutical supply chain tracking to detect counterfeits During the COVID-19 pandemic, several countries explored blockchain-based vaccine certificates and distribution tracking to ensure transparency and prevent misuse. Estonia and the UAE are leading examples of blockchain adoption in national healthcare systems. ## Urban governance and smart city platforms City governments manage an array of digital services—from public transport and utilities to permitting and community feedback. As cities adopt smart infrastructure, blockchain can serve as the secure, interoperable data layer that connects devices, departments, and citizens in real time. Applications in urban governance include: * Tokenized incentives for recycling, mobility, or energy conservation * Transparent tracking of utility usage and billing * Citizen complaint management with traceable resolution timelines * Decentralized identity for accessing municipal services By using blockchain as a coordination mechanism, cities can deliver more responsive, efficient, and citizen-friendly digital public services. Barcelona, Dubai, and Amsterdam have deployed blockchain projects to modernize service delivery and enhance citizen engagement. ## Taxation and revenue management Efficient taxation is vital for government sustainability, yet public tax systems often suffer from limited integration, complex compliance procedures, evasion, and corruption. Blockchain offers a transparent and auditable infrastructure to automate tax collection, reporting, and reconciliation while enabling real-time oversight. Blockchain-based taxation systems can provide: * Immutable recordkeeping of invoices and taxable events * Smart contract enforcement of tax calculations and deductions * Integration with digital payment systems for instant tax remittance * Real-time dashboards for tax authorities and audit agencies * Cross-border tax validation for goods and services For example, a government could link its value-added tax system to a blockchain-enabled e-invoicing network. Each invoice issued by a registered business is hashed and recorded on-chain. Smart contracts compute the applicable tax and enforce split payments—sending the net amount to the seller and the tax portion directly to the treasury. This reduces fraud, prevents underreporting, and ensures timely revenue collection. Brazil, India, and China have explored integrating blockchain with e-invoicing and GST (Goods and Services Tax) systems to enhance tax transparency and reduce evasion. ## Elections and voting systems Free and fair elections are the foundation of democratic governance. However, conventional voting systems are vulnerable to issues such as ballot tampering, voter fraud, low turnout, and delayed counting. Blockchain provides a secure and transparent method for digital voting where each vote is recorded immutably and counted accurately. A blockchain-based voting system can support: * Voter registration through self-sovereign digital identity * Issuance of unique, one-time voting tokens to verified citizens * Secure ballot casting using encrypted, pseudonymous identities * Transparent counting process visible to all stakeholders * Immutable audit trail of every vote and counting action These systems can be used for local, national, or institutional elections as well as participatory governance mechanisms such as citizen budgeting or policy consultations. For instance, a city could implement a blockchain-based digital voting app where residents cast votes on budget allocations. Each vote is verified using a digital ID and timestamped on-chain. The results are publicly auditable and final within seconds of vote closing. Estonia, South Korea, and Utah County in the United States have piloted blockchain voting technologies for both government and internal organizational elections. ## Public finance and budget tracking Governments manage large and complex budgets that involve multiple departments, programs, and vendors. Traditional financial systems often lack transparency and are susceptible to misreporting or misallocation of funds. Blockchain provides a mechanism for real-time, transparent, and programmable budget execution. Key features of blockchain-enabled public finance systems include: * On-chain disbursement of public funds through smart contracts * Multi-signature approvals and audit trails for each transaction * Real-time dashboards for citizens, media, and auditors * Conditional fund release based on project milestones or delivery proofs * Tamper-proof logging of receipts, invoices, and contracts A municipal government could use blockchain to track infrastructure project budgets. Funds are allocated through a smart contract that releases payments based on verified completion stages, such as road paving or building inspections. Citizens can view project status and spending directly on a public interface. The World Bank and several African nations have explored blockchain in public finance management to increase transparency and reduce fraud in development aid and infrastructure projects. ## Environmental regulation and carbon markets Climate change mitigation requires reliable tracking of emissions, enforcement of environmental regulations, and management of carbon credits and offsets. Blockchain offers verifiable, decentralized infrastructure for environmental monitoring and sustainable finance. Applications include: * Tokenization of carbon credits and offsets * Transparent emissions tracking and registry management * Smart contracts for automatic compliance enforcement * Peer-to-peer carbon credit marketplaces * Verifiable impact measurement for green finance initiatives For example, an environmental agency could deploy IoT sensors at industrial facilities to measure emissions. These sensors send data to the blockchain via trusted oracles. If emissions exceed a permitted threshold, the smart contract triggers penalties or requires the company to purchase additional carbon credits. Blockchain also enables decentralized registries of carbon offsets where each credit is uniquely identified, traceable, and permanently recorded upon retirement. This prevents double counting and increases market integrity. Companies like IBM, Verra, and the Energy Web Foundation are working with governments to develop blockchain-based environmental monitoring and carbon trading platforms. ## Law enforcement and judicial systems Legal systems rely heavily on documentation, evidence integrity, and traceability of procedures. Blockchain enhances these functions by offering immutable storage of case files, chain-of-custody records, digital warrants, and procedural logs. Use cases for law enforcement and judiciary include: * Digital evidence management with time-stamped verification * Secure sharing of case files among police, prosecutors, and courts * Smart contracts to manage parole, bail conditions, or sentencing rules * Citizen portals for reporting, tracking complaints, or receiving summons * Automated fine collection and citation management For instance, digital surveillance footage, once verified and hashed, can be stored on a blockchain to prove authenticity and timestamp. A digital warrant issued by a magistrate can be recorded on-chain with access granted only to authorized enforcement officers. Countries such as China and India have piloted blockchain in court systems for evidence management, bail tracking, and smart legal document notarization. ## Intellectual property and public registries Governments maintain registries of intellectual property such as patents, copyrights, and trademarks. These records are often siloed, vulnerable to tampering, and slow to verify. Blockchain introduces a tamper-evident registry where creators can register and timestamp their works, and examiners can audit and validate claims transparently. Applications include: * On-chain registration of creative works and inventions * Smart contract licensing and royalty distribution * Open access to ownership history and litigation status * Cross-border IP collaboration with verifiable timelines A national IP office could offer a blockchain-based portal where authors, artists, and inventors register their work. Each registration is hashed and anchored on-chain, allowing for instant verification of submission time and ownership. Disputes are resolved based on the immutable history of claims and usage rights. WIPO and national agencies in South Korea, Australia, and the UAE have explored blockchain use in IP protection and licensing workflows. ## Transport, logistics, and infrastructure projects Public infrastructure and logistics services involve complex coordination between agencies, contractors, and stakeholders. Projects such as road construction, public transport networks, and airport expansions often face delays, cost overruns, and misreporting. Blockchain can be used to improve tracking, transparency, and accountability. Use cases include: * Supply chain tracking for construction materials * On-chain project milestones and performance records * Permitting and inspection logs with timestamped validations * Integration with GPS and IoT devices for fleet tracking A public works department could issue tenders on-chain and monitor the delivery of materials such as cement or steel using blockchain-enabled logistics. Each batch is recorded with origin, quantity, and delivery status. Payments are released based on delivery confirmation and project milestones verified by independent inspectors. Blockchain enables transparency in contractor payments, prevents procurement fraud, and builds citizen trust in public spending. ## Border control and customs Customs and immigration departments require accurate and secure exchange of data on travelers, cargo, and declarations. Blockchain can streamline cross-border operations by allowing trusted parties to access verified records, reduce paperwork, and speed up clearance processes. Use cases for blockchain in customs and immigration include: * Tokenized cargo manifests with on-chain declarations * Cross-border customs agreements using smart contracts * Shared traveler and immigration data between countries * Blockchain-based visa and travel permit registries For example, a shipment moving across multiple borders can be tracked on a blockchain where each customs authority verifies its passage and inspection. If all records are valid, the next border crossing is pre-cleared, speeding up transit and reducing administrative load. Organizations like the World Customs Organization and Singapore Customs are experimenting with blockchain-enabled trade facilitation tools. ## Emergency response and disaster relief In disaster scenarios, timely and transparent relief distribution is critical. Coordination among governments, NGOs, and local stakeholders requires real-time information and audit trails to prevent duplication, theft, or misuse of aid. Blockchain helps manage: * Beneficiary registration and entitlement verification * Transparent allocation of relief funds and supplies * Smart contracts for conditional disbursement based on verified need * Real-time dashboards for donors, agencies, and field workers Following a natural disaster, affected families could register their needs via mobile applications. Once verified, they receive digital vouchers or tokens that can be redeemed for food, shelter, or medicine. All transactions are recorded on-chain and visible to donors and government agencies for oversight. UNICEF and the World Food Programme have run blockchain pilots to deliver aid and track usage in refugee camps and disaster-affected regions. ## Archiving and public record preservation Governments are custodians of vast historical, legal, and administrative records—from legislative documents to census data. These archives must be preserved, authenticated, and accessible for public trust and institutional memory. Blockchain provides: * Permanent digital hashes of public records stored in distributed ledgers * Tamper-proof timestamping of original document versions * Long-term access policies through decentralized storage systems * Immutable audit trails of who accessed or altered a record For example, a national archive could hash and record every digital law or court ruling on-chain, preserving its authenticity even if the website or file system changes. Researchers and journalists could verify that the document is original and unaltered. Decentralized storage platforms such as IPFS can be integrated with blockchain to host the files, while the hashes and metadata remain permanently accessible and verifiable. ## Freedom of information and open data Transparency is a cornerstone of good governance. Many countries have right-to-information laws and open data platforms, but their effectiveness depends on the accuracy, availability, and credibility of published data. Blockchain can be used to: * Certify that public datasets are complete and unmodified * Record the origin and update history of government statistics * Enable citizen auditing of public expenditures, laws, and policies * Build APIs that return real-time, verified data to applications and dashboards For instance, a finance ministry could publish its annual budget data on-chain, including line items, departmental allocations, and disbursements. Journalists, researchers, and citizens can verify every update against the ledger, ensuring data integrity and institutional accountability. Blockchain enhances the transparency and reliability of open data while discouraging manipulation or concealment of information. ## Agricultural subsidies and supply chain transparency Agriculture is a vital sector in most economies and a key focus area for public policy. Governments often provide subsidies, crop insurance, procurement services, and disaster relief to farmers. However, these programs face challenges such as delayed disbursements, lack of transparency, and fraudulent claims. Blockchain can improve efficiency, trust, and traceability across agricultural value chains. Blockchain applications in agriculture include: * Digital farmer identity and land ownership verification * On-chain registration of subsidies and insurance policies * Smart contract-based payouts linked to weather or yield data * Transparent procurement tracking from farm to warehouse to market * Food traceability systems for quality assurance and export compliance For example, a state government could issue digital tokens representing fertilizer subsidies. Registered farmers receive these tokens in their wallets and redeem them at approved vendors. Every transaction is recorded on the blockchain, ensuring transparency, preventing duplication, and enabling data-driven policy reforms. Blockchain also supports agricultural cooperatives and marketplaces by tracking produce origin, quality, and payment history. This helps small farmers access better pricing and reduces losses due to middlemen or delayed payments. ## Public safety and emergency services Public safety agencies such as police, fire departments, and emergency medical responders manage sensitive data, operate in fast-changing environments, and require high coordination. Blockchain can enhance accountability, inter-agency coordination, and real-time access to critical data. Key use cases in public safety include: * Tamper-evident digital logs of incident reports and actions taken * Chain-of-custody tracking for evidence and forensic materials * Emergency call routing and escalation protocols using smart contracts * Identity verification for field responders and citizens * Blockchain-backed audit trails for use-of-force reporting or disciplinary cases Imagine a blockchain network that links police stations, ambulance services, and local hospitals. When a distress call is received, a smart contract triggers dispatch, logs each step of the response, and updates relevant stakeholders. Once an incident is closed, the record is sealed with timestamps and access rights based on role and jurisdiction. These systems create more accountability in high-stakes situations and reduce manual reporting burdens for frontline personnel. ## Defense procurement and military logistics Defense and security organizations handle complex procurement, maintenance, and logistics operations with high security requirements. The opacity and volume of these systems can lead to inefficiencies, overspending, or supply chain vulnerabilities. Blockchain offers traceability, automation, and integrity in defense operations. Blockchain in defense may include: * On-chain records of parts manufacturing, inspection, and certification * Digital defense contracts with milestone-based payments * Equipment lifecycle tracking and predictive maintenance triggers * Inter-agency coordination on classified logistics with permissioned access For instance, when procuring military-grade hardware, each component is recorded on a blockchain during production, testing, and delivery. If a fault is discovered later, the exact manufacturing batch and supplier can be traced, enabling faster recalls and accountability. Several defense agencies globally, including those in the United States and NATO members, have launched research programs on using blockchain for supply chain integrity, secure communications, and asset tracking. ## Public transportation and mobility platforms Transportation systems such as metro rail, buses, and bike-sharing schemes are often subsidized and managed by public authorities. These systems need secure ticketing, dynamic pricing, usage tracking, and intermodal coordination. Blockchain can support a unified digital layer for mobility services. Use cases for blockchain in transport include: * Multi-vendor smart ticketing systems with real-time settlement * Subsidy verification and fraud prevention in concession fares * Ride or pass ownership through NFTs or tokenized passes * Mobility-as-a-service (MaaS) platforms with shared incentives A city might implement a blockchain-based transport wallet where citizens hold ride credits, monthly passes, or tokens earned through eco-friendly behavior such as cycling or carpooling. These tokens are interoperable across bus, metro, and last-mile services, with automatic routing and fare calculations done via smart contracts. Projects in Sweden, Dubai, and Singapore have investigated blockchain-based digital mobility networks that integrate public and private transport operators under common governance rules. ## Government research funding and grants Research and innovation are central to national development, and governments allocate substantial funds to universities, startups, and independent labs. However, research funding mechanisms can suffer from opaque selection criteria, delayed disbursement, and limited visibility into project progress. Blockchain can enhance trust and efficiency by: * Registering funding calls, proposals, and reviews on-chain * Automating grant approval and release based on smart contracts * Tracking expenditure, milestones, and deliverables * Publishing research outcomes and peer reviews immutably Consider a national research foundation that operates a blockchain-based grant portal. Each grant call is published with criteria and evaluation workflows. Researchers submit proposals that are timestamped and assigned pseudonymous reviewers. Funding is disbursed in phases, triggered by milestone approvals and submission of verified outputs. Such a system improves fairness in selection, reduces administrative overhead, and increases the credibility of public-funded research. ## Utility billing and energy systems Public utilities such as electricity, water, and gas need accurate billing, meter data management, and fraud prevention. With the rise of decentralized energy generation, blockchain enables peer-to-peer energy trading, smart meter integration, and verifiable consumption history. Utility applications for blockchain include: * Smart metering and usage-based billing using oracles * Subsidy application and redemption via tokens * Tokenization of carbon credits or solar incentives * Settlement of cross-grid energy trades between households or municipalities A municipality could deploy solar panels on public buildings and track their energy output on-chain. Residents participate in a tokenized scheme where excess energy is rewarded and usage is billed automatically. All data is visible to regulators, auditors, and citizens via a public dashboard. Governments in Australia, Germany, and India have supported pilots involving blockchain-based metering, microgrids, and decentralized energy settlements. ## Immigration, refugee, and cross-border identity systems Migration and refugee movements present humanitarian and logistical challenges. Governments and international bodies require systems that respect privacy, provide legal identity, and support service delivery across borders. Blockchain enables secure, portable, and user-controlled identity frameworks. Use cases include: * Cross-border digital identity records linked to biometrics * Tamper-proof logs of visa issuance and immigration status * Health and vaccination records portable across countries * Aid and financial inclusion tools for displaced populations A refugee who loses their documents during displacement can access their blockchain-based digital ID to prove prior residency, vaccinations, or education. Aid organizations can use the ID to authenticate beneficiaries and deliver cash aid via digital wallets. The United Nations and NGOs have explored blockchain to issue portable identity credentials to stateless individuals, enabling access to healthcare, education, and mobility in host nations. ## Tourism, culture, and heritage preservation Tourism departments manage heritage sites, event access, and revenue collection. Cultural institutions face challenges in provenance, ticket fraud, and visitor data fragmentation. Blockchain can protect cultural assets and streamline tourism services. Applications include: * NFT-based access passes for museums and festivals * Traceable registries of historical artifact ownership * Smart contract distribution of tourism revenues among local communities * Visitor badges and loyalty points for frequent travelers For instance, a national heritage board could issue digital collectibles that double as entry passes for cultural events. These NFTs can include embedded discounts, local business tie-ins, or audio guides. Tourists build a verifiable on-chain record of site visits and contribute reviews or donations via the same platform. Projects in France, Japan, and Italy are exploring blockchain’s potential in digital tourism ecosystems. ## Cooperative governance and rural development Decentralized cooperatives, often supported by public grants, play a major role in agriculture, fisheries, housing, and credit in rural regions. Blockchain strengthens these cooperatives by providing digital infrastructure for governance, finance, and recordkeeping. Use cases include: * On-chain voting and decision-making for cooperative members * Transparent ledger of contributions, loans, and dividends * Smart contract enforcement of bylaws and dispute resolution * Integration with rural banking and microfinance institutions A dairy cooperative might use a blockchain-based app to track milk production, allocate shared costs, and distribute revenues. Members vote on investment proposals using digital tokens, and outcomes are instantly reflected on-chain for all to review. This fosters trust, financial inclusion, and digital governance in remote areas. ## Public libraries, open knowledge, and academic records Public libraries and national knowledge networks can use blockchain to preserve open access to books, documents, and academic work. Blockchain ensures that content is original, uncensored, and credited to the rightful author. Applications include: * Immutable digital records of publications and revisions * Peer-reviewed knowledge sharing with timestamped edits * Library card tokens that allow borrowing and community contributions * Royalty or grant flows to authors through smart contract licensing An open-source research portal can use blockchain to manage version control, prevent plagiarism, and reward contributors. Each contribution is hashed, logged, and acknowledged publicly, creating transparent academic incentives. Institutions such as MIT and research groups in the Netherlands have experimented with blockchain for open science, academic reputation, and public knowledge registries. ## Real estate development and zoning regulation Urban planning, land use control, and real estate development involve interdependent approvals from public bodies. Blockchain brings traceability and efficiency to the issuance of permits, zoning adjustments, and developer commitments. Use cases include: * Permit application workflows with digital signatures and time tracking * On-chain representation of zoning maps and development rights * Citizen dashboards for monitoring construction activity and grievances * Smart contracts that enforce escrow, impact fees, and inspection results When a developer applies for a building permit, the application is submitted on-chain with required documents and stakeholder endorsements. Inspection reports and approvals are digitally signed and linked. Once completed, the project’s regulatory compliance history is preserved forever, deterring misuse and improving oversight. Cities like Dubai and San Francisco have considered blockchain-based zoning and permitting platforms for their smart city initiatives. ## Interoperability between agencies and jurisdictions In public administration, most blockchain use cases require collaboration between multiple departments, ministries, or even sovereign governments. However, siloed digital infrastructures and incompatible data formats often hinder cooperation. Blockchain offers a shared infrastructure that can facilitate interoperability without requiring centralized control. Key interoperability scenarios include: * Cross-border data exchange for customs, immigration, and trade * Shared ledgers across central and local governments for budget and taxation * Legal and regulatory frameworks that enable multi-agency contract execution * Standards for exchanging verifiable credentials, certificates, and licenses A practical example involves a shared national digital ID system used by banks, tax departments, and health agencies. Each agency issues and verifies attributes (e.g., income status, citizenship, insurance coverage) on a blockchain ledger. Citizens share proofs without re-verifying data or completing repeated applications. To support such interoperability, governments must adopt common data schemas, define smart contract interfaces, and build cross-chain bridges where necessary. This requires strong collaboration between public sector IT teams, standards bodies, and regulatory authorities. ## Phased implementation roadmap for blockchain adoption Introducing blockchain into government operations requires a careful, phased approach. Blockchain projects impact multiple stakeholders and involve changes to legal processes, citizen interaction models, and back-office systems. A phased roadmap helps manage these complexities. ### Phase 1: Assessment and pilot * Identify high-impact use cases with limited integration requirements * Evaluate legal and regulatory constraints * Develop proof of concept with a focus on traceability or transparency * Use testnets or sandboxes for evaluation and learning ### Phase 2: Integration and scaling * Build production-grade blockchain infrastructure (public or permissioned) * Onboard multiple departments or agencies as network participants * Integrate with existing systems through middleware and APIs * Establish identity and access control frameworks ### Phase 3: Governance and interoperability * Create cross-agency governance boards for smart contract management * Define standards for data sharing, privacy, and key recovery * Enable interoperability with other blockchain networks or international systems ### Phase 4: Public engagement and citizen adoption * Launch mobile apps, dashboards, and portals for citizen participation * Offer self-sovereign digital identities and reusable credentials * Provide public education and feedback loops to improve adoption Each phase builds on the previous one, gradually replacing manual workflows with verifiable automation while preserving trust and accountability. ## Key technology components for public sector blockchain systems Deploying a blockchain solution for government services involves a number of supporting components, each of which must be secure, scalable, and legally compliant. * **Blockchain node infrastructure**: Public, permissioned, or hybrid networks operated by government bodies or certified entities * **Smart contracts**: Encoded logic for verification, disbursement, entitlement, or record updates * **Wallets and credentials**: Digital wallets for citizens, agencies, and employees with identity verification features * **APIs and oracles**: Integration with real-world data sources such as payment systems, biometrics, or sensors * **Monitoring and analytics**: Dashboards to track adoption, usage, and performance in real time * **Auditing tools**: Forensics, logging, and replay capabilities to verify decision trails and compliance * **Data protection layers**: Encryption, selective disclosure, and privacy-preserving computation These tools must be orchestrated within legal frameworks and designed with a user-first approach to ensure usability by both civil servants and citizens. ## Legal, regulatory, and data protection considerations Government use of blockchain must comply with laws around data protection, procurement, access to information, and administrative procedure. Every implementation should assess the legal context in areas such as: * **Data privacy laws**: Ensuring compliance with regulations such as GDPR, India’s DPDP Act, or HIPAA when storing personal data or identifiers * **Legal admissibility**: Determining whether blockchain entries can serve as evidence or official records under existing statutes * **Procurement frameworks**: Updating RFPs and contracts to include open-source protocols, smart contract audits, and long-term upgrade plans * **Sovereignty and hosting**: Ensuring blockchain nodes and digital infrastructure remain under national jurisdiction and are resilient to external attacks Data minimization, encryption, and proper consent models are critical when dealing with public registries, identity, health, or education data. Zero-knowledge proofs, selective disclosure, and verifiable credentials help meet these obligations without compromising decentralization. ## Capacity building for blockchain governance Beyond technology, successful blockchain deployment in the public sector requires investment in human capacity and institutional governance. Governments should build: * **Blockchain literacy among policymakers**: Training workshops, courses, and secondments for senior civil servants * **Technical teams**: In-house or contracted developers familiar with Solidity, Rust, Go, and smart contract security * **Audit and compliance units**: Capable of verifying on-chain logic, validating oracle data, and responding to system changes * **Citizen engagement programs**: Focused on digital literacy, wallet onboarding, and service access through mobile platforms Open government platforms can publish documentation, roadmaps, and source code to involve academia, civic tech, and citizen watchdogs in shaping policy and ensuring accountability. ## Monitoring, metrics, and key performance indicators To evaluate the impact of blockchain use in the public sector, projects must define and track KPIs aligned with policy goals, such as: * **Service delivery metrics**: Time saved, cost per transaction, uptime and error rates * **Transparency metrics**: Number of publicly auditable contracts, number of accesses to dashboards, citizen satisfaction * **Efficiency metrics**: Reduction in redundant processes, automation rate, decreased manual interventions * **Trust metrics**: Surveyed trust in service reliability, openness of procurement, complaint resolution rates * **Security and compliance metrics**: Number of incidents, vulnerabilities resolved, smart contract audit coverage Monitoring frameworks should publish regular updates to internal dashboards as well as public portals that demonstrate continuous improvement and performance. ## Examples of blockchain success stories in the public sector Across the globe, governments and public institutions are experimenting with blockchain to solve practical problems. Some noteworthy examples include: ### Estonia Estonia uses blockchain infrastructure to secure public records such as health data, identity registries, and judicial files. X-Road, Estonia’s national data exchange layer, integrates blockchain anchoring to detect tampering and ensure that data requests are auditable by citizens. ### Georgia The Republic of Georgia implemented a blockchain-based land registry in partnership with Bitfury. More than 1.5 million land titles are recorded immutably, reducing fraud and improving access to legal documentation. ### Colombia Colombia’s National Agency for Public Procurement (Colombia Compra Eficiente) piloted a blockchain-based procurement platform to reduce corruption, ensure transparency, and allow public scrutiny of contract awards. ### Dubai Dubai launched the “Dubai Blockchain Strategy” to become the first city fully powered by blockchain. The strategy includes paperless government services, smart visas, and business registration on blockchain infrastructure. ### Brazil The Brazilian tax authority implemented a blockchain platform to facilitate data exchange between customs and tax agencies, improving cross-border trade and reducing compliance complexity for exporters. These projects demonstrate that blockchain, when deployed thoughtfully, can deliver measurable improvements in service delivery, transparency, and operational resilience. ## Challenges and limitations Despite its promise, blockchain adoption in government comes with real-world limitations that must be considered: * **Technical complexity**: Integrating blockchain with legacy systems can be difficult, especially when internal IT teams lack experience * **Scalability and performance**: Public blockchains may struggle with high-throughput use cases such as real-time payments or micro-transactions * **Legal ambiguity**: Smart contracts may lack clear legal status or mechanisms for dispute resolution * **Resistance to change**: Bureaucratic inertia, internal politics, and job security concerns can delay adoption * **Security risks**: Misconfigured smart contracts, wallet mismanagement, and oracle manipulation can lead to data loss or unauthorized access Risk assessments and contingency planning should accompany every pilot. Incremental rollout, sandbox environments, and external audits help mitigate these risks while building institutional confidence. ## The future of blockchain in the public sector Blockchain represents a foundational shift in how governments can manage data, processes, and relationships with citizens. Over the next decade, we expect to see: * **Self-sovereign public identity**: Citizens controlling their identity credentials across borders, institutions, and private services * **Decentralized administrative platforms**: Ministries, cities, and international organizations coordinating over shared infrastructure * **Public digital assets**: Tokenization of land, licenses, permits, and carbon credits becoming standard practice * **Hybrid public-private service layers**: Nonprofits, banks, and startups interoperating with public infrastructure through APIs and open protocols * **Citizen-centric governance**: Transparent, participatory mechanisms embedded in software, from budgeting to dispute resolution file: ./content/docs/knowledge-bank/smart-contracts.mdx meta: { "title": "Smart contracts", "description": "Understanding smart contract development and best practices" } import { Callout } from "fumadocs-ui/components/callout"; import { Card } from "fumadocs-ui/components/card"; # Smart contracts Smart contracts are self-executing contracts with terms directly written into code. ## Core concepts
### Contract Structure * State variables * Functions * Events * Modifiers ### Contract Types * Standard contracts * Library contracts * Interface contracts * Proxy contracts
Blockchain has introduced a shift in how applications execute logic and manage data in decentralized environments. Two core components that enable this automation are smart contracts and chaincode. While the terminology varies depending on the platform, “smart contracts” on Ethereum and other EVM-based platforms, and “chaincode” on Hyperledger Fabric, the conceptual foundation is similar: encapsulating business logic in a secure, verifiable, and autonomous format.
Both serve as deterministic code that gets triggered by transactions, leading to changes in state or the execution of defined logic. These units of automation replace the need for centralized backend services or intermediaries, reducing operational costs and increasing transparency and efficiency. However, the differences in architecture, programming model, governance, and performance between public and permissioned networks have led to platform-specific design choices and development methodologies for these artifacts. ## Historical context and conceptual foundation The concept of smart contracts dates back to the 1990s, introduced by Nick Szabo. His definition was more theoretical, focused on creating digitally-enforced contracts that automatically execute when predefined conditions are met. At the time, there was no platform robust enough to implement such logic in a decentralized and tamper-proof environment.
This changed with the advent of Ethereum in 2015. Ethereum was the first blockchain platform designed from the ground up with smart contracts in mind. It introduced the Ethereum Virtual Machine (EVM), a fully isolated runtime environment where smart contracts could be deployed and executed in a decentralized and trustless way.
Chaincode emerged later as part of Hyperledger Fabric, a permissioned blockchain platform developed under the Linux Foundation’s Hyperledger project. Fabric was built with enterprise requirements in mind, such as access control, privacy, and modular consensus, making it suitable for supply chain, finance, government, and other regulated industries. Chaincode plays the same functional role as smart contracts but operates in a controlled and governed environment. ## Smart contracts in Ethereum Ethereum smart contracts are programs written primarily in Solidity, a statically typed, contract-oriented language inspired by JavaScript and C++. These contracts are compiled into bytecode, which runs on the Ethereum Virtual Machine (EVM). Each deployed contract is stored at a specific address and maintains its own storage, execution logic, and interface functions.
A smart contract in Ethereum is deployed through a transaction containing its compiled bytecode. Once deployed, the contract becomes immutable, its logic cannot be changed unless an upgrade pattern, like proxy contracts, is used.
Smart contracts are triggered when a user or another contract sends a transaction to the contract’s address. The transaction includes a function selector (derived from the function signature) and the required parameters encoded using the Ethereum ABI (Application Binary Interface). When executed, the EVM processes the contract logic deterministically on every full node across the network. Key constructs inside a smart contract include: * msg.sender: The address of the account or contract that called the function * msg.value: Amount of Ether sent with the call * block.timestamp: The timestamp of the current block * storage: A persistent key-value store associated with the contract * memory: A temporary, volatile area used during execution Contracts can hold Ether, interact with other contracts, emit events, perform mathematical computations, and enforce access control using modifiers. ## Chaincode in Hyperledger Fabric Chaincode in Hyperledger Fabric is the equivalent of a smart contract but designed for a permissioned, enterprise environment. It is commonly written in Go, but support is also available for Java and Node.js. Instead of being compiled to bytecode for a virtual machine, chaincode runs as a Docker container, isolated from the peer nodes.
The chaincode lifecycle in Fabric is significantly more structured and involves organizational governance. Here’s how it works: 1. Package: The chaincode is bundled into a .tar.gz archive that includes the source code and metadata. 2. Install: This package is installed on endorsing peers. 3. Approve: Each participating organization in the consortium must approve the chaincode definition. 4. Commit: After approval, the definition is committed to the channel.
The primary interface includes three functions: * Init: Invoked when the chaincode is first deployed or upgraded. * Invoke: Handles logic execution for transaction proposals. * Query: Performs data reads without altering the ledger. Unlike Ethereum, the state is not stored directly on the blockchain but maintained in a key-value world state database like LevelDB or CouchDB. Each peer maintains its own copy of this world state, while the blockchain itself acts as an immutable log of all transactions. ## Execution models: Ethereum vs. Fabric One of the most fundamental differences lies in how smart contracts and chaincode are executed and validated. In Ethereum, every transaction is: * Sent to the network * Mined into a block by a validator * Executed by every node on the network to ensure consistency * Recorded in the blockchain
This is a replicated state machine approach. All full nodes execute the transaction and reach consensus on the outcome. In Hyperledger Fabric, the process is more modular: * Execution: Proposals are simulated by endorsing peers. * Ordering: The endorsed transactions are submitted to an ordering service. * Validation: Committing peers validate the endorsements before updating the state. This execute-order-validate model allows Fabric to achieve high throughput and low latency while maintaining governance and security. It also enables confidential transactions using private data collections and organizational policies. ## Smart contract storage and gas economy In Ethereum, smart contracts operate under a tightly resource-constrained environment. Every operation within a contract consumes gas, which is paid in Ether. Gas acts as a safeguard against misuse or infinite loops and compensates miners or validators for the computation performed.
This makes storage optimization a major design concern. On-chain storage is expensive, so developers often use lean data structures: * mapping(address => uint) for lookup tables * Arrays for indexed access (though costly when large) * bytes32 hashes to reference off-chain content (like IPFS data) * Event logs to emit data retrievable by off-chain services without being stored on-chain Additionally, there is no built-in concept of relational data or SQL-like queries. Developers must implement their own indexing, filtering, and pagination logic, or use off-chain services like The Graph to index contract events and expose a GraphQL API.
Due to Ethereum’s immutable nature, upgrading a contract means deploying a new version. Developers implement upgradeable contract patterns, such as: * Proxy pattern: Separate storage from logic. The proxy contract forwards calls to the logic contract. * EIP-1967 and EIP-1822: Standard layouts for upgradeable contracts * UUPS (Universal Upgradeable Proxy Standard): A minimal and efficient upgrade pattern These patterns allow the contract logic to be changed without losing state. However, they introduce complexity and must be handled with precision to avoid bricking the contract or introducing security vulnerabilities. ## Chaincode storage and private data In Fabric, the storage model is more flexible and familiar for enterprise developers. The world state is a database, typically: * LevelDB: Default key-value store, fast and lightweight. * CouchDB: Optional document-oriented store, supports complex queries. Each key in the world state maps to a value (usually a JSON document). Transactions that change the state are recorded in blocks on the ledger but the current state is stored separately. This model separates state from the immutable transaction log.
Unlike Ethereum, Fabric allows for private data collections (PDCs). These are used when some data should only be visible to a subset of organizations in the consortium. Instead of storing sensitive data on the ledger, Fabric stores a hash of the data and shares the actual payload directly between authorized peers. This enables compliance with privacy regulations and use cases such as: * Trade finance (sharing sensitive invoice data) * Pharmaceutical supply chains (batch data confidentiality) * Government and inter-agency workflows Chaincode can access both public state and private collections using the Fabric SDK or the GetPrivateData API. This modularity gives developers fine-grained control over data visibility and trust. ## Access control and authorization Security and permissioning differ significantly between public and private blockchains. Ethereum contracts are public by default. Anyone can call a function unless explicitly restricted. Developers implement access control using: * Modifiers (e.g., onlyOwner) * Role-based access (hasRole in OpenZeppelin’s AccessControl) * Multi-signature schemes for administrative operations * ecrecover to verify signatures and off-chain identities Fabric uses MSP (Membership Service Providers) to manage identities. Each participant has an X.509 certificate issued by a recognized CA (Certificate Authority). Access control is enforced at several levels: * Chaincode logic can inspect the client’s identity using APIs like GetCreator() or attribute-based logic. * Channel configuration defines which organizations have access to which data and chaincode. * Endorsement policies define which organizations must sign off on a transaction for it to be considered valid. This makes Fabric highly suitable for inter-organization workflows, supply chains, and regulated environments where access must be restricted and auditable. ## Language support and developer experience The choice of programming language and development tools is another key distinction. Ethereum: * Primary language: Solidity * Others: Vyper (Python-inspired), Huff (low-level), Fe (experimental) * Tooling: Hardhat, Foundry, Truffle, Remix * Testing frameworks: Mocha, Chai, Waffle * Deployment: Infura, Alchemy, custom RPC nodes Smart contract development includes writing Solidity code, compiling with the Solidity compiler (solc), and testing with local testnets like Ganache or Hardhat’s in-memory network. Advanced debugging, gas estimation, stack tracing, and coverage analysis are critical. Hyperledger Fabric: * Language: Go (recommended), JavaScript (Node.js), Java * Tooling: Fabric SDKs for Node.js, Java, Go * Development: peer lifecycle CLI, Docker-based containerization, Fabric CA for identity issuance * Local deployment: Using Fabric samples or Docker Compose environments Fabric provides structured sample chaincode templates and encourages modular design. Testing is typically performed using scripts that invoke chaincode through the SDK or CLI, simulating proposals and observing ledger updates.
In contrast to Ethereum, Fabric’s containerized environment allows for more traditional application development practices such as version control, unit testing, and CI/CD pipelines. ## Event handling and off-chain integration Smart contracts and chaincode both support emitting events, which are crucial for off-chain applications to track blockchain activity. In Ethereum, contracts use the event keyword and the EVM logs these emissions. These logs are: * Indexed by topics (event signature and arguments) * Accessible via JSON-RPC (eth\_getLogs) * Frequently consumed by tools like The Graph, Moralis, or custom Node.js listeners using Web3.js or Ethers.js In Fabric, chaincode emits events using the SetEvent API. These events are embedded in the transaction block and picked up by clients subscribed to the peer’s event services. Applications can register for block events, filtered events, or chaincode-specific events using the Fabric SDK.
This event-driven model is essential for building responsive frontends, notification systems, and external integrations (e.g., triggering a payment, updating ERP records, or syncing with cloud services). ## Inter-contract communication and composability In Ethereum, smart contracts can interact with one another using direct function calls or delegate calls. This enables composability, the property that allows multiple contracts to be used together like building blocks. Popular DeFi protocols (like Yearn, Aave, and Compound) rely heavily on this feature. For example: * A staking contract might call a reward distribution contract * A DEX aggregator might route trades through multiple liquidity pools * A governance contract might control upgrades to other contracts However, care must be taken with reentrancy, gas limits, and fallback behaviors. Contracts should implement reentrancy guards and adhere to the “checks-effects-interactions” pattern.
Fabric does not support the same kind of composability because of its endorsement model and modular design. However, chaincode can still invoke other chaincodes via the InvokeChaincode function. This enables modular architecture where different chaincodes handle asset types, regulatory validation, or cross-channel data queries. ## Governance and version management Governance refers to the mechanisms used to control, upgrade, and manage access to contracts or chaincode in a blockchain network. In Ethereum, governance is often implemented at the application level, since the network itself is public and decentralized. Developers of decentralized applications (dApps) must build their own logic for: * Administrator roles * Multi-signature control * DAO (Decentralized Autonomous Organization) structures for on-chain voting * Time-locked functions and upgrade proposals For example, a DeFi protocol may use a governance token that allows holders to propose and vote on upgrades to interest rate models or reserve factors. These votes trigger execution of functions in a “Governor” contract, which then calls the upgradable logic components. Governance becomes an intrinsic part of the protocol’s trust model.
Hyperledger Fabric takes a different approach. Governance is built into the platform: * Only authorized members of the consortium can install or approve chaincode * Channel configurations define organizational privileges * Chaincode upgrades require unanimous or majority approval, depending on the endorsement policy * Identity revocation and certificate expiration are centrally managed Because Fabric is designed for permissioned consortia, every upgrade, channel change, or access configuration involves signed transactions from member organizations. This makes Fabric highly auditable and controlled, essential for enterprise-grade applications where legal compliance and operational risk are non-negotiable. ## Performance and scalability Smart contracts and chaincode differ significantly in performance, throughput, and scalability. Ethereum, operating as a public blockchain, must optimize for decentralization and trust minimization. This limits throughput to a few dozen TPS (transactions per second) on the base layer. Although Ethereum 2.0 and layer 2 solutions (like Optimism, Arbitrum, zkSync) have increased capacity through rollups and sidechains, the base layer remains a bottleneck for compute-heavy logic.
Gas fees also influence scalability. During peak periods, gas prices can spike, making contract interactions prohibitively expensive for users. This pushes developers to optimize logic, reduce storage use, and batch operations to minimize user costs.
Hyperledger Fabric, by design, separates execution from consensus. It can achieve hundreds to thousands of TPS depending on the hardware, network configuration, and endorsement complexity. Since all participants are known and authenticated, Fabric eliminates the need for mining or staking, reducing overhead. Key scalability factors include: * Number of peers and organizations * Complexity of endorsement policies * Volume of reads and writes per transaction * Use of private data collections Fabric can horizontally scale by splitting data across channels, independent ledgers with their own policies and chaincode. This allows one network to serve multiple business units or use cases in parallel. ## Auditing and traceability Smart contracts provide transparency because all interactions and state changes are visible on the blockchain. This is a double-edged sword. While it improves accountability, it also exposes sensitive logic and data. To mitigate this, developers use techniques like: * Abstracting logic behind proxies * Emitting only hashed or obfuscated data * Encrypting off-chain payloads and linking via content hashes Ethereum’s public nature is useful for use cases like: * Verifying ownership (NFTs) * Proving event occurrence (e.g., time of creation) * Demonstrating fairness in auctions or gaming Tools like Etherscan, Tenderly, and The Graph enhance auditability by providing indexed access to contract history, call traces, and error diagnostics.
Fabric provides native auditing capabilities tailored to enterprises. Each block contains a full cryptographic record of transactions, signed by the submitter and validated by the network. Logs can be exported to SIEM systems, fed into compliance dashboards, or attached to legal evidence trails.
Moreover, private data collections in Fabric allow organizations to prove data existence or perform zero-knowledge proofs without revealing raw data. This capability is invaluable for industries like: * Pharmaceuticals (e.g., batch integrity) * Trade finance (e.g., invoice fraud prevention) * Government (e.g., tamper-proof registries) ## Real-world use cases Both smart contracts and chaincode have seen wide adoption, but in different domains: Ethereum smart contracts * DeFi: Lending (Aave), AMMs (Uniswap), stablecoins (DAI) * NFTs: ERC-721 and ERC-1155 used in marketplaces like OpenSea * Gaming: On-chain assets and play-to-earn mechanics (Axie Infinity) * DAOs: Governance via tokenized voting * Identity: Soulbound tokens and decentralized identifiers These applications benefit from Ethereum’s global accessibility, network effects, and liquidity. However, they face limitations on speed, privacy, and cost. Fabric chaincode * Supply chain: Tracking agriculture, vaccines, mining products * Finance: Cross-border payments, factoring, CBDCs * Government: Land registry, voting, customs compliance * Health care: Clinical trials, pharma cold chain, patient consent * Insurance: Fraud prevention, parametric claims These use cases prioritize privacy, trust, auditability, and control. They are often implemented as B2B consortia with legal agreements backing the chain. Developer challenges and solutions Developing smart contracts is intellectually rigorous and security-critical. Common challenges include: * Unintended logic bugs (e.g., integer overflow, reentrancy) * Upgrade complexity * Gas estimation and limits * Eventual consistency of cross-contract calls To address these, best practices include: * Using tested libraries like OpenZeppelin * Auditing with tools like MythX, Slither, and Certora * Writing extensive test cases and simulations * Using static analyzers and symbolic execution tools Chaincode developers face different hurdles: * Understanding the Fabric lifecycle and endorsement policies * Designing for modularity across organizations * Managing certificate-based identities and wallets * Setting up dev environments with Docker and CA nodes Fabric provides starter kits, test networks, and sample chaincode to simplify onboarding. Larger projects benefit from using CI/CD pipelines, Helm charts, Kubernetes orchestration, and secrets management for production deployments. ## Interoperability and cross-chain functionality As blockchain ecosystems diversify, interoperability is becoming a crucial requirement. Smart contracts and chaincode must increasingly interact with systems beyond their native network, whether that’s another blockchain, a legacy ERP system, or a cloud-based analytics engine. Ethereum and cross-chain interactions Smart contracts on Ethereum can’t directly interact with other blockchains or external systems. To bridge this gap, developers rely on: * Oracles (e.g., Chainlink, Band Protocol): These bring external data onto the blockchain. For example, fetching off-chain asset prices, weather information, or compliance results. * Bridges: Used to transfer tokens and data between chains (e.g., Ethereum, Polygon). This allows liquidity movement and contract invocation across chains. * Relayers and Message Passing Protocols: Protocols like LayerZero, Axelar, or Wormhole enable generic message-passing between smart contracts deployed on different blockchains. However, these tools introduce new attack surfaces. Oracle manipulation (e.g., price feed exploits) and bridge vulnerabilities (e.g., reentrancy in token wrapping contracts) have led to several high-profile exploits in recent years. To mitigate risk: * Use decentralized oracles with reputation models * Implement fail-safes and kill switches in contracts * Design time-locks for sensitive operations * Use multi-signature schemes for bridge control Fabric and system integration In contrast, Fabric is designed from the outset to be interoperable with enterprise IT systems. Chaincode interacts with: * Client applications through SDKs that can relay events, fetch ledger data, and trigger invokes * External databases or APIs through intermediary integration layers * IoT networks feeding real-world data for automation (e.g., temperature sensors in pharma supply chain) Furthermore, Fabric supports Chaincode-as-an-External-Service (CCaaS). This allows developers to write chaincode in any language and run it outside of the Fabric peer container. It opens the door to integrating with services like: * Payment gateways * Identity verification systems * Cloud AI inference engines * Enterprise databases (e.g., Oracle, SQL Server) Integration patterns often include: * Kafka streams or RabbitMQ for event-driven flows * RESTful APIs with JWT tokens or OAuth for user authentication * Hash-based proof mechanisms for verifiable claims This flexibility is ideal for industries where blockchain is not a replacement, but a layer of integrity and auditability within a broader digital architecture. ## Legal and compliance considerations Smart contracts and chaincode carry real-world implications. As they increasingly encode legal agreements, regulatory frameworks are evolving to catch up. Smart contracts can: * Represent enforceable contracts (e.g., escrow logic for marketplaces) * Trigger financial transactions or settlements * Record legal rights (e.g., ownership of an NFT or real-world asset) Challenges include: * Immutability: Once deployed, a contract may be impossible to change, even if laws or user needs evolve. * Jurisdiction: Ethereum nodes operate globally, but disputes are governed by national laws. * Dispute resolution: There is no inherent mechanism for arbitration or human override in most public chain contracts. Legal engineers are exploring hybrid contracts, where legal language and smart contract logic are linked. Tools like OpenLaw, Clause.io, and Accord Project attempt to bridge legal prose and executable code. Efforts are also underway to formalize smart contract legality. For instance: * EU’s MiCA regulation outlines requirements for crypto-asset service providers * UK Law Commission recognizes smart contracts as enforceable under existing contract law * The UNIDROIT project on digital assets and private law includes smart contract frameworks Chaincode and compliance Fabric, being permissioned, offers more compliance-aligned features: * Identity and certificate traceability * Role-based access control * Confidential data sharing * GDPR-aligned data deletion via off-chain referencing * Regulatory reporting through block event logs This makes Fabric well-suited for: * Regulated industries like banking, insurance, pharmaceuticals * Governments requiring high transparency and control * Auditable workflow tracking (e.g., customs clearance, tax collection) In many deployments, smart legal clauses are enforced via chaincode, while audit trails and logs are integrated with compliance reporting tools, reducing manual oversight and regulatory risk. ## Security practices and threat models Security in blockchain is binary, you’re either secure or exploited. The cost of failure is high, especially when code is immutable and value is at stake. Thus, security architecture is a fundamental concern for both smart contracts and chaincode. ## Ethereum smart contract security Risks include: * Reentrancy: Attackers reenter the contract before state updates * Integer overflow/underflow: Before Solidity 0.8.x, arithmetic bugs caused major losses * Access control flaws: Misconfigured admin logic * Front-running: Transaction order manipulation on public mempools * Flash loan exploits: Temporary capital used to manipulate or drain funds Security practices: * Use established libraries (e.g., OpenZeppelin) * Adopt design patterns like: * Checks-Effects-Interactions * Pull over Push payments * Guarded fallback functions * Write extensive unit and integration tests * Conduct formal verification for critical logic * Use static and dynamic analysis tools (MythX, Slither, Echidna) Auditing firms such as Trail of Bits, Certik, and OpenZeppelin are often engaged before mainnet deployment. ## Chaincode security Chaincode operates in a more trusted and controlled environment but is not immune to risks: * Logic bugs (e.g., flawed endorsement conditions) * Data leakage via logs or improper use of private collections * Identity spoofing if MSP or CA is compromised * Insufficient validation of inputs * Chaincode-to-chaincode access abuse Security controls include: * Certificate revocation and renewal mechanisms * Endorsement and validation policies * TLS-secured communication between peers and clients * Audit logging and block-level integrity proofs * Isolated container execution for chaincode logic Organizations often deploy Fabric in hardened Kubernetes clusters with firewalls, DDoS protection, and intrusion detection systems to defend the full stack. ## Enterprise adoption strategies The path to adopting blockchain solutions differs significantly based on whether an organization builds with public smart contracts or private chaincode. Each comes with distinct architectural choices, legal implications, and business models. Public blockchain adoption with smart contracts Organizations building on Ethereum or other public blockchains often aim to: * Tap into public liquidity and composability (e.g., DeFi or tokenized assets) * Establish transparent and decentralized infrastructure for services like identity, media, or decentralized storage * Implement open innovation models, such as incentivized networks and community-owned protocols Adoption journey: 1. Prototype with testnets like Goerli or Sepolia using frameworks like Hardhat or Foundry 2. Deploy contracts on mainnet or L2 chains (Polygon, Arbitrum, Base) 3. Integrate frontends with wallet connectors (e.g., MetaMask, WalletConnect) 4. Secure through audits and bug bounty programs 5. Onboard users with token incentives, governance rights, or NFT rewards
Regulatory risks, gas cost volatility, and UX friction remain barriers. However, the community-driven innovation and developer tool maturity in Ethereum’s ecosystem make it the preferred platform for open financial and digital ecosystems. ## Enterprise blockchain adoption with Fabric chaincode Private consortiums adopting Fabric begin by identifying multi-party workflows that require: * Trusted execution across organizational boundaries * Verifiable audit trails * Fine-grained access control * Integration with legacy systems (ERP, CRM, payment rails) Adoption journey: 1. Define the consortium: Roles, data owners, regulators, service providers 2. Design the network: Number of peers, channels, ordering nodes 3. Develop chaincode in Go or Node.js for domain-specific workflows 4. Configure MSPs, CAs, and identities for each organization 5. Launch pilot networks on local or cloud infrastructure 6. Scale deployment to production with orchestration, monitoring, and compliance processes
Industries like logistics, healthcare, government, and finance are actively deploying Fabric-based networks due to its modular, governed, and privacy-preserving design. ## Trends shaping the future Smart contracts and chaincode are evolving rapidly in response to both technical innovation and market demand. The following trends are shaping the future of blockchain development and deployment: 1. Zero-knowledge proofs (ZKPs) Smart contracts are incorporating zk-SNARKs and zk-STARKs for privacy-preserving computation. Use cases include: * Private voting (e.g., MACI) * Anonymous identity (e.g., Semaphore, zkLogin) * Scalable L2 rollups with zero-knowledge validity proofs (zkSync, Scroll, Polygon zkEVM) Fabric is also exploring ZKP integration through custom chaincode modules that validate off-chain assertions without revealing underlying data. 2. Account abstraction Ethereum is transitioning toward account abstraction (EIP-4337), allowing smart contracts to act as user wallets. This will enable: * Gasless transactions (sponsored by dApps) * Biometric or social login * Session keys and programmable recovery It transforms the UX of smart contract interaction and lowers the barrier to Web3 adoption for non-technical users. 3. Tokenization of real-world assets Both smart contracts and chaincode are powering the tokenization of assets: * Real estate, commodities, bonds, and even invoices * On-chain trading, settlement, and collateralization * Compliance with local regulations via role-based access and KYC integration Platforms like SettleMint, ConsenSys Codefi, and R3 Corda are at the forefront of building asset tokenization infrastructure using these paradigms. 4. CBDCs and digital cash Central banks are exploring digital currencies built on smart contracts or chaincode. Examples: * Ethereum-based pilots (e.g., Banque de France, MAS) * Fabric-based implementations (e.g., Project Bakong in Cambodia) * Interbank settlement using private blockchains (e.g., Jasper-Ubin, mBridge) These systems use programmable logic for issuance, circulation control, compliance, and analytics. 5. Decentralized identity and verifiable credentials Smart contracts are increasingly tied to DIDs and VCs: * Establish on-chain identifiers * Issue credentials via trusted institutions * Validate claims without revealing user data (e.g., zero-knowledge credentials) Fabric supports similar models using attribute-based certificates and private data collections, making it ideal for enterprise-grade identity networks. file: ./content/docs/knowledge-bank/solidity.mdx meta: { "title": "Solidity programming", "description": "Guide to Solidity smart contract development" } import { Callout } from "fumadocs-ui/components/callout"; import { Card } from "fumadocs-ui/components/card"; import { Tabs, Tab } from "fumadocs-ui/components/ui/tabs"; ## Introduction to Solidity Solidity is the primary programming language used for writing smart contracts on the Ethereum blockchain and other EVM-compatible platforms. It is a statically typed, contract-oriented language influenced by JavaScript, Python, and C++. Solidity enables developers to encode business logic and digital agreements directly onto the blockchain in the form of executable contracts. Solidity compiles into bytecode that runs on the Ethereum Virtual Machine. Each deployed contract becomes part of the blockchain's permanent history and can interact with users, other contracts, or itself based on its defined functions and data structures. The language supports inheritance, libraries, user-defined types, event emission, and cryptographic primitives. ## The Ethereum Virtual Machine Before diving into Solidity syntax and logic, it is crucial to understand the execution environment. Solidity contracts run on the Ethereum Virtual Machine, which is a sandboxed runtime capable of executing bytecode deterministically across all Ethereum nodes. The EVM has access to the blockchain’s current state and can modify it as part of transaction execution. The EVM operates on a stack-based architecture with its own instruction set. Developers interact with it indirectly through high-level code written in Solidity. The EVM is responsible for managing account balances, contract storage, and gas usage. Each operation within a contract costs a specific amount of gas and transactions must supply a sufficient gas limit to execute successfully. ## Contract Structure A Solidity smart contract starts with a version pragma to define the compiler version. This is followed by imports, state variable declarations, function definitions, events, modifiers, and any supporting types. The structure must be clear and organized to ensure maintainability and readability. Here is a basic example of a Solidity contract: ```solidity // SPDX-License-Identifier: MIT pragma solidity ^0.8.0; contract HelloWorld { string public message; constructor(string memory initMessage) { message = initMessage; } function updateMessage(string memory newMessage) public { message = newMessage; } } ``` This contract demonstrates core concepts such as constructor initialization, public state variables, and transaction-triggered updates. Once deployed, this contract can store and retrieve a message on-chain and allow users to update it. ## Data Types in Solidity Solidity offers a range of data types to handle values. These include primitive types such as integers, booleans, and addresses, as well as complex structures like arrays, mappings, structs, and enums. Memory and storage handling is critical since the location of data impacts gas usage and state persistence. The basic types include the following **Boolean** Used to store true or false values. It consumes minimal storage and is commonly used for conditions and flags. **Integer** Solidity provides signed and unsigned integers with widths ranging from 8 to 256 bits. Integer overflow was a critical issue prior to version 0.8.x, which now has built-in overflow checks. **Address** The address type holds Ethereum addresses. It includes functions such as transfer, send, and call to interact with other accounts or contracts. **String and Bytes** Strings are dynamically sized UTF-8 sequences. Bytes can be fixed or dynamic in size and are used for efficient binary data storage. **Arrays** Arrays can be fixed or dynamic and support indexing. They can hold any type including other arrays or structs. **Mappings** Mappings are hash tables that associate keys with values. They are particularly efficient for lookups and are widely used for token balances or permissions. **Structs and Enums** Structs group multiple fields under a single type. Enums define a restricted set of named values and are useful for state machines and access modes. ```solidity struct Product { string name; uint price; bool available; } enum Status { Pending, Shipped, Delivered } ``` Understanding these types and their appropriate use cases is essential for writing efficient and secure smart contracts. ## Functions and Visibility Functions are the building blocks of a Solidity smart contract. They define the logic that interacts with and modifies the contract’s state. A function can be called internally by other functions or externally via transactions and off-chain calls. Every function has a signature that may include arguments, return values, visibility specifiers, mutability specifiers, and modifiers. Solidity supports multiple visibility levels to control access to functions and variables. **Public** Functions and variables marked as public can be accessed from both inside and outside the contract. Solidity automatically creates a getter method for public state variables. **Private** Only visible within the contract that defines them. Private functions and variables are not accessible by derived contracts. **Internal** Accessible within the contract and by contracts that inherit from it. Internal visibility allows reuse through inheritance but prevents access by external actors. **External** Callable only from outside the contract. External functions are optimized for gas and used for API-like interfaces that interact with users or other contracts. ```solidity contract AccessExample { string internal name; function setName(string memory newName) public { name = newName; } function getName() external view returns (string memory) { return name; } } ``` ## Function Modifiers Modifiers are custom logic wrappers used to change the behavior of functions. They are typically used for access control, validation, or logging. A modifier can execute code before or after the target function runs and uses the underscore character as a placeholder for the function body. Common use cases include role-based access, locking mechanisms, and input validations. ```solidity modifier onlyOwner() { require(msg.sender == owner, "Not authorized"); _; } function updateSettings() public onlyOwner { // Only owner can perform this action } ``` Modifiers make contracts easier to read and maintain by isolating repetitive checks or preconditions. ## Memory vs Storage Solidity uses two main locations for data: memory and storage. Choosing the correct location is important for both performance and correctness. **Storage** Storage variables persist on-chain and retain their values between transactions. They are more expensive to use and are associated with the contract's permanent state. **Memory** Memory variables exist only during function execution. They are cheaper and are reset after each external call or function return. Function arguments of reference types like arrays, structs, and strings must explicitly declare whether they are stored in memory or storage. ```solidity function setMessage(string memory _msg) public { message = _msg; } ``` Local variables should use memory unless they need to persist across function calls. Operations on storage references can unexpectedly modify contract state if not handled correctly. ## Constructors and Initialization Solidity contracts support constructors to initialize state variables during deployment. A constructor is defined using the keyword `constructor` and can accept parameters. It is called once and only during deployment. ```solidity contract Token { string public name; constructor(string memory _name) { name = _name; } } ``` If no constructor is defined, Solidity provides a default one. Constructors are useful for passing values such as token names, owner addresses, or initial configurations. ## Events and Logging Solidity provides events for emitting logs from contracts. Events allow contracts to communicate with the outside world by triggering logs that can be captured by off-chain applications or indexed by external services. Events are declared with the `event` keyword and triggered with the `emit` statement. ```solidity event Transfer(address indexed from, address indexed to, uint amount); function transfer(address to, uint amount) public { balances[msg.sender] -= amount; balances[to] += amount; emit Transfer(msg.sender, to, amount); } ``` Indexed parameters allow external applications to filter events efficiently. Event logs are stored in the transaction receipt and are not accessible from within contracts. ## Error Handling and Assertions Solidity offers several mechanisms to handle errors and enforce correctness. **Require** Checks for valid conditions and reverts with a message if the condition fails. It refunds unused gas and is typically used for input validation and access control. **Revert** Explicitly causes a failure and reverts all changes. It is used to signal errors deeper in the call stack or to create custom error messages. **Assert** Used to check internal consistency and invariants. It consumes all remaining gas and is usually reserved for cases that should never fail unless there is a bug. ```solidity function withdraw(uint amount) public { require(balance[msg.sender] >= amount, "Insufficient funds"); balance[msg.sender] -= amount; payable(msg.sender).transfer(amount); } ``` Proper error handling improves user experience and guards against contract misuse. ## Inheritance and Contract Composition Solidity supports single and multiple inheritance, allowing contracts to inherit state variables and functions from one or more base contracts. This enables reuse of code, modular design, and extensibility of functionality. A derived contract can override functions from a base contract and use the `super` keyword to reference parent implementations. This pattern is widely used in frameworks like OpenZeppelin where base contracts implement common features such as ownership, pausability, or token standards. ```solidity contract Base { function greet() public pure virtual returns (string memory) { return "Hello from Base"; } } contract Derived is Base { function greet() public pure override returns (string memory) { return "Hello from Derived"; } } ``` The `virtual` keyword must be used on base functions that are intended to be overridden, and the `override` keyword must be declared on derived functions to ensure compatibility. ## Abstract Contracts An abstract contract is one that contains at least one function without an implementation. These contracts cannot be deployed directly and are intended to serve as base definitions that must be extended by child contracts. Abstract contracts define reusable logic and interfaces for complex systems. They enforce structure while allowing customization in derived implementations. ```solidity abstract contract Account { function deposit() public virtual; } contract BankAccount is Account { function deposit() public override { // Implementation } } ``` Abstract contracts are particularly useful when designing modular applications with interchangeable components. ## Interfaces in Solidity Interfaces are similar to abstract contracts but with stricter rules. They define function signatures without implementations and cannot include state variables, constructors, or non-external functions. Interfaces are commonly used to interact with external contracts, such as ERC20 or ERC721 tokens. They allow contracts to call functions on other contracts without needing the full source code. ```solidity interface IERC20 { function totalSupply() external view returns (uint); function transfer(address to, uint amount) external returns (bool); } ``` Any contract that implements the interface must provide concrete implementations of the defined functions. Interfaces enable modularity, upgradeability, and protocol compatibility. ## Libraries and Code Reuse Solidity provides libraries as a way to organize and reuse logic without maintaining state. Libraries can contain reusable functions that operate on primitive types or user-defined structs. They are deployed once and linked to other contracts either statically or dynamically. Stateless libraries reduce code duplication and optimize for gas by sharing logic across contracts. Solidity allows both internal and external library calls, with `using for` syntax enabling method chaining on types. ```solidity library Math { function add(uint a, uint b) internal pure returns (uint) { return a + b; } } contract Calculator { using Math for uint; function compute(uint x, uint y) public pure returns (uint) { return x.add(y); } } ``` Libraries are essential in building secure and efficient systems. Popular libraries include SafeMath, Address, Strings, and EnumerableSet from OpenZeppelin. ## Contract-to-Contract Interaction Solidity contracts can interact with other contracts through their interfaces or direct references. This allows building composable systems, delegating functionality, or creating dependency chains. There are three primary methods to interact with contracts: **Direct Instantiation** The contract is deployed and its address is used to create an instance in another contract. **Interfaces** An interface is defined for the external contract and used to make safe calls. **Low-level Calls** Functions like `address.call`, `delegatecall`, and `staticcall` provide low-level access but require caution due to lack of type safety. ```solidity interface IExternal { function getValue() external view returns (uint); } contract Caller { function fetch(address target) public view returns (uint) { IExternal ext = IExternal(target); return ext.getValue(); } } ``` Care must be taken to handle failed calls, manage gas, and validate external data. Contract interactions are powerful but must be audited for reentrancy, access control, and unexpected behaviors. ## Gas Optimization Techniques Every operation in Solidity costs gas. Efficient contracts reduce cost for users and optimize blockchain storage. Developers must consider gas costs when designing logic, especially for loops, storage writes, and external calls. Common gas-saving techniques include: Using `uint256` instead of smaller types like `uint8` unless packing structs. The default word size of the EVM is 256 bits and aligning types prevents unnecessary operations. Packing multiple small variables into a single storage slot by placing them sequentially in a struct. This reduces the number of SSTORE operations and lowers gas usage. Avoiding expensive operations such as writing to storage inside loops or repeatedly calling functions that return the same value. Instead, cache results in memory and update storage only once. Using constants and immutable variables for values that never change. Constants are inlined during compilation, and immutables are set once during deployment. ```solidity uint256 constant MAX_SUPPLY = 1000000; address immutable creator; constructor() { creator = msg.sender; } ``` Precomputing values off-chain when possible and storing minimal references (such as hashes or IPFS links) on-chain. This ensures auditability while saving gas. ## Fallback and Receive Functions Solidity supports special functions to handle unexpected calls and Ether transfers. These include the fallback and receive functions. **Receive** Called when the contract receives plain Ether with no data. It must be declared as external and payable. **Fallback** Called when a function is not found or data is provided with the Ether transfer. Can be used to handle dynamic calls or proxy behavior. ```solidity receive() external payable { // Handle incoming Ether } fallback() external payable { // Handle unknown function calls } ``` Contracts with neither a receive nor a fallback function will reject Ether transfers. These functions must be handled carefully to avoid exposing vulnerabilities such as uncontrolled proxy logic or denial of service. ## Storage Layout and Upgradability Understanding the layout of storage is critical for writing upgradeable contracts. Solidity stores state variables sequentially in storage slots. In upgradable contracts using proxy patterns, storage layout must be preserved across versions. Breaking layout compatibility can lead to overwritten values or locked state. Developers use patterns like: Reserved storage slots that leave gaps for future variables Using structs with consistent layouts Avoiding reordering of variables between upgrades Using libraries like OpenZeppelin’s Upgradeable Contracts that handle these constraints with automated tools ## Deployment Considerations Deploying a Solidity contract involves compiling it with the Solidity compiler and broadcasting a transaction containing the bytecode. Deployment must be planned considering: Gas limits and funding Network congestion Correct configuration of constructor arguments Initial state validation and post-deployment scripts Tooling like Hardhat, Truffle, and Foundry streamline deployment. Developers can write migration scripts, automate deployment pipelines, and deploy to testnets like Goerli or Sepolia before mainnet launches. Contracts once deployed are immutable unless designed with upgradability. Therefore, deployments must be audited, documented, and verified using block explorers. ## Testing and Debugging Contracts Testing is crucial in Solidity development. Bugs in smart contracts can cause financial losses, loss of data, or legal issues. Testing strategies include: Unit testing with JavaScript or TypeScript using frameworks like Mocha and Chai Integration testing using Hardhat or Foundry to simulate full user workflows Property-based testing with tools like Echidna to check for unexpected failures Gas profiling to detect inefficient logic Stack tracing with Hardhat and debugging failed transactions on local networks Tests should cover edge cases, reentrancy, state transitions, permissioned functions, and math boundaries. Example of a simple unit test in Hardhat: ```javascript it("should update the message", async function () { const [owner] = await ethers.getSigners(); const Contract = await ethers.getContractFactory("HelloWorld"); const contract = await Contract.deploy("Initial"); await contract.updateMessage("New message"); expect(await contract.message()).to.equal("New message"); }); ``` Writing thorough and automated tests improves code quality, confidence, and reduces risk of deployment errors. ## Real-World Applications of Solidity Solidity is the backbone of many real-world blockchain applications. It is used to build decentralized finance platforms, NFT marketplaces, DAOs, identity management solutions, and more. These applications run autonomously on the blockchain and rely on Solidity contracts to manage state, enforce rules, and handle value. In decentralized finance, Solidity is used to implement lending protocols, decentralized exchanges, automated market makers, and staking systems. Contracts manage user deposits, interest accruals, liquidity pools, and real-time asset swaps. Protocols like Aave, Compound, and Uniswap rely on robust and secure Solidity contracts. In NFTs, Solidity is used to encode ownership of digital assets, media, and collectibles. NFT standards such as ERC721 and ERC1155 define how tokens are minted, transferred, and traded. These standards allow creators to build marketplaces, auctions, and royalties systems that are fully on-chain. In DAOs, Solidity enables governance through smart contracts that manage proposals, voting, and treasury disbursements. Token holders can interact with DAO contracts to steer the direction of decentralized communities and allocate funds democratically. ## ERC Standards and Token Contracts Ethereum Request for Comments (ERC) standards define common interfaces and behaviors for tokens. The most widely used standards in Solidity are ERC20, ERC721, and ERC1155. **ERC20** Defines a fungible token interface. Each token is identical and divisible. Used for currencies, governance tokens, and utility tokens. **ERC721** Defines non-fungible tokens. Each token has a unique identifier and is used for collectibles, art, and identity. **ERC1155** Defines a multi-token standard that can manage both fungible and non-fungible assets in one contract. Useful for gaming and marketplaces. Example of an ERC20 token in Solidity: ```solidity contract MyToken is ERC20 { constructor() ERC20("MyToken", "MTK") { _mint(msg.sender, 1000000 * 10 ** decimals()); } } ``` These standards promote interoperability across wallets, exchanges, and dApps. ## Upgradeable Contracts and Proxy Patterns Smart contracts are immutable by design, but upgradeability can be achieved using proxy patterns. This involves separating logic and storage. A proxy contract delegates calls to an implementation contract while preserving state. Common upgrade patterns include: Transparent Proxy Pattern, where admin can upgrade the implementation, and users interact with a proxy UUPS (Universal Upgradeable Proxy Standard), a lightweight proxy approach with logic embedded in the implementation Beacon Proxy, where multiple proxies can share a common upgrade point via a beacon contract Upgradeability requires careful management of storage layout and access control. Libraries like OpenZeppelin provide secure implementations for deploying and managing upgradeable contracts. ## DeFi and Composability DeFi applications are built with composability in mind. This allows contracts to interact with each other to form complex financial instruments. A vault may use a lending protocol as collateral, an exchange to swap tokens, and an oracle for pricing. Solidity enables this through safe contract interactions, event logging, and shared standards. Developers must be aware of reentrancy risks, flash loan attacks, and front-running vulnerabilities. To build secure DeFi protocols, developers use: Price oracles with time-weighted averages Reentrancy guards and withdrawal patterns Permit functions for gasless approvals using signatures Circuit breakers and emergency pause functionality Treasury contracts and time-locked governance ## NFT Use Cases and Marketplace Contracts NFTs are digital representations of unique assets. Solidity allows for minting, transferring, and auctioning NFTs. Common features include: On-chain metadata linking to IPFS or Arweave Minting limits, royalties, and whitelists Batch transfers and airdrops Integration with off-chain marketplaces via events and standards An NFT contract must comply with ERC721 or ERC1155 and implement functions such as `tokenURI`, `safeTransferFrom`, and approval mechanisms. Example snippet for minting an ERC721: ```solidity function mint(address to, uint tokenId) public onlyOwner { _safeMint(to, tokenId); } ``` Marketplaces often rely on Solidity for order matching, escrow, and bidding systems. Events like `Transfer`, `Approval`, and `Sale` enable real-time indexing and discovery. ## Smart Contract Auditing Auditing is a critical step before deploying Solidity contracts to mainnet. It involves a deep review of the codebase to identify bugs, vulnerabilities, and inefficiencies. Audit activities include: Manual review of logic, access control, and storage layout Static analysis for known patterns and anti-patterns Unit and integration test coverage evaluation Formal verification of critical invariants Security researchers simulate attack vectors and suggest mitigation strategies. Common audit findings include unprotected ownership transfers, unchecked external calls, and improper math operations. Well-audited contracts are essential for DeFi, token launches, and enterprise applications. Auditors provide reports with severity classifications and recommended fixes. ## Advanced Design Patterns in Solidity Solidity supports several advanced design patterns that enhance flexibility, modularity, and safety in smart contract development. **Factory Pattern** Used to create multiple instances of a contract from a parent contract. Common in NFT collections, lending vaults, or token launches. The factory contract handles deployment and registration of new child contracts. ```solidity contract Factory { address[] public children; function createChild() external { Child c = new Child(); children.push(address(c)); } } ``` **Proxy Pattern** Separates logic and data to enable upgrades. Uses `delegatecall` to forward calls from a proxy to an implementation. Requires careful management of storage slots and admin privileges. **Pull over Push** Reduces risks by letting users withdraw funds instead of having them sent automatically. Prevents reentrancy and unexpected failures. ```solidity mapping(address => uint) public balances; function withdraw() public { uint amount = balances[msg.sender]; balances[msg.sender] = 0; payable(msg.sender).transfer(amount); } ``` **Access Control and Role Management** Implementing granular permissions using role-based patterns enhances security and decentralization. Contracts use mappings and modifiers to enforce role ownership and administrative boundaries. **Pausable Contracts** Include pause functionality to temporarily disable sensitive functions during emergencies or maintenance. Commonly used in DeFi protocols to prevent exploits during volatile periods. ## Solidity Development Tools A rich ecosystem of tools supports Solidity development across the lifecycle from writing code to deploying it on-chain. **Solidity Compiler (solc)** The core compiler that transforms Solidity source code into bytecode and ABI. Supported by most frameworks and used in custom build setups. **Hardhat** A flexible development framework for Solidity. Offers in-memory EVM for testing, plugin system, network forking, stack traces, and deployment automation. **Foundry** A fast, Rust-based toolkit for smart contract development. Supports fuzzing, property testing, Solidity scripting, and efficient builds. **Truffle** Legacy framework offering test and deployment tooling. Used in conjunction with Ganache for local chain simulation. **Remix IDE** A browser-based Solidity editor for quick experimentation. Includes a Solidity compiler, debugger, and testing console. **Ethers.js and Web3.js** JavaScript libraries for interacting with Solidity contracts from frontend or backend applications. Provide contract instantiation, event listeners, and signer abstractions. **The Graph** Indexes blockchain data emitted by Solidity events. Allows dApps to query historical and real-time data using GraphQL. **Slither and MythX** Static analysis tools that detect common bugs and vulnerabilities in Solidity code. Often used during audits. ## Best Practices for Solidity Development Following best practices in Solidity improves code security, readability, and maintainability. Use the latest stable compiler version for security improvements and bug fixes Always specify exact compiler version using pragma to avoid incompatibilities Favor short and readable functions with clear logic separation Validate all external inputs with `require` and checks Avoid complex nested loops or deep inheritance trees Use modifiers for role enforcement and repeated checks Write unit and integration tests covering edge cases Audit for reentrancy, access control, overflow, and race conditions Use established libraries such as OpenZeppelin for tokens, roles, and safe math Document contracts and public APIs using NatSpec comments ## The Future of Solidity Solidity is actively maintained by the Ethereum Foundation and community contributors. Its evolution is shaped by developer feedback, security research, and EVM ecosystem needs. Key areas of ongoing and future improvement include: Optimizing for gas efficiency with new opcodes and compiler outputs Improving developer ergonomics with better debugging and error reporting Supporting language features such as generics, custom types, and macros Integrating with zero-knowledge tools to enable private computations Enabling more native cross-chain and asynchronous execution patterns Expanding formal verification support for mission-critical systems The language has matured from simple token contracts to powering multi-billion-dollar decentralized systems. With new features, patterns, and tooling, Solidity will continue to be a foundation for programmable value and decentralized governance. Solidity is a gateway into decentralized systems that shift control from centralized authorities to code-enforced logic. From tokens and DAOs to DeFi and NFTs, Solidity enables developers to build unstoppable applications with trust, transparency, and autonomy. Mastering Solidity involves understanding not just syntax but also the principles of blockchain execution, gas efficiency, state management, and security. With the right tools and discipline, developers can design, build, and maintain smart contracts that are robust, upgradeable, and impactful across industries. As Ethereum and the EVM ecosystem evolve, Solidity will continue to play a key role in shaping the future of decentralized applications and programmable finance. file: ./content/docs/knowledge-bank/subgraphs.mdx meta: { "title": "Subgraphs", "description": "A complete guide to building, deploying, and querying subgraphs for blockchain data indexing using The Graph protocol" } ## Introduction to subgraphs Subgraphs are the indexing and querying units used within The Graph protocol. They define how on-chain data should be extracted, processed, and served through a GraphQL API. Subgraphs are essential for building decentralized applications that require fast and reliable access to blockchain state and historical data. Rather than querying a blockchain node directly for each interaction, developers create subgraphs to transform raw events and calls into structured, queryable datasets. These subgraphs run on The Graph’s decentralized network or its hosted service and serve as the backend data layer for many of the most popular dApps. Subgraphs are written in a declarative way. Developers specify which smart contract events to listen to, how to transform those events into entities, and what GraphQL schema the final API should expose. This model enables clean separation between data generation on-chain and data consumption off-chain. ## Understanding The Graph protocol The Graph protocol is an indexing infrastructure that allows querying blockchain data through GraphQL. It supports various EVM-compatible chains like Ethereum, Polygon, Avalanche, and others. The core components of the protocol include: Indexers, who run nodes that index data and serve queries Curators, who signal valuable subgraphs using GRT tokens Delegators, who stake GRT with indexers to secure the network Consumers, who query subgraphs using GraphQL Subgraph developers define the indexing logic and deploy it to the network. Once deployed, their subgraphs become accessible via GraphQL endpoints and are maintained by indexers without requiring centralized APIs. The protocol provides deterministic indexing through WASM-based mappings, scalability through sharding and modular design, and economic incentives to ensure data availability and integrity. ## Anatomy of a subgraph A subgraph project is composed of a few critical files and directories. These define how The Graph will extract and structure the data: **subgraph.yaml** This is the manifest file. It defines the network, data sources (contracts), event handlers, and mappings. It instructs The Graph which chain to listen to, which contracts to monitor, and how to process specific events or function calls. **schema.graphql** This file defines the GraphQL schema for the subgraph. It declares entity types, their fields, relationships, and any indexing options. These types become the basis for how data can be queried later on. **AssemblyScript mappings** Mapping files are written in AssemblyScript, a TypeScript-like language that compiles to WebAssembly. These files include event handlers that transform blockchain data into entities. They run in a sandboxed environment and cannot make HTTP calls or access off-chain storage. **Generated types** Using the Graph CLI, developers generate TypeScript definitions for events, entities, and contract bindings. This allows safe and predictable manipulation of blockchain data within mapping functions. These elements combine to form a complete subgraph that listens to smart contract events, transforms them into structured data, and exposes them via a GraphQL API. ## Sample subgraph structure A typical subgraph structure in the project directory might look like this: ``` ├── subgraph.yaml ├── schema.graphql ├── src/ │ └── mapping.ts ├── generated/ │ ├── schema.ts │ └── contract/ │ └── Contract.ts ├── abis/ │ └── Contract.json ``` Each file plays a specific role in defining how data flows from the blockchain into a queryable dataset. * `subgraph.yaml` specifies the smart contract and handlers * `schema.graphql` defines the API * `mapping.ts` transforms events into entities * `generated/` holds types used in the mappings * `abis/` contains the smart contract ABI required to decode events This structure ensures the subgraph remains modular, readable, and easy to maintain. ## Defining the GraphQL schema The schema file in a subgraph project is named `schema.graphql`. It defines the data model of the subgraph. Each data model is known as an entity and is represented using GraphQL type definitions. Entities are stored in the subgraph's underlying database and can be queried via GraphQL. Each entity must have an `id` field of type `ID`, which serves as the unique identifier. Example schema: ```graphql type Profile @entity { id: ID! owner: Bytes! name: String! createdAt: BigInt! } ``` The schema supports scalar types like `String`, `Int`, `BigInt`, `Bytes`, `Boolean`, and `ID`. Entities can also reference other entities using one-to-one or one-to-many relationships, which are established by using `@derivedFrom` on the related side. ```graphql type User @entity { id: ID! profiles: [Profile!]! @derivedFrom(field: "owner") } ``` This schema describes a one-to-many relationship from `User` to `Profile`, where each profile is linked to a user via the `owner` field. The schema must be aligned with the data emitted by smart contract events. Each time an event is handled, new instances of these entities are created or updated through the mapping logic. ## Writing the subgraph manifest The manifest file `subgraph.yaml` tells The Graph which blockchain to connect to, which contracts to monitor, and which handlers to invoke. It also defines the schema and mapping files. A minimal example of a subgraph manifest: ```yaml specVersion: 0.0.4 description: Tracks profiles on-chain repository: https://github.com/example/profile-subgraph schema: file: ./schema.graphql dataSources: - kind: ethereum name: ProfileContract network: mainnet source: address: "0x1234567890abcdef..." abi: ProfileContract startBlock: 15000000 mapping: kind: ethereum/events apiVersion: 0.0.7 language: wasm/assemblyscript entities: - Profile abis: - name: ProfileContract file: ./abis/ProfileContract.json eventHandlers: - event: ProfileCreated(indexed address,indexed bytes32,string,uint256) handler: handleProfileCreated file: ./src/mapping.ts ``` This manifest tells The Graph to watch the `ProfileCreated` event emitted by a contract deployed at a specific address on Ethereum mainnet. The event will be handled by the `handleProfileCreated` function in the mapping file. The `startBlock` is used to optimize syncing by skipping historical blocks that do not contain relevant data. The ABI is needed to decode event parameters. ## Creating the mapping logic Mapping logic is written in AssemblyScript and placed in the `src` folder. It contains functions that respond to smart contract events and generate or update entities based on event data. Example mapping for `ProfileCreated`: ```ts import { ProfileCreated } from "../generated/ProfileContract/ProfileContract"; import { Profile } from "../generated/schema"; export function handleProfileCreated(event: ProfileCreated): void { let entity = new Profile(event.params.profileId.toHex()); entity.owner = event.params.owner; entity.name = event.params.name; entity.createdAt = event.block.timestamp; entity.save(); } ``` The `event` object gives access to event parameters, transaction metadata, and block context. The handler creates a new `Profile` entity using the profile ID as the key, assigns values, and saves it to the store. Handlers must always ensure that IDs are unique and types are compatible with the schema. Entities are saved using the `.save()` method and will be queryable via the GraphQL API after indexing. ## Generating types from the schema To safely work with entity types and contract events in the mapping file, developers use the Graph CLI to generate code from the schema and ABI. The command is: ``` graph codegen ``` This generates TypeScript files under the `generated/` directory. These include: * Type-safe classes for each entity in `schema.ts` * Smart contract bindings for each ABI in its respective folder These generated types eliminate common errors, offer autocompletion, and ensure consistency between the schema, mappings, and event definitions. Entities in the generated code extend the `Entity` class and expose getters and setters for each field, along with type casting and default value helpers. ## Deploying a subgraph The CLI packages the files, uploads the schema, manifest, mappings, and ABIs, and registers the subgraph with the indexing service. A deployment hash is generated, which serves as a reference to the current version. ## Querying with GraphQL Once deployed and synced, subgraphs expose a GraphQL endpoint. This allows front-end applications, analytics tools, or external APIs to query the data. The GraphQL schema is derived directly from `schema.graphql`, and every entity becomes a queryable type. Developers can retrieve data with flexible queries such as: ```graphql { profiles(first: 5, orderBy: createdAt, orderDirection: desc) { id name owner createdAt } } ``` Filters can be applied using `where` clauses to narrow down results. ```graphql { profiles(where: { owner: "0xabc..." }) { name id } } ``` Pagination is supported using `first` and `skip`, enabling efficient rendering of lists and infinite scroll interfaces. Sorting can be applied using `orderBy` on indexed fields, with `asc` or `desc` directions. Subgraphs enable complex data consumption with minimal performance cost, as all queries run against a pre-indexed store maintained by indexers. ## Versioning and schema migration As smart contracts evolve or new requirements emerge, subgraphs need to be versioned. Developers can deploy multiple versions of a subgraph and mark one as the current production version. Each version has a unique deployment ID, and changes to the schema, event handlers, or mappings require a new deployment. To support schema changes: * Update the `schema.graphql` * Regenerate types using `graph codegen` * Update mappings accordingly * Test and deploy as a new version The old version remains accessible but no longer receives new data. This allows safe rollouts, testing, and rollback if necessary. ## Performance optimization and indexing Efficient indexing is crucial to ensure that subgraphs sync quickly and serve queries promptly. Developers can improve performance by: Reducing the number of entities created per event Avoiding heavy use of derived fields or reverse lookups Minimizing unnecessary state updates to entities Reducing large loops or repetitive logic in mappings Setting an appropriate `startBlock` to skip unnecessary historical data Avoiding cross-contract or recursive calls in mappings, which are unsupported Indexing speed depends on block density, event frequency, and mapping logic complexity. For high-volume subgraphs, batching and conditional logic can help reduce bottlenecks. Indexing logs can be monitored via the dashboard or CLI to debug issues such as failed events, missing ABI entries, or type mismatches. ## Debugging and testing Subgraphs can be tested locally using a forked chain or mock events. The Graph CLI supports: * Code generation and validation * Manifest linting * Subgraph simulation For contract testing, frameworks like Hardhat or Foundry can emit events and verify the subgraph behavior using integration test setups. Event handlers should be designed to be deterministic and side-effect-free. Subgraphs do not persist intermediate state or allow external API calls, so all logic must be pure and repeatable. Logs and sync statuses provide real-time feedback on indexing progress, failed handlers, or schema violations. Proper testing reduces production errors and ensures reliable data for users and applications. ## Using dynamic data sources In many decentralized applications, new smart contracts are deployed at runtime. These contracts are not known in advance, so they cannot be declared statically in the manifest file. To support this, subgraphs allow the use of dynamic data sources. Dynamic data sources are created at runtime through templates. When a subgraph encounters a specific event, it can instantiate a new data source to begin listening to events from a new contract. For example, a factory contract may emit a `ProfileDeployed` event each time a new profile contract is created. The subgraph listens to this factory and, upon detecting the event, dynamically spawns a new data source for the deployed profile contract. ```ts import { ProfileTemplate } from "../generated/templates"; import { ProfileDeployed } from "../generated/Factory/Factory"; export function handleProfileDeployed(event: ProfileDeployed): void { ProfileTemplate.create(event.params.newContract); } ``` The template must be defined in the `subgraph.yaml` file: ```yaml templates: - name: ProfileTemplate kind: ethereum/contract network: mainnet source: abi: Profile mapping: kind: ethereum/events apiVersion: 0.0.7 language: wasm/assemblyscript entities: - Profile abis: - name: Profile file: ./abis/Profile.json eventHandlers: - event: ProfileUpdated(indexed address,string) handler: handleProfileUpdated file: ./src/profile-mapping.ts ``` This pattern is commonly used in factory-based architectures such as token vaults, NFT launchpads, or DeFi protocols. ## Indexing multiple contracts Subgraphs can index multiple contracts by declaring multiple data sources in the manifest. Each data source can monitor a different contract, respond to different events, and use distinct handlers. Example use case: * One contract manages token minting * Another manages metadata updates * A third handles permissions Each contract can be added with its own `dataSource` entry, ABI, and event handlers. ```yaml dataSources: - kind: ethereum name: TokenContract source: address: "0x..." abi: Token mapping: ... - kind: ethereum name: MetadataContract source: address: "0x..." abi: Metadata mapping: ... ``` This approach allows modular indexing and accommodates complex systems where state is distributed across multiple contracts. ## Subgraph templating and reuse Subgraph templates promote reuse across similar deployments. Developers can publish and share subgraph configurations for common contract standards like ERC20, ERC721, or governance protocols. Reusable subgraphs help accelerate development for ecosystems like: * NFT marketplaces * DAO voting systems * Liquidity pools These templates abstract the contract interactions and provide ready-made GraphQL APIs. Developers only need to supply addresses and optional configuration overrides. Templates can be versioned and imported using packages or remote includes via IPFS. This enables teams to collaborate and standardize data access across multiple dApps or sub-networks. ## Use cases enabled by subgraphs Subgraphs are a critical backend component in many types of decentralized applications. Some common use cases include: Real-time token balances and holder snapshots Historical trade activity for decentralized exchanges NFT ownership and metadata browsing DAO governance participation, proposals, and vote history Streaming payments and claimable rewards tracking Cross-chain bridge activity and relay verification Portfolio analytics for wallet dashboards Decentralized identity registries and attestations Event-driven notification systems and protocol health monitors By exposing data through a flexible and reliable GraphQL API, subgraphs allow developers to build rich user experiences without overloading blockchain nodes or dealing with raw logs. Subgraphs also improve security and decentralization by removing the need for proprietary or centralized data APIs. ## Community and ecosystem The Graph ecosystem includes developers, indexers, curators, and contributors building tools and maintaining subgraphs across major chains. Popular subgraphs are used by Uniswap, Aave, Balancer, ENS, and many other leading protocols. Developers can contribute by: * Publishing subgraphs to Graph Explorer or Subgraph Studio * Signaling high-quality subgraphs to support indexing on the network * Writing custom handlers for niche protocols or contract types * Sharing templates and tutorials for emerging standards The community maintains libraries, tutorials, and starter kits to help developers bootstrap new subgraphs quickly and follow best practices. ## Best practices for subgraph development Subgraph development benefits from a consistent, modular, and testable approach. Following best practices ensures high performance, clarity, and reliability over time. * Use consistent entity naming and schema versioning. Entities should be named in singular form and grouped logically. Fields should be explicit, typed, and avoid ambiguous names. * Always define a unique and deterministic ID for each entity. Event parameters such as transaction hash, log index, or custom identifiers can be combined to avoid duplication. * Avoid using optional or nullable fields when not necessary. A well-defined schema allows for cleaner queries and better indexing performance. * Batch updates and reduce redundant writes to the store. Saving an entity after each minor change can increase load and indexing time. Perform calculations in memory before saving. * Use event-level filtering logic in mappings to avoid unnecessary processing. Only create or update entities when specific conditions are met. * Comment your mapping logic to explain transformations. AssemblyScript is not always familiar to all developers, and clarity in logic helps with collaboration. * Keep mapping logic pure and deterministic. Avoid side effects or state-dependent behavior that relies on prior events. Subgraphs must be replayable and idempotent. * Regenerate types with `graph codegen` after every schema or ABI change. This prevents runtime errors and ensures that mappings are aligned with the current data model. * Use `@derivedFrom` carefully. Derived fields must not be relied on for event handling, as they are computed post-indexing and cannot trigger side effects. * Test subgraphs locally using Ganache or Hardhat with a forked mainnet. Emit sample events and ensure that the Graph node indexes the subgraph correctly and returns accurate results. ## Known limitations and constraints While powerful, subgraphs come with design limitations developers must account for. * Subgraphs are read-only and cannot write to the blockchain or trigger transactions. They cannot send messages or invoke contract methods. * Mappings are sandboxed and cannot perform asynchronous operations, call external APIs, or access off-chain state. * Cross-contract reads are not supported. Mappings only receive event data and cannot query blockchain state beyond what is emitted in the event. * There is no native support for joins in GraphQL queries. Relationships must be explicitly defined in the schema and managed through entity linking. * Historical contract state prior to deployment of the subgraph is not available unless explicitly emitted and indexed. * Block-by-block tracking is only supported using block handlers, which can be computationally expensive and should be used sparingly. * There is no persistent cache between handler calls. All context must be passed through the event or reconstructed from existing entities. * Debugging AssemblyScript may lack advanced IDE support. Logging and replaying test events is often necessary to trace logic issues. ## Performance tuning and scaling Subgraphs can be optimized for speed and scalability through a series of techniques. * Set a meaningful `startBlock` to avoid indexing irrelevant history. Use the deployment block of the contract or the earliest event of interest. * Avoid storing large text strings or unnecessary data. Use IPFS hashes for content and load media off-chain when needed. * Use indexed fields for `orderBy` and `where` filters. This makes queries more efficient and improves response time. * Handle large event volumes by minimizing computations in each handler. Avoid loops over arrays when working with block or transaction metadata. * Group entity updates together and reduce entity cardinality when possible. Instead of creating a new entity per interaction, consider updating an aggregate counter or history record. * Use Graph Studio and Explorer tools to monitor indexing speed, handler runtimes, and potential performance bottlenecks. * Use dynamic data sources only when necessary. Static indexing is faster and simpler when contract addresses are known. ## Future of subgraphs and The Graph protocol The Graph protocol is evolving to support more chains, richer indexing features, and increased decentralization. The Graph Network is live and continues to expand its capabilities. Support for more non-EVM chains such as Solana, NEAR, and Cosmos is under development. This will enable cross-chain indexing and unified data layers across ecosystems. Improvements to GraphQL querying, pagination, and derived field performance are underway. This will make front-end development faster and more flexible. Zero-knowledge proofs and cryptographic verification of data integrity are being explored to ensure trustless querying at scale. Custom indexers and modular handlers are being developed to allow alternative indexing logic and chain-specific plugins. Subgraph Studio is expected to offer improved debugging, real-time monitoring, and better multi-environment management tools for developers. The subgraph ecosystem will continue to grow as more protocols adopt The Graph as their indexing standard. Curated registries, version control, and marketplace discovery will be enhanced to make data services more accessible and sustainable. Subgraphs are a powerful abstraction that bridge on-chain data with off-chain usability. They allow developers to expose rich, queryable APIs from blockchain events with minimal overhead and maximum flexibility. By defining clear schemas, mapping contract events, and deploying to a decentralized network of indexers, developers create robust backends that scale with their applications. Subgraphs are an essential part of Web3 infrastructure, enabling wallets, dashboards, marketplaces, and governance platforms to deliver fast and reliable data to users. Mastering their architecture and development process will remain a vital skill for anyone building the decentralized internet. file: ./content/docs/knowledge-bank/supply-chain.mdx meta: { "title": "Supply chain use cases", "label": "Blockchain use cases in supply chain management", "description": "Comprehensive guide to blockchain applications in global supply chains, covering traceability, logistics, procurement, compliance, and resilience" } ## Introduction to blockchain in supply chain management Global supply chains are complex networks involving manufacturers, suppliers, logistics providers, financial institutions, customs agencies, and end customers. These ecosystems span geographies, languages, and legal systems. As supply chains grow in complexity, they face increasing challenges around transparency, efficiency, fraud prevention, and real-time visibility. Traditional supply chain systems are often siloed, paper-driven, and dependent on centralized intermediaries. These limitations hinder trust between parties, delay resolution of disputes, and prevent accurate tracking of materials and goods. Blockchain introduces a decentralized infrastructure that enables shared, tamper-evident records across all stakeholders. Each event—such as shipping, certification, inspection, payment, or customs clearance—can be recorded on-chain, providing a single source of truth accessible to authorized parties. By enabling auditable data, programmable workflows, and verifiable identities, blockchain has the potential to transform the way supply chains operate—from raw material sourcing to last-mile delivery. ## Benefits of blockchain in supply chain ecosystems Blockchain brings a set of capabilities uniquely suited to solve common supply chain challenges: * Immutable, timestamped records of transactions, movements, and ownership changes * Multi-party data sharing without exposing confidential internal systems * Smart contract automation of payments, compliance checks, and service-level agreements * Provenance tracking and material authenticity for quality control and certification * Reduced reliance on intermediaries for coordination, dispute resolution, and enforcement These benefits translate into improved traceability, faster dispute resolution, lower costs, and increased customer confidence. ## Traceability from origin to consumption End-to-end traceability is a cornerstone of supply chain reliability. Businesses and regulators increasingly demand proof of where a product came from, what processes it underwent, and whether it met required standards. Blockchain provides a verifiable audit trail for every stage of a product’s lifecycle. Key features of blockchain-based traceability include: * Unique digital IDs for raw materials, components, and finished goods * On-chain logging of transformations, shipments, and handling * Cryptographic signatures from suppliers, labs, or certifiers * Public or permissioned access to traceability data by auditors and customers Example: * A chocolate manufacturer logs each cocoa shipment on blockchain with origin, farm ID, and batch code * As the cocoa is roasted, blended, and packaged, each step is recorded and linked to the final product * Retailers and consumers scan the packaging to view the full supply chain, including sustainability claims This level of traceability improves food safety, supports ethical sourcing, and helps companies meet compliance obligations across geographies. ## Anti-counterfeiting and product authentication Counterfeit goods are a global problem affecting pharmaceuticals, electronics, luxury items, and industrial components. Blockchain allows manufacturers to issue digital certificates of authenticity that can be verified at any point in the supply chain. Blockchain supports product authentication by: * Assigning tamper-resistant digital identities to each product unit * Allowing customers or partners to verify authenticity using mobile apps * Recording every handoff between suppliers, distributors, and retailers * Detecting duplicate or mismatched entries that indicate counterfeit activity Example: * A medical device manufacturer embeds a QR code on each unit, linked to a blockchain entry * Distributors, hospitals, and regulators can scan and verify product origin and batch information * If a counterfeit unit enters the market, it lacks a valid blockchain record and is flagged automatically This protects brand reputation, reduces liability, and increases buyer trust—especially in regulated or high-value industries. ## Inventory visibility and logistics tracking Supply chains often suffer from poor visibility into inventory levels, shipment location, and logistics handoffs. Delays, theft, and misrouting are common when multiple parties rely on disconnected systems. Blockchain improves logistics coordination through real-time, shared records of asset movement. Logistics tracking on blockchain includes: * Recording departure, arrival, and transit events with timestamps and geolocation * Linking each shipment to its bill of lading, invoices, and customs forms * Updating shipment status through IoT sensors or mobile scanning * Providing a tamper-evident log accessible to all stakeholders Example: * A high-value electronics shipment is tracked from factory to warehouse to retailer * Each leg of the journey is confirmed on blockchain, along with temperature and vibration readings from onboard sensors * If a delay or tampering is detected, automated alerts are sent and insurance contracts are triggered By replacing emails and phone calls with verifiable data, blockchain improves delivery reliability, reduces insurance claims, and optimizes fleet utilization. ## Smart contracts for procurement and payments Procurement involves multiple layers of approvals, verifications, and invoice processing. Delays in payments or errors in contract enforcement can strain supplier relationships. Smart contracts on blockchain automate these processes by encoding terms and executing them automatically when conditions are met. Smart procurement applications include: * Supplier onboarding with KYC and contract registration * Automatic invoice generation upon goods delivery * Multi-tier approvals and conditional payment triggers * Volume-based discounts or penalty clauses enforced on-chain Example: * A retailer agrees to pay a food supplier within three days of successful delivery and inspection * The smart contract releases funds automatically once GPS and temperature data confirm compliance * In case of non-compliance, penalties are calculated and deducted before payment This reduces processing time, increases trust, and provides a transparent audit trail for both buyers and suppliers. ## Compliance and regulatory reporting Many supply chains are subject to environmental, safety, labor, and trade regulations. Demonstrating compliance typically involves collecting certifications, inspection records, and documentation across multiple suppliers and jurisdictions. Blockchain simplifies compliance by ensuring records are immutable, time-stamped, and accessible to auditors. Blockchain-based compliance systems offer: * Digital storage of certifications such as RoHS, REACH, ISO, or fair-trade labels * Timestamped proof of inspections, tests, and training events * Smart contract validation of compliance before processing orders * Regulator dashboards for real-time audit access Example: * An apparel brand sources organic cotton and needs to validate that farms meet sustainability standards * Third-party certifiers upload audit results and GPS-verified field data to blockchain * Suppliers must pass compliance checks before orders are fulfilled * Brands use blockchain data for annual ESG disclosures and investor reporting This reduces the risk of non-compliance penalties, supports certification credibility, and saves time during audits. ## Cold chain and condition-sensitive logistics Transporting perishable goods such as pharmaceuticals, food, and chemicals requires strict control of temperature, humidity, and handling conditions. Any deviation can spoil the product or invalidate safety certifications. Blockchain, combined with IoT sensors, ensures that all condition-sensitive events are logged and verified. Cold chain use cases include: * IoT-based temperature and humidity monitoring throughout transit * Smart contract alerts triggered by threshold violations * Real-time data access for logistics partners, insurers, and receivers * Immutable logs for quality assurance and dispute resolution Example: * A vaccine shipment is monitored for temperature throughout international transport * Any excursion beyond the allowed range is recorded and alerts are sent * The receiving clinic checks the blockchain record before accepting or rejecting the shipment * If rejected, a smart contract claims insurance and initiates replacement logistics Blockchain makes cold chain logistics more transparent, accountable, and compliant with health and safety standards. ## Ethical sourcing and sustainability verification Consumers and regulators increasingly demand evidence that goods are sourced ethically, produced sustainably, and comply with environmental or social standards. Blockchain enables traceability of sustainability data and third-party certifications throughout the supply chain. Applications include: * Logging carbon emissions, water usage, or waste at each production stage * Verifying renewable energy usage or low-impact materials * Recording fair labor compliance and community engagement * Connecting product SKUs to full sustainability metadata Example: * A coffee company logs each harvest, washing, and transport stage with sustainability metrics * Blockchain records include farm practices, labor treatment, and deforestation risk * Retailers and consumers can view this data via a QR scan on the final product * Investors and regulators use the same data for sustainability reports This helps companies meet ESG goals, attract responsible investors, and build brand loyalty among ethical consumers. ## Multi-tier supplier management Large manufacturers often rely on suppliers several tiers removed from their operations. Lack of visibility into Tier 2 and Tier 3 suppliers leads to risks around quality, capacity, and compliance. Blockchain provides a way to register and monitor multiple supplier tiers through a shared, permissioned ledger. Features of multi-tier supply chain visibility include: * Supplier registration with identity and capability verification * Event-driven logging of subcontracted activities * Dynamic tracking of material flow through each supply layer * Permission-based access for OEMs and auditors Example: * An automotive company wants to trace semiconductors used in its electric vehicles * The Tier 1 supplier sources chips from Tier 2 foundries, who source silicon from Tier 3 refiners * Each tier registers their activity on blockchain, enabling full traceability of inputs * If a recall is needed, the OEM can identify affected batches and root causes instantly This approach reduces risk, increases supply chain resilience, and supports responsible sourcing across distributed production ecosystems. ## Supply chain financing and working capital optimization Access to working capital is a persistent challenge for small and mid-size suppliers in global supply chains. Delays in invoice payments or unclear contract performance often prevent them from accessing affordable credit. Blockchain improves supply chain financing by providing verified, real-time data about deliveries, service milestones, and fulfillment status. Applications of blockchain in supplier finance include: * Tokenization of invoices based on confirmed delivery events * Smart contracts that trigger financing eligibility upon verification * Credit scoring algorithms using on-chain performance history * Peer-to-peer finance marketplaces for invoice-backed loans Example: * A textile supplier delivers fabric to a fashion brand and logs delivery confirmation on blockchain * The confirmed record is used to tokenize the invoice and post it on a finance platform * A financial institution buys the invoice at a discount and is repaid automatically when the buyer releases funds * The supplier receives instant liquidity without waiting for 60-day payment terms Blockchain reduces lending risk by enabling trustworthy data, expanding financing access, and increasing liquidity across the supply chain. ## Cargo insurance and automated claims Cargo insurance covers goods in transit against risks like damage, theft, or delay. However, processing claims is often slow and disputes are common due to incomplete documentation or ambiguous responsibilities. Blockchain streamlines insurance by linking verified supply chain events with smart contract logic. Use cases include: * Digital policies with condition-based triggers * On-chain logging of sensor data from insured shipments * Automated claim validation using smart contracts and oracles * Immutable records of carrier handoffs and delivery exceptions Example: * A shipment of chemicals is insured for temperature-related spoilage * During transit, an IoT sensor records a breach of acceptable temperature * The event is logged to the blockchain and triggers the insurance smart contract * Based on predefined rules, a payout is processed and delivered without manual claim submission This enhances insurer transparency, reduces fraud, and provides faster relief to affected parties — while lowering operational costs for underwriters. ## Customs clearance and cross-border trade International trade requires goods to pass through customs and border protection agencies, often involving manual documentation, delayed approvals, and risk of corruption. Blockchain enables real-time, verifiable exchange of shipping, inspection, and compliance data to accelerate customs processing. Blockchain customs applications include: * Digital bills of lading, packing lists, and invoices stored immutably * Permissioned access for customs authorities in importing and exporting countries * Smart contracts that validate compliance with origin and tariff rules * Traceability of goods to verify sanctions, restrictions, or quotas Example: * An electronics manufacturer ships goods from Korea to Germany * All export and import documents are registered on blockchain, accessible to customs in both countries * The receiving customs officer verifies that origin certifications, safety checks, and tariff classifications are valid * Clearance is granted instantly without manual verification or paper forms Blockchain reduces customs delays, enhances security, and enables interoperable trade ecosystems aligned with digital trade agreements. ## Product recalls and quality incident response When a defective or unsafe product reaches consumers, recalls must be executed quickly and precisely. Traditional systems struggle to identify affected batches, trace shipments, or coordinate notifications. Blockchain enhances recall management through immutable product histories and real-time stakeholder access. Blockchain recall systems provide: * Batch-level traceability from factory to point of sale * Real-time identification of affected goods and delivery locations * Smart contract-based trigger of distributor notifications and refunds * Audit logs of response times, corrective actions, and regulatory reporting Example: * A food manufacturer identifies contamination in a specific production lot * The lot code is mapped on-chain to all retailers and logistics partners that received it * A recall smart contract notifies affected parties, halts sales, and processes refunds to customers * Regulators access a full timeline of events and company actions This system limits brand damage, accelerates consumer safety actions, and improves regulatory compliance through full supply chain visibility. ## Supplier onboarding and verification Global supply chains often involve onboarding new suppliers for raw materials, packaging, services, or logistics. Verifying legitimacy, credentials, and performance history is time-consuming and error-prone. Blockchain creates a decentralized supplier registry that simplifies onboarding and reduces fraud. Features include: * On-chain registration of supplier identity, certifications, and performance metrics * Access-controlled sharing of sensitive documentation * Timestamped records of KYC, audits, and blacklist checks * Smart contract validation of eligibility for procurement events Example: * A large retailer sources new suppliers for sustainable packaging * Each candidate uploads proof of environmental certifications and past contract references to the blockchain * Procurement officers view and compare verified profiles without needing to contact third parties * When selected, the supplier's compliance and payment terms are enforced through smart contracts Blockchain builds trust across new partnerships and reduces time-to-contract while preserving auditability. ## Multi-modal and last-mile delivery coordination Delivering goods involves multiple transport modes including sea, air, rail, and road. Coordinating between carriers, warehouses, and retailers introduces complexity, especially in last-mile delivery. Blockchain creates a unified platform for tracking goods and managing dynamic delivery routes. Use cases: * Shared visibility across ocean freight, port terminals, inland logistics, and couriers * Smart contract handoffs at mode transitions with condition verification * On-chain confirmation of proof-of-delivery (POD) and signature * Dynamic rerouting based on real-time delivery data and constraints Example: * A shipment of electronics arrives at a port and is transferred to a rail operator * Blockchain records each transfer and verifies container seal integrity * Upon last-mile delivery, a mobile app logs recipient signature and GPS timestamp to blockchain * If delays or deviations occur, stakeholders are notified instantly and can adapt routing This reduces handoff errors, improves delivery KPIs, and supports end-to-end performance optimization. ## Freight booking, scheduling, and asset utilization Shippers, freight forwarders, and carriers often rely on separate platforms to book cargo, schedule pickups, and assign capacity. This fragmentation leads to inefficiencies and unused space. Blockchain enables decentralized freight marketplaces and real-time scheduling coordination. Applications include: * Smart contract-based freight bidding and auction mechanisms * On-chain booking calendars linked to carrier availability * Incentive systems for full-load optimization and return-trip planning * Verifiable service records for carriers and drivers Example: * A manufacturer posts a time-sensitive cargo job on a blockchain freight platform * Verified carriers bid for the job, with smart contracts enforcing pickup time, price, and delivery conditions * GPS and sensor data feed into the contract, and payment is released upon validated delivery * Carrier ratings and on-time history are updated automatically on-chain This improves operational agility, lowers transport costs, and increases fleet utilization across fragmented networks. ## Packaging reuse, pallet pooling, and return logistics Reusable packaging such as crates, pallets, and containers reduce environmental impact but are difficult to track and manage. Blockchain provides a ledger to monitor asset ownership, location, and usage history, supporting circular logistics models. Use cases: * Tokenization of packaging assets for tracking and accountability * Shared logistics models where returnable assets are exchanged between participants * Smart contracts to charge deposit, usage, or damage fees * Integration with reverse logistics and recycling flows Example: * A beverage company distributes drinks in reusable crates * Each crate is tagged and logged on blockchain with delivery, return, and cleaning cycles * Retailers receive tokens as deposit, returned when crates are scanned and verified * Damage or loss triggers automatic fines, and reuse rates are published for ESG tracking Blockchain makes reuse systems scalable, financially viable, and trustworthy for all stakeholders. ## Digitization of trade documents Global trade requires a significant number of documents including bills of lading, letters of credit, invoices, packing lists, and inspection reports. These documents are often printed, couriered, or emailed—causing delays, errors, and security risks. Blockchain digitizes and secures these documents for instant, verified access. Document digitization features: * Issuance of digital bills of lading with transfer history on-chain * Anchoring of scanned PDFs or XML to tamper-proof hashes * Access control policies for banks, freight forwarders, and customs * Smart contract conditions for releasing payments or goods Example: * A cargo shipment is issued a digital bill of lading by the shipping line * The document is signed by origin authorities, approved by the bank, and transferred to the buyer on delivery * Each action is recorded on blockchain, eliminating paper trails and manual delays * A letter of credit is executed via smart contract once delivery is confirmed and inspection reports match terms This reduces fraud, speeds up trade cycles, and aligns with international digital trade frameworks. ## Integrated supply chain dashboards and analytics With blockchain providing structured, consistent, and verifiable data across supply chain processes, businesses can build real-time dashboards that go beyond traditional ERP systems. These dashboards provide visibility, risk monitoring, and predictive analytics. Dashboards can include: * Shipment status, temperature, and route analytics from on-chain IoT data * Supplier performance, delay history, and compliance flags * Financial exposure based on tokenized invoices and receivables * Carbon footprint and sustainability scorecards based on full chain emissions Example: * A global food company monitors its key ingredient supply chain in real time * Dashboards track shipment delays, supplier disruptions, and inventory shortages * Predictive models suggest when to reorder, switch suppliers, or adjust production * On-chain data improves planning accuracy and reduces response times during crises Blockchain serves as the backbone for intelligent, resilient, and data-driven supply chains. ## Port operations and warehouse automation Ports and warehouses are pivotal nodes in the global supply chain. Congestion, miscommunication, and manual document handling at these points lead to delays, revenue loss, and inventory mismanagement. Blockchain enhances port and warehouse operations by improving coordination, automating workflows, and offering shared visibility across stakeholders. Use cases include: * Smart gate access with digital vehicle and cargo authorization * On-chain record of warehouse receipts and proof of inventory movements * Automation of loading, unloading, and storage workflows via smart contracts * Real-time dashboards for port authorities, customs, carriers, and freight forwarders Example: * A shipping container arrives at a port and is scanned upon entry * The digital bill of lading, customs declaration, and warehouse slot allocation are all linked on blockchain * The container is routed, stored, and scheduled for release through a series of smart contracts that verify readiness and payment * All actions, delays, and handling notes are recorded and accessible to approved parties Blockchain reduces manual handoffs, enables just-in-time cargo management, and fosters accountability in high-volume logistics zones. ## Industry-specific use cases: pharmaceuticals Pharmaceutical supply chains demand high precision, traceability, and compliance with global health regulations. Temperature excursions, counterfeiting, and non-compliant handling can threaten patient safety. Blockchain delivers tamper-proof traceability, real-time monitoring, and compliance reporting. Applications in pharma: * Serialization of each drug unit or batch with on-chain authentication * Cold chain compliance monitored via IoT and logged immutably * Certification of each manufacturing, shipping, and handling step * Smart recall systems and regulatory access dashboards Example: * A vaccine batch is produced and assigned a digital identity on blockchain * Each step of shipment—packing, storage, airport transfer, customs, and delivery—is logged with IoT telemetry and timestamps * Pharmacists scan and verify the product before administering * If a recall is issued, all stakeholders are instantly notified with affected units identified by batch and distribution point Blockchain ensures regulatory alignment, improves safety, and boosts public confidence in life-saving pharmaceuticals. ## Industry-specific use cases: food and agriculture Food supply chains face pressure to ensure freshness, safety, and ethical sourcing while minimizing waste and fraud. Blockchain enables full traceability from farm to fork, automates compliance with food safety laws, and supports certification of origin and organic standards. Applications include: * On-chain logging of farm practices, harvest dates, and storage conditions * Certification of organic or fair-trade status by verified third parties * Cold chain tracking for perishable items * Expiry-based smart contracts for automatic recalls or price reductions Example: * A batch of mangoes is harvested, sorted, and shipped with blockchain-registered tags * Each shipment includes pesticide test results, refrigeration logs, and shipping metadata * Upon reaching the supermarket, staff verify freshness and storage compliance via mobile apps * In case of contamination, affected batches are quickly identified and removed from shelves Blockchain reduces waste, supports food security, and enhances brand trust in competitive markets. ## Industry-specific use cases: fashion and apparel Fashion brands face reputational risks tied to labor exploitation, environmental impact, and fast-moving global supply chains. Blockchain offers provenance tracking, ethical sourcing transparency, and lifecycle documentation for apparel products. Use cases include: * Digital product passports from raw material to retail * Verification of certifications such as GOTS, BCI, or carbon-neutral sourcing * Tracking of factory conditions, subcontracting, and inspection history * Integration with resale and recycling platforms for circular fashion Example: * A designer brand creates a digital twin for each item of clothing it produces * The blockchain record includes material source, labor conditions, and environmental impact data * Customers scan a QR code on the tag to see full product provenance and sustainability score * When the product is resold or recycled, those events are recorded, completing a circular record Blockchain helps fashion brands build credibility in sustainability while creating new channels for consumer engagement and loyalty. ## Risk management and contingency planning Supply chains face disruptions from weather, geopolitical conflict, labor strikes, and pandemics. Traditional systems struggle to adapt due to opaque processes and delayed information flow. Blockchain provides real-time risk monitoring and contingency execution. Applications in risk management: * Distributed event logging from on-ground partners (e.g., port shutdowns, accidents) * Smart contracts that activate alternative routing or supplier options * Performance logs for resilience scoring and supplier redundancy planning * Risk-sharing contracts with dynamic insurance coverage and pooled reserves Example: * A key shipping route is disrupted due to a geopolitical conflict * A smart contract evaluates risk exposure and triggers re-routing to a secondary supplier * Inventory stock levels and transit delays are updated in a dashboard shared with operations, procurement, and finance teams * Insurance payouts and penalty waivers are triggered where thresholds are breached Blockchain allows faster, data-driven responses to uncertainty and creates more adaptive supply chain networks. ## Supplier diversity and inclusion tracking Large corporations are increasingly required to meet targets for supplier diversity, such as engaging with minority-owned, women-owned, or small local businesses. Blockchain helps companies document and verify diversity metrics without manual oversight. Blockchain supports diversity initiatives through: * Verified registry of supplier certifications (e.g., MWBE, LGBTBE) * On-chain tracking of purchase orders and invoice volume across diverse vendors * Smart contract-enforced allocation quotas or bidding preferences * Audit-ready reporting for ESG disclosures and compliance Example: * A government agency sets a 30 percent procurement goal for small and minority-owned businesses * All supplier profiles and contracts are logged on blockchain with diversity certification * Monthly analytics track spend percentages, fulfillment rates, and vendor performance * Reports are submitted automatically to oversight boards with data transparency Blockchain improves accountability, reduces tokenism, and helps expand economic opportunity within global sourcing strategies. ## Product lifecycle tracking and circular economy models As sustainability becomes central to business models, companies are shifting from linear (produce-use-dispose) to circular (reuse-recycle-regenerate) approaches. Blockchain enables tracking of products beyond initial sale into repair, resale, and recycling. Applications include: * Assigning persistent digital IDs to products for tracking over time * Recording repair, refurbishment, and resale events on-chain * Tokenizing returns or recycling incentives for customers * Measuring and verifying extended product usage and impact Example: * An electronics company tracks each laptop from assembly to customer delivery * Repairs at service centers, battery replacements, and trade-ins are logged to the product’s digital ID * Once recycled, valuable metals and components are traced and remanufactured * Customers receive loyalty tokens for sustainable behavior, linked to product lifecycle This enables compliance with circular economy legislation, reduces e-waste, and strengthens long-term relationships with environmentally conscious customers. ## Supplier collaboration and innovation Innovation in supply chains often depends on strong relationships between buyers and suppliers. However, IP protection concerns, coordination barriers, and delayed payments hinder co-innovation. Blockchain fosters collaboration with secure data sharing, shared rewards, and traceable contributions. Applications include: * Secure upload of supplier prototypes, design iterations, and test results * Timestamped attribution of innovation to specific partners * Royalty sharing through programmable smart contracts * Joint innovation challenges with voting and reward distribution on-chain Example: * A consumer electronics firm runs an open call for component innovations among its supplier base * Submissions are logged with contributor identity and encrypted designs * Voters assess the best solution, and the smart contract disburses funds and recognition * If the design becomes a commercial product, downstream sales trigger royalty payments Blockchain aligns incentives, protects IP, and opens new innovation models in competitive supply chains. ## AI integration and data integrity for forecasting AI and machine learning are increasingly used in supply chain planning for demand forecasting, pricing optimization, and route planning. However, these models rely on high-quality, trustworthy data. Blockchain ensures that the data feeding AI systems is tamper-proof and transparently sourced. Benefits include: * Trusted data pipelines from verified sensors, partners, and processes * Model inputs and predictions traceable to specific datasets and timestamps * Auditable histories of model training data for regulatory compliance * Shared learning models governed through DAO-based data cooperatives Example: * A food distributor uses AI to predict seasonal demand for fresh produce * Blockchain ensures that delivery, weather, and consumption data are accurate and unaltered * The AI model outputs are visible to supply chain managers and linked to smart contracts for procurement * In case of anomalies, the data trail can be examined for integrity and source credibility Blockchain improves explainability, fairness, and auditability of AI in complex, data-rich supply chains. ## Smart labeling and interactive packaging Physical products can be linked to their digital records using smart labels, enabling end users to verify authenticity, origin, and lifecycle information. Blockchain enhances this capability by storing immutable metadata that is accessible via QR codes, NFC tags, or RFID chips on the product itself. Use cases include: * Packaging that links to tamper-proof blockchain history * Real-time updates on sourcing, delivery, and certifications * Integration with consumer-facing apps for authenticity and sustainability info * Engagement tools such as reward redemption and resale verification Example: * A wine bottle carries a QR code that links to a blockchain record of grape origin, vineyard processing, shipping, and bottling details * Consumers scan the label to verify temperature compliance during transport and explore tasting notes and vintage data * Resellers verify provenance and validate that the bottle was not opened or tampered with This approach enhances brand engagement, combats counterfeiting, and supports digital twin strategies for physical goods. ## Implementation models and deployment frameworks Blockchain implementation in supply chains requires careful planning and integration with existing IT systems, operational processes, and partner ecosystems. There is no one-size-fits-all approach, but common deployment models include: ### Private or consortium blockchains * Used among a closed group of stakeholders such as manufacturers, suppliers, and logistics providers * Offers control over participation, data visibility, and performance tuning * Common platforms: Hyperledger Fabric, Quorum, Corda ### Public-permissioned blockchains * Enable broader visibility while restricting write permissions to verified entities * Ideal for scenarios involving regulators, certifiers, or consumers * Example platforms: Polygon, Avalanche, Hedera, LACChain ### Public blockchains * Provide full transparency and immutability for applications requiring open access * Suitable for consumer verification, decentralized trade, or open marketplaces * Common choices: Ethereum, Tezos, Arbitrum Factors to consider in implementation: * Interoperability with ERP, WMS, TMS, and IoT platforms * Data privacy policies, compliance requirements, and user roles * Onboarding and training for suppliers, inspectors, and internal teams * Integration with smart contracts, wallets, and analytics systems Phased rollouts often start with pilot use cases, followed by multi-node expansion, middleware deployment, and eventually full enterprise integration. ## Interoperability and standards Supply chains span geographies, legal frameworks, and technical systems. For blockchain to be effective, networks must interoperate across public and private chains, industry consortia, and national platforms. Key strategies include: * Using cross-chain bridges or interoperability protocols (e.g., Polkadot, Cosmos, Chainlink CCIP) * Adopting data standards like GS1, EPCIS, and UN/CEFACT for structured messaging * Leveraging verifiable credentials and decentralized identifiers (DIDs) for entity verification * Designing APIs and SDKs for seamless application integration Example: * A textile exporter in India uses a local blockchain to register compliance and production data * This information is relayed to a European customs platform via a cross-chain bridge and verified by regulators in real time * Brands, distributors, and auditors access this data through GraphQL APIs or dashboards Standardization enables true global scalability, reduces vendor lock-in, and builds ecosystems where blockchain networks work together instead of in silos. ## Digital governance and consortium coordination Blockchain introduces new governance models for multi-party collaboration, where trust and rules are embedded in code. Supply chain consortia must define how decisions are made, who maintains smart contracts, and how data access is managed. Governance models may include: * Multi-signature approval schemes for protocol upgrades or node onboarding * Token-weighted or stake-based voting systems for feature prioritization * Smart contract-controlled treasuries for funding maintenance or incentives * Arbitration protocols for handling disputes between participants Example: * A group of food retailers, producers, and logistics firms form a consortium to track agricultural sourcing * Smart contracts define onboarding rules, data-sharing permissions, and voting mechanisms * Members periodically vote on adding new certifications or changing metadata schemas * Funding for infrastructure upgrades is automatically drawn from a pooled treasury based on vote outcomes Digital governance ensures alignment, fairness, and adaptability in decentralized supply chain networks. ## Future outlook for blockchain in supply chain Blockchain’s role in supply chain management will continue to expand as organizations prioritize resilience, transparency, and automation. Over the next decade, we expect to see: * Mainstream integration with digital twins and industrial IoT for real-time visibility * Proliferation of smart product passports aligned with sustainability and trade regulations * Tokenization of supply chain assets including invoices, carbon credits, and raw materials * Broader adoption of decentralized marketplaces and trustless procurement systems * Convergence with AI for automated decision-making and exception handling As blockchain matures and interoperability frameworks solidify, supply chains will shift from opaque, reactive systems to proactive, data-driven networks where trust is automated, and performance is optimized across every transaction. Blockchain offers a fundamentally new architecture for trust, data sharing, and automation in global supply chains. It does not replace existing systems but augments them by creating a shared ledger of truth that spans organizations, borders, and industries. Its impact includes: * Enabling traceability and provenance where fraud and opacity once thrived * Automating settlements, inspections, and compliance in real time * Empowering consumers, regulators, and partners with trustworthy data * Facilitating sustainable, inclusive, and ethical sourcing practices The success of blockchain in supply chain management depends not just on technology, but on leadership, collaboration, and willingness to redefine how value is created and exchanged. With thoughtful deployment and strategic alignment, blockchain can serve as the backbone of next-generation supply chains that are secure, transparent, and built to last. file: ./content/docs/security/application-security.mdx meta: { "title": "Application security" } Our development process integrates security at every stage. We follow best practices and employ advanced tools to ensure the security of our applications. ## Secure software development lifecycle (sdlc) Our SDLC incorporates security activities at each stage of development, such as requirements gathering, design, coding, testing, and deployment. * **Secure Coding Practices**: Promote secure coding practices within the development team, including adhering to coding standards and conducting code reviews. * **Threat Modeling**: Perform threat modeling exercises to identify potential security threats and vulnerabilities at the design stage. * **Secure Dependencies**: Manage and update all dependencies and third-party libraries used in the software to ensure they are free of vulnerabilities. ## Regular security testing We conduct regular security testing throughout the development lifecycle to identify and address potential security weaknesses. * **Vulnerability Scanning**: Automated vulnerability scanning tools are used to identify common vulnerabilities. * **Penetration Testing**: Regular third-party penetration tests are conducted to identify and remediate vulnerabilities. Our penetration testing includes network, application, and infrastructure assessments to ensure comprehensive coverage. SettleMint does not publicly share detailed results of network penetration tests, but high-level summaries and compliance reports can be provided to customers upon request. * **Code Analysis**: Automated and manual code analysis to ensure that security flaws are identified and addressed. file: ./content/docs/security/compliance-and-certifications.mdx meta: { "title": "Compliance and certifications" } SettleMint is committed to maintaining compliance with industry standards and regulations. We have obtained several certifications that demonstrate our dedication to security and quality. ## Industry standards and certifications We adhere to industry standards and best practices to ensure the highest level of security. * **ISO 27001**: Our information security management system is certified to ISO 27001 standards, ensuring a systematic approach to managing sensitive information. * **SOC 2 Type II**: We undergo regular SOC 2 Type II audits to ensure the security and availability of our services. SettleMint conducts regular internal and external audits to ensure compliance with relevant standards and to identify areas for improvement. * **GIA (Global Information Assurance)**: We follow GIA standards to ensure robust information security practices. * **CoBIT (Control Objectives for Information and Related Technologies)**: Our adherence to CoBIT standards ensures that our IT management and governance processes are aligned with business goals and risks. ## Information security management system (isms) SettleMint provides customers with documentation describing our Information Security Management System (ISMS). This documentation details our security policies, procedures, and controls, demonstrating our commitment to maintaining a robust security framework in line with industry standards. ## Regular audits We conduct regular internal and external audits to ensure compliance with relevant standards and to identify areas for improvement. * **Internal Audits**: Conducted by our internal audit team according to industry best practices. * **External Audits**: Conducted by independent third-party auditors to provide an objective assessment of our security posture. ## Continuous improvement We are committed to continuously improving our security practices to stay ahead of emerging threats and to meet the evolving needs of our clients. * **Security Reviews**: Regular reviews of our security policies and procedures to ensure they are up-to-date and effective. * **Client Feedback**: We actively seek feedback from our clients to improve our security measures and address any concerns they may have. file: ./content/docs/security/data-security.mdx meta: { "title": "Data security" } We employ advanced encryption techniques and data protection measures to ensure the security of data at all times. ## Data encryption Sensitive data is encrypted both in transit and at rest using industry-standard encryption protocols. * **In Transit**: Data is encrypted using TLS 1.2 or higher to protect it during transmission. * **At Rest**: Data is encrypted using AES-256 to ensure it remains secure when stored. ## Data backup and recovery Regular backups are performed, and data recovery plans are in place to ensure quick restoration of services in the event of an incident. * **Backup Frequency**: Backups are performed regularly to ensure that data can be restored to a recent state. * **Recovery Plans**: Detailed recovery plans are in place to ensure quick and efficient restoration of services. ## Data retention and deletion We have policies and procedures in place for data retention and secure deletion. * **Data Retention**: Data is retained only as long as necessary for business purposes or as required by law. * **Secure Deletion**: Data is securely deleted when it is no longer needed, using techniques such as degaussing and cryptographic wiping. file: ./content/docs/security/incident-response.mdx meta: { "title": "Incident response" } We have a detailed incident response plan in place to address security incidents promptly and effectively. ## Incident detection Continuous monitoring and automated alerting systems are used to detect potential security incidents. * **Monitoring Systems**: Comprehensive monitoring systems are in place to detect suspicious activity and potential security incidents. * **Automated Alerts**: Automated alerting systems notify the incident response team of potential incidents in real-time. ## Incident handling A dedicated incident response team is available 24/7 to handle security incidents promptly. * **Incident Response Team**: A team of trained professionals is available to respond to security incidents at any time. * **Incident Management**: Incidents are managed according to a predefined process, ensuring a quick and efficient response. ## Incident recovery Comprehensive recovery plans are in place to ensure the quick restoration of services and data integrity. * **Recovery Procedures**: Detailed procedures are in place to ensure the quick and efficient recovery of services. * **Post-Incident Analysis**: After an incident, a thorough analysis is conducted to identify root causes and implement measures to prevent future occurrences. file: ./content/docs/security/index.mdx meta: { "title": "Introduction" } At SettleMint, we prioritize the security of our clients' data and systems. Our comprehensive security posture encompasses policies, procedures, and technologies designed to protect against a wide range of threats. This document outlines the key elements of our security strategy and demonstrates our commitment to maintaining the highest standards of security. ## Our commitment to security SettleMint is committed to providing a secure environment for all our digital asset solutions. We understand the critical importance of security in the blockchain industry and continuously work to ensure that our infrastructure and applications meet the highest standards. ## Key elements of our security posture * **Proactive Security Measures**: Implementing proactive security measures to prevent incidents before they occur. * **Continuous Monitoring**: Continuous monitoring and regular audits to ensure compliance with security standards. * **Employee Training**: Ongoing employee training and awareness programs to foster a culture of security. * **Client Collaboration**: Working closely with clients to understand their security needs and incorporate their requirements into our solutions. file: ./content/docs/security/infrastructure-security.mdx meta: { "title": "Infrastructure security" } Our infrastructure is designed with multiple layers of security to protect against various threats. We employ advanced technologies and best practices to ensure the security and resilience of our systems. ## Cloud security Our cloud providers are industry leaders, offering robust security features and compliance certifications. * **DDoS Protection**: Advanced DDoS protection mechanisms to prevent and mitigate distributed denial-of-service attacks. * **Network Security**: Secure network architecture with firewalls, intrusion detection systems, and network segmentation to protect against unauthorized access and threats. ## High availability and disaster recovery Our blockchain platform is designed with a focus on ensuring high availability and robust disaster recovery to maintain uninterrupted service and secure data integrity under various conditions. * **Redundancy**: Critical components are redundant, ensuring that the failure of a single component does not affect the overall system. * **Backup and Recovery**: Utilize Velero for efficient backup and restoration in DR scenarios, managed by cluster operators. * **Geographically Distributed Nodes**: Enabling blockchain node deployment across multiple data centers in different regions to enhance resilience against regional outages and optimize performance globally. * **Inter-Cluster Synchronization**: We use advanced consensus protocols for real-time data synchronization across clusters, ensuring data consistency and integrity. * **Automatic Failover Mechanisms**: Critical components like transaction processing nodes and storage have automatic failover, with hot standby nodes for immediate takeover. * **Load Balancing**: We apply sophisticated load balancing to evenly distribute workloads and prevent overloads, enhancing network performance. ## Tamper audit and software integrity SettleMint's Kubernetes and container management infrastructure includes tamper audit and software integrity functions to detect changes in container builds or configurations. These measures ensure the integrity of release artifacts and workloads by using tools such as image signing, admission controllers, and runtime security tools to monitor and secure the environment. Continuous monitoring and automated checks help maintain a secure Kubernetes deployment. ## Access control and monitoring SettleMint restricts, logs, and monitors access to all critical systems, including hypervisors, firewalls, vulnerability scanners, network sniffers, and APIs. This comprehensive access control and monitoring ensure that only authorized personnel can access these systems, enhancing security and accountability. ### Monitoring privileged access SettleMint monitors and logs privileged access (administrator level) to information security management systems. This practice ensures that all administrative actions are tracked and reviewed, enhancing security and accountability by detecting and responding to any unauthorized or suspicious activities. file: ./content/docs/security/security-policies.mdx meta: { "title": "Security policies" } SettleMint has established comprehensive security policies to safeguard our systems and data. These policies are designed to ensure the confidentiality, integrity, and availability of information. ## Data protection and privacy We adhere to strict data protection regulations such as GDPR and CCPA. Personal data is handled with the utmost care, ensuring confidentiality and integrity. * **Data Encryption**: All sensitive data is encrypted both in transit and at rest using industry-standard encryption protocols. * **Data Minimization**: We collect only the data necessary for our operations and limit access to it based on the principle of least privilege. ## Access control Multi-factor authentication (MFA) is required for access to sensitive systems. Role-based access control (RBAC) ensures that employees have the minimum necessary access. * **Authentication**: Strong authentication mechanisms, including MFA and SSO, are enforced across our systems. * **Authorization**: Access to resources is granted based on roles and responsibilities, ensuring that users only have access to what they need. ## Incident response Our incident response policy outlines the procedures for detecting, responding to, and recovering from security incidents. * **Incident Detection**: Continuous monitoring and automated alerting systems to detect potential security incidents. * **Incident Handling**: A dedicated incident response team is available 24/7 to handle security incidents promptly. * **Incident Recovery**: Comprehensive recovery plans to ensure quick restoration of services and data integrity. ## Employee training and awareness Continuous training and awareness programs are crucial to maintaining our security posture. Employees undergo regular security training to stay updated on the latest threats and best practices. * **Training Programs**: Regular security training sessions for all employees. * **Awareness Campaigns**: Ongoing awareness campaigns to reinforce the importance of security in daily operations. ## Third-party security SettleMint's third-party agreements include provisions for the security and protection of information and assets. These agreements ensure that all partners and vendors adhere to our stringent security requirements, maintaining a consistent security posture across our supply chain. * **Vendor Assessments**: We conduct regular security assessments of our vendors to ensure compliance with our security standards. * **Contractual Obligations**: Security requirements are embedded in our third-party contracts to ensure ongoing compliance. file: ./content/docs/security/security-scanners.mdx meta: { "title": "Security scanners" } SettleMint uses advanced security scanners to maintain the integrity and security of our codebase and dependencies. This page provides detailed information about the scanners we use, including Aikido, TruffleHog, and Renovate. ## Aikido Aikido is a comprehensive security platform that provides a variety of tools for vulnerability management and penetration testing. It includes multiple scanners to cover different aspects of security: * **ZAP (Zed Attack Proxy)**: Used for penetration testing and finding vulnerabilities in web applications. It helps identify issues such as SQL injection, cross-site scripting (XSS), and other security threats. * **Trivy**: A comprehensive security scanner for container images, file systems, and Git repositories. It detects vulnerabilities, misconfigurations, and secrets. * **Clair**: An open-source project for the static analysis of vulnerabilities in application containers (currently supports Docker). It scans container images for known vulnerabilities in the packages installed. * **Nuclei**: A fast, customizable vulnerability scanner based on templates. It helps in identifying security issues across various protocols. * **Bandit**: A security linter for Python code that finds common security issues in Python code. * **Gitleaks**: A tool for detecting hardcoded secrets like passwords, API keys, and tokens in Git repositories. * **Syft**: Used for generating Software Bill of Materials (SBOMs) and open source license scanning. * **Grype**: A vulnerability scanner for container images and filesystems. * **Checkov**: An infrastructure as code (IaC) static analysis tool that detects misconfigurations in cloud infrastructure. * **Phylum**: Detects malware in dependencies. * **endoflife.date**: Detects outdated and end-of-life software. Aikido ensures that security is maintained throughout the development lifecycle by providing continuous monitoring and automated testing. You can request the Aikido security scan report by following this [link](https://app.aikido.dev/audit-report/external/ifiVHdPo7XlO1kmSjOoPtofe/request). ### Cloud infrastructure integration In addition to these scanners, Aikido is integrated with our cloud infrastructure to ensure secure operations. This integration allows us to run our infrastructure in a secure manner, leveraging the power of these tools to continuously monitor, assess, and improve the security posture of our cloud environments. ## Trufflehog TruffleHog is a tool for detecting secrets in the codebase. It scans for high-entropy strings and other potential secrets in the code repositories, ensuring that sensitive information such as API keys, passwords, and tokens are not exposed in the source code. * **High-Entropy String Detection**: Identifies strings that may be secrets based on entropy. * **Pattern Matching**: Uses regular expressions to identify potential secrets based on known patterns. ## Renovate Renovate is a dependency management tool that automates the process of updating dependencies. It regularly scans for outdated or vulnerable dependencies and creates pull requests to update them. * **Automated Dependency Updates**: Regularly scans and updates dependencies to the latest versions. * **Pull Request Creation**: Automatically generates pull requests for updates, simplifying the update process. * **Compatibility Checks**: Ensures that updates are compatible with the existing codebase, reducing the risk of breaking changes. ## Integration with ci/cd pipeline These security scanners are integrated into our CI/CD pipeline to provide continuous security checks and ensure that vulnerabilities are identified and addressed promptly. * **Continuous Integration**: Automated security scans are performed at each stage of the development process. * **Continuous Deployment**: Ensures that only secure and compliant code is deployed to production. By using these advanced security scanners, SettleMint maintains a high level of security for its applications and infrastructure, protecting against a wide range of threats and vulnerabilities. file: ./content/docs/support/faqs.mdx meta: { "title": "FAQs", "description": "Frequently asked questions" } ## Frequently Asked Questions (FAQs)
**1. Why is SettleMint considered the best blockchain platform for enterprises?**
SettleMint offers a high level of abstraction without limiting control. It accelerates enterprise blockchain adoption with a full-stack low-code development environment, built-in protocol support (Ethereum, Hyperledger Fabric, etc.), smart contract lifecycle tools, and robust middleware for integration. It simplifies the entire lifecycle from development to production deployment, making blockchain projects faster to implement, easier to scale, and cost-efficient to maintain.

**2. What blockchain protocols are supported by SettleMint?**
SettleMint supports a wide variety of blockchain protocols: * Private Networks - Hyperledger Besu, Hyperledger Fabric and Quorum. * Layer 1 Public Networks - Ethereum, Avalanche, Hedera and Fantom. * Layer 2 Public Networks - Polygon PoS, Polygon zkEVM, Optimism, Arbitrum and Soneium. The platform's extensibility allows onboarding of additional protocols based on project requirements.

**3. How does SettleMint simplify smart contract development and deployment?**
SettleMint provides: * A contract IDE for authoring Solidity or chaincode * Templates and reusable libraries * One-click deployment to any supported network * Version control and upgrade lifecycle management * Auto-generated GraphQL and REST APIs * Event binding and subscription to smart contract logs These tools reduce development effort while providing deep control over contract logic.

**4. Can SettleMint integrate with existing enterprise systems?**
Yes. SettleMint offers: * Middleware connectors * SDKs for languages like JavaScript, Python, and Java * Integration studio * Zero config APIs This enables seamless integration with legacy systems, workflows, and data pipelines.

**5. How does SettleMint manage identity and access control?**
Identity and access are managed using: * **RBAC (Role-Based Access Control):** Assign roles across apps, nodes, and contracts * **Membership Service Providers:** Especially in Fabric networks for certificate-based access * **API Gateways with Auth:** Support for JWT, OAuth2, and API keys * **On-chain permissions:** Smart contracts can enforce ACLs for method calls Security is enforced across both infrastructure and app layers.

**6. Is it possible to monitor and debug blockchain applications on SettleMint?**
Yes, SettleMint provides observability features including: * Real-time logs from smart contracts and nodes * Transaction explorer and state diffing tools * Metrics dashboards for node health and API usage * Subgraph query monitoring * Alerts and triggers on transaction or performance failures These capabilities help developers maintain SLAs and proactively resolve issues.

**7. What kind of deployment environments does SettleMint support?**
SettleMint supports: * **Hosted environments** managed by SettleMint for rapid prototyping * **Self-hosted** Kubernetes or cloud-native deployments (AWS, Azure, GCP) * **On-premise** installations for highly regulated industries * **Multi-region support** for high availability and compliance needs The platform abstracts DevOps complexity while maintaining flexibility.
file: ./content/docs/support/slas.mdx meta: { "title": "Service Level Commitment", "description": "Overview of SettleMint's reliability, support tiers, and enterprise-grade guarantees." } # SettleMint Service Level Commitment SettleMint delivers enterprise-grade reliability, support, and performance to ensure your blockchain solutions operate smoothly and securely. Our Service Level Commitments are designed to match the needs of mission-critical workloads across industries. ## Platform Uptime We commit to delivering **99.9%+ availability** across our managed environments, with infrastructure built for resilience, redundancy, and rapid recovery. * High-availability cloud deployments * Disaster recovery and failover procedures * Regular security patching and proactive maintenance ## Support Tiers SettleMint offers multiple support tiers to match your operational needs: | Support Plan | First Response Time | Intervention Window | Customer Success Engineer | SLAs & Penalties | | ------------ | ------------------- | ------------------- | ------------------------- | ---------------- | | Standard | ≤90 mins (P1/P2) | 10h/5d | Included | Not included | | Silver | ≤60 mins (P1/P2) | 10h/5d, 15h/6d | Included | Included | | Gold | ≤30 mins (P1) | 24h/7d | Included | Included | | Platinum | Immediate (P1) | 24h/7d | Included | Included | > P1 = Critical priority | P2 = High priority Detailed SLA and penalty > conditions are available upon request. ## Incident Prioritization Incidents are classified by severity to ensure appropriate response and resolution times. * **P1 - Critical:** Complete service disruption or production outage. * **P2 - High:** Major degradation impacting business operations. * **P3 - Medium:** Non-critical issues or partial functionality loss. * **P4 - Low:** Minor bugs, requests, or informational questions. ## Maintenance and Updates * **Minor updates** (patches, bug fixes) are deployed frequently and safely. * **Major updates** are planned and communicated in advance. * **Scheduled maintenance** is limited to four hours per month, with 10 business days’ notice. ## Backup & Monitoring * **Daily backups** of non-volatile data with 30-day retention * **Proactive monitoring** across all tiers * **Advanced monitoring and reporting** available on request ## Enterprise Assurance Our full SLA document, including detailed KPIs, penalty clauses, and escalation procedures, is available as part of enterprise contracts. file: ./content/docs/support/support.mdx meta: { "title": "Get support" }
![Settlemint support](../../img/using-the-platform/support.png)
For any technical issues or troubleshooting support, feel free to reach out to us.
Our team is available to assist you with any queries you may have. Contact us at [support@settlemint.com](mailto:support@settlemint.com) , we’re here to help.
If you have an existing contract, you can also get in touch with your Account Manager or Customer Success Manager for any assistance.
file: ./content/docs/terms-and-policies/cookie-policy.mdx meta: { "title": "Cookie policy" } ## 1. What are cookies? Cookies are small (text) files, which are stored onto your device by the server of the website you visit. Cookies contain information used by the server to: * Optimize functionality of the website. * Optimize rendering of the website. * Retain and reuse selected preferences. * Analyze visitor's behavior. * Provide targeted advertisement. Cookies typically do not register any personal data, such as your name, address, phone number, email address or other data that can be traced back to you. If you wish, you can configure most browsers to reject cookies or to notify you when cookies are being sent. ## 2. Which cookies do we use? A distinction can be made in the types of cookies in relation to the controlling and processing of the cookies: * First party cookies: Cookies which are fully controlled by SettleMint. * Third party cookies: Cookies which are controlled by a third party related to SettleMint; e.g. Google or Facebook. A second distinction can be made based on the purpose of cookies: * Necessary cookies: Cookies are required to use the website. * Functional cookies: Cookies are facilitating the use of the website and provide you a more personalized experience. * Analytical cookies: Cookies are used to compile visitor statistics to provide a better understanding of the functioning of the website. * Marketing cookies: Cookies can monitor internet user behavior to show personalized online advertisements and customized content. Necessary, functional and analytical cookies, whether first or third party, are always used and placed when visiting our website. We ask for your consent to use and place first party cookies related to marketing purposes. file: ./content/docs/terms-and-policies/gdpr-guide.mdx meta: { "title": "GDPR Compliance" } The General Data Protection Regulation (GDPR) is a comprehensive privacy regulation that governs the collection, processing, and storage of personal data within the European Union (EU) and the European Economic Area (EEA). As a European company building a blockchain application, it is essential to ensure your application complies with GDPR regulations. This documentation will outline key considerations and provide guidance for achieving compliance.
To support our clients in aligning with GDPR requirements, SettleMint provides platform-level features and architectural best practices that help ensure privacy, security, and regulatory alignment while building decentralized applications. *** ## Key considerations ### 1. Data minimization Under GDPR, companies must practice data minimization, collecting and processing only what is necessary for a specific, declared purpose. Blockchain’s inherent immutability introduces challenges here. SettleMint supports this principle by: * Providing integrated off-chain storage modules where sensitive user data can be stored securely, keeping only cryptographic references or hashes on-chain. * Allowing developers to configure smart contracts to avoid direct storage of personally identifiable information (PII). **Best practices suggested:** * Store only deterministic hashes or proofs on-chain. * Use secure IPFS or cloud connectors to manage off-chain personal data. *** ### 2. Identifying data controllers and data processors GDPR requires clear distinction between **data controllers** (who determine the purpose and means of processing) and **data processors** (who act on behalf of controllers). On the SettleMint platform: * Access roles and data flows can be clearly modeled using permissioned blockchain channels. * Organizations on a blockchain network can be mapped to controller/processor roles via Membership Service Provider (MSP) structures. **Best practices suggested:** * Maintain a registry of actors and their responsibilities in your governance model. * Document data processing agreements between consortium members. *** ### 3. Right to erasure (Right to be Forgotten) The immutability of blockchain makes deletion of personal data difficult or impossible. SettleMint addresses this challenge through: * Off-chain personal data storage, enabling full erasure of user data without breaking blockchain references. * Support for advanced cryptographic patterns such as zero-knowledge proofs and hashed identifiers to make data unlinkable. **Best practices suggested:** * Never store raw PII on-chain. * Design smart contracts to support revocation and pointer invalidation mechanisms. *** ### 4. Pseudonymization and anonymization SettleMint enables privacy-by-design through data transformation tools that support: * **Pseudonymization**: Replacing user identifiers with random tokens or blockchain addresses. * **Anonymization**: Removing or irreversibly altering PII such that it cannot be re-linked. **Best practices suggested:** * Use public-private key pairs to abstract identities. * Avoid reusing pseudonyms across different datasets. *** ### 5. Consent management GDPR mandates that users provide clear and revocable consent for processing their personal data. SettleMint provides application kits and templates for: * Building smart contract-based consent registries that are transparent and auditable. * Logging and timestamping user consent and withdrawals immutably, while storing detailed consent data off-chain. **Best practices suggested:** * Design explicit consent flows in the application UI. * Allow users to view and manage consent history via self-sovereign identity interfaces. *** ### 6. Data protection impact assessment (DPIA) A DPIA is essential to proactively assess and mitigate privacy risks. SettleMint supports DPIA efforts by: * Providing visual workflows and configuration templates that help document data flows, access levels, and risk areas. * Enabling rapid prototyping and simulation of data processing within your decentralized architecture. **Best practices suggested:** * Use DPIA templates early in the design phase. * Update DPIA documentation with each chaincode upgrade or network policy change. *** ### 7. Cross-border transfers Transfers of personal data outside the EU/EEA require appropriate safeguards such as Standard Contractual Clauses (SCCs) or Binding Corporate Rules (BCRs). For permissioned blockchains built with SettleMint: * Data residency policies can be enforced through organization-specific data nodes and localized off-chain storage. * Data access policies can be enforced through Fabric/Quorum consortium rules and smart contract-level whitelisting. **Best practices suggested:** * Ensure all network participants agree to and implement SCCs where applicable. * Architect the network with geographic boundaries in mind when dealing with sensitive user data. *** ## SettleMint’s GDPR-aligned features SettleMint is committed to privacy-first blockchain development and offers the following GDPR-supportive features: * **Off-chain Secure Data Vaults**: Integration with IPFS, cloud, and database connectors for compliant data storage. * **Zero-knowledge Pattern Support**: Capability to implement zk-proofs, Merkle proofs, and hashed pointers to minimize on-chain data exposure. * **Granular Access Controls**: Role-based access, smart contract permissions, and organization-level policies enforce strict data governance. * **Audit Logging and Consent Trails**: Tamper-proof registries to track user consent and system actions in accordance with GDPR transparency requirements. * **Chaincode Lifecycle Management**: Ensures that every upgrade or change in data logic is reviewed, versioned, and auditable. *** Achieving GDPR compliance for blockchain applications requires thoughtful design, clear governance, and secure implementation practices. SettleMint simplifies this journey by embedding privacy-focused capabilities directly into its blockchain development platform. Whether you're building enterprise applications or public-facing dApps, SettleMint provides the tools, architecture, and support to meet your data protection obligations under GDPR. file: ./content/docs/terms-and-policies/privacy-policy.mdx meta: { "title": "Privacy policy" } ## 1. Who we are "We", "us", "our", SettleMint, CertiMint or Databroker means SettleMint NV, with its registered office at Arnould Nobelstraat 38, 3000 Leuven, Belgium and with company number BE0661674810. Your privacy is important to us, therefore we've developed this Privacy Policy, which sets out how we collect, disclose, transfer and use ("process") the personal data that you share with us, as well as which rights you have. Please take a moment to read through this policy. We only process personal data in accordance with this Privacy Policy. SettleMint acts both as a "controller" and a "processor" of personal data. The controller of the personal data determines the purposes and means of the processing of personal data and the processor processes the personal data on behalf of the controller. Personal data are all data that can be traced back to individual persons and identify them directly or indirectly; such as a name, phone number, location, email or home address. Should you have any questions, concerns or complaints regarding this Privacy Policy or our processing of your personal data; or you wish to submit a request to exercise your rights as set out by the GDPR, you can contact us: * Via mail: [privacy@settlemint.com](mailto:privacy@settlemint.com). * By post: Arnould Nobelstraat 30, 3000 Leuven, Belgium to the attention of our Data Protection Officer. This Privacy Policy was revised last on February 21, 2021. ## 2. How and for which purpose do we collect your personal data ### 2. 1 contact form When filling in the contact form on our website, we need certain information about you in order to be able to answer your questions or requests. We will use the information collected through the contact form only for the purpose of dealing with your request. For this purpose, we collect the following data: * Full name and Surname * Company name * E-mail address * Phone number * Any additional information you provide to us regarding your project Alternatively, you can contact us by email via [support@settlemint.com](mailto:support@settlemint.com). We process this information based on your consent as you provided this information freely to us. ### 2. 2 newsletter In the event you register for our newsletter, your email address will be used in order to send you our newsletters, which may include invites to events, seminars, etc. organized by us. All other data fields are marked as "voluntary" and you can submit your question without having to fill in this additional requested information. For this purpose, we collect the following data: * Name * E-mail address We process this information based on your consent as you provided this information freely to us. ### 2. 3 website maintenance and improvement In order to improve our website, we offer the possibility to provide us with feedback through the Hotjar tool. The providing of feedback, with or without the Hotjar tool is not mandatory nor required to view and browse our website. For this purpose, we collect the following data: * Emoticon representing your general feeling about your experience. * Free text field. * Email address. * Connection with data related to visits (device-specific, usage data, cookies, behavior and interactions) of previous and future visits. Combination of feedback with any other feedback previously submitted from your device, location (limited to country), language used, technology used (device and browser), custom attributes (e.g. products or services you are using), your behavior and interactions (pages visited). We furthermore use Google Analytics and Hubspot to provide us insights on the website performance, conversion rates and other visitor metrics. Google Analytics and Hubspot use cookies in order to collect the data which is being processed. For more information on cookies, we refer to our cookie policy. We process this information based on our legitimate interest. ### 2. 4 job applicants (including unsuccessful applicants) SettleMint processes personal data of applicants seeking to be employed by SettleMint and (potential) business relations. Business relations include clients, suppliers and subcontractors who provide services or carry out assignments for or on behalf of SettleMint (processors). The information we collect from you depends on your relationship with SettleMint or the services you use within SettleMint. For this purpose, we collect the following data: * Name; * Curriculum vitae (CV), which may include: * Address. * Place of residence. * Date of birth. * Telephone number. * E-mail address. * References. * Certificates. We process this information based on the execution of a (future) contract. ### 2. 5 employees and former employees SettleMint processes personal data of employees and former employees, selfemployed persons/employees employed by SettleMint and (potential) business relations. Business relations include clients, suppliers and subcontractors who provide services or carry out assignments for or on behalf of SettleMint (processors).The information we collect from you depends on your relationship with SettleMint or the services you use within SettleMint. The data is used to e.g., provision salary payments, registration of mobile phone number, mobility and insurance. For these purposes, we collect the following data: * Name; * Address; * Contact details, including email address and telephone number; * Date of birth; * Place of birth; * Nationality; * National register number; * Gender; * Language; * Details of your qualifications, skills, experience and employment history, including start and end dates, with previous employers and with the organization; * Information about your pay and benefits; * Bank account number; * Information about your marital status, next of kin, dependents and emergency contacts; * Employment contract. We process this information based on the execution of a contract. ### 2. 6 (potential) business connections During any interaction with you, we may collect personal data for business and marketing purposes. Interaction may include events (collection of business cards), our options to contact SettleMint, or you when serving as a contact point for the collaboration with your company. For this purpose, we collect the following data: * Company information (name, address, sector...); * Contact details (name, email-address and/or phone number...) * Job title; * Notes on our meetings/conversations/history in general; * Contract information, including billing. We process this information based on our legitimate interest. ### 2. 7 cookies Our website makes use of cookies to facilitate the rendering and functioning. For further information relating to our use of cookies, we refer you to our Cookie Policy. We process this information based on legitimate interest. ### 2. 8 training Under the name of Blockchainacademy.global, SettleMint organizes training sessions to which any individual can subscribe. For this purpose, we collect the following data: * Name; * Email address; * Bank data. We may furthermore ask the attendees of the training for feedback on the attended training, in order to improve our training activities. For this purpose, we anonymously collect the following data: ● Feedback. We process this information based on the execution of a contract. ## 3. Do we share or transfer your personal data? We actively and passively share data with a number of affiliated third parties which we engage to assist us in the execution of our daily activities. Active sharing means that the third party processes the information as input in the process of our collaboration with said third party. Passive sharing on the other hand means that we use a service/software provided and hosted by the third party, however the third party does not process the information as an input in the process of our collaboration with said third party. Our active sharing collaborations are: * KBC - KBC uses the data for insurance purposes commissioned by SettleMint for SettleMint employees. * NMBS/SNCB - NMBS/SNCB uses the data for issuance of subscription purposes commissioned by SettleMint for SettleMint employees. * Orange - Orange uses the data for mobile phone number registration purposes commissioned by SettleMint for SettleMint employees. * SD Worx - SD Worx uses the data for salary payment purposes commissioned by SettleMint for SettleMint employees. Our passive sharing collaborations are: * Deloitte - We use this supplier for accounting purposes. * Eventbrite - We use this supplier for organization of training purposes. SettleMint actively processes the information and provides the training, while Eventbrite hosts the website on which individuals can register for the training. * Google Mail - We use this Software as a Service for digital communication purposes. SettleMint actively processes the information while Google hosts the software. * Leadfeeder - We use this Software as a Service for customer relationship management purposes.SettleMint actively processes the information while Leadfeeder hosts the software. * MailChimp - We use this Software as a Service for newsletter purposes. SettleMint actively processes the information while MailChimp hosts the software. * Microsoft Office Lens - We use this Software as a Service for customer relationship management purposes. SettleMint actively processes the information and Microsoft provides the software. * Pipedrive - We use this Software as a Service for customer relationship management purposes. SettleMint actively processes the information while Pipedrive hosts the software. * SurveyMonkey - We use this Software as a Service for training feedback purposes. SettleMint actively processes the information while Pipedrive hosts the software. * Hotjar - We use this Software as a Service for website visit experience feedback. SettleMint actively processes the information, while Hotjar hosts the software. * Google Analytics - We use this Software as a Service for website traffic analysis. SettleMint actively processes the information, while Google hosts the software. * Zoom - We use this Software as a Service for web conferencing purposes. SettleMint actively processes the information while Zoom hosts the software. * Phantombuster - We use this Software as a Service for sales automation purposes. SettleMint actively processes the information while Phantombuster hosts the software. * Zapier - We use this Software as a Service for marketing automation purposes. SettleMint actively processes the information while Zapier hosts the software. * Leadpages - We use this Software as a Service for website visit experience feedback. SettleMint actively processes the information, while Leadpages hosts the software. * Segment - We use this Software as a Service for data management purposes. SettleMint actively processes the information, while Segment hosts the software. * Hubspot - We use this Software as a Service for customer relationship management purposes & marketing automation. SettleMint actively processes the information while Hubspot hosts the software For each of the above mentioned third parties, we have a data processing agreement, governing the use by these third parties and the protection of your personal data. Besides the aforementioned affiliated third parties, we make use of social media and their plugins, which enable you to be directed to our social media channels and to interact with our content and employees. We do not however disclose your personal data to any of our social media partners. Any reference made to you will be discussed with you upfront to obtain your consent. These social media channels on which we are represented, and related management tools are: * Facebook; * LinkedIn; * Twitter; * Instagram; * YouTube; * Reddit; * Medium; * GitHub; * Telegram; * Hootsuite In the event you click such a link, such social media service provider may collect personal data about you and may link this information to your existing profile on such social media. We are not responsible for the use of your personal data by such social media service provider. In this case, the social media service provider will act as controller. ## 4. What techniques do we use to protect the privacy of your personal data? SettleMint has implemented technical and organizational measures that are appropriate to the obtained personal data. These safeguards are designed to secure all your personal data from loss and unauthorized access, copying, use or modification. 1. Technical measures: * Use of anti- virus, firewalls, etc.; * Authentication; * Encrypted hard disks; * Access restriction; * Encryption of data; * Secure backup. 2. Organizational measures: * Access for specific persons; * Internal Privacy Policy for employees; * Training of employees; * Confidentiality clauses; * Incident & data breach management. We can transfer your personal data to parties that are based outside the EEA. In such a case, we ensure that your personal data is processed in a country that has a similar degree of data protection and where at least one of the following safeguards is implemented: * Countries that have been deemed to provide an adequate level of data protection by the European Commission; * Where we use specific providers, we may use specific contracts approved by the European Commission which gives personal data the same protection it has within the EEA; * Where we use providers based in the US, we may transfer your data if they are certified under the EU-US Privacy Shield, which requires a similar level of data protection as if it was processed within the EEA." ## 5. How long do we keep your personal data? We retain your data for as long as it is necessary for the fulfillment of the purposes we collected it for. In some circumstances we may anonymize your personal data - which means it can no longer be associated to you- for research or statistical purposes in which case we may use this information without further notice to you. In cases where local law requires it, we retain your personal data for the following period: * Hotjar website visit experience feedback - 1 year * CV obtained through external recruiters - 2 years * CV uploaded via our website - 1 year * Employee data - 5 years or as legally required * Orange mobile phone registration data - 5 years or as legally required * KBC employee insurance data - 5 years or as legally required * Deloitte accounting -5 years or as legally required ## 6. What are your rights? You have rights under the GDPR in relation to your personal data. We have summarized them for you in a clear and legible way. To exercise any of your rights, please send us a written request in accordance with paragraph 1 of this Privacy Policy. We will respond to your request without undue delay, but in any event within one month of the receipt of the request. In the case of complex requests or many requests, we may extend this period with two additional months. In such case, we shall inform you of the extension within one month of the receipt of your request and the reasons for the delay. ### 6. 1 the right to be informed In accordance with Article 12 of the GDPR, we as controller shall take appropriate measures to provide any information referred to in Articles 13 through to 22 and Article 34 relating to processing of your personal data in a concise, transparent, intelligible and easily accessible form, using clear and plain language, in particular for any information addressed specifically to a child. The information shall be provided in writing, or by other means, including, where appropriate, by electronic means. When requested by you, the information may be provided orally, given that your identity is proven. Where we obtain personal data, collected directly from you, we shall provide you with: * Our contact details. * The contact details of our data protection officer where applicable. * The purposes of the processing for which the personal data is intended, as well as the legal basis for the processing. * Details of the purposes for processing in case of legitimate interests. * The recipients of the personal data, if any. * Where applicable, the intention to transfer personal data to a third country orinternational organization and the existence or absence of an adequacy decision by the Commission and any appropriate or suitable safeguards. * The period for which the personal data will be stored. * Information on further processing other than for the purposes originally stated, prior to further processing. Where we obtain personal data, not collected directly from you, we shall provide you with: * The information as mentioned in the paragraph above, on information we collected directly from you. * The identity and contact details of the controller/controller's representative. * The contact details of the data protection officer where applicable ### 6. 2 the right to access In accordance with Article 15 of the GDPR, you have the right to ask us if we process personal data concerning you. In the case that we process your personal data, you have the right to ask us: * The purpose for which it is been processed; * Which personal data; * Duration of the retention; * The source of data (third party or automated processing such as profiling); * Safeguards related to transfer; * A copy of the data. Note that for any additional copies, we reserve the right to charge a reasonable fee to cover administrative costs. ### 6. 3 the right to rectification In accordance with Article 16 of the GDPR, you have the right to request a correction of the stored personal data concerning you if they are inaccurate or incorrect. ### 6. 4 the right to erasure (right to be forgotten) In accordance with Article 17 of the GDPR, you have the right to request that your personal data held by us is erased. In other words, you have the right to be forgotten by us if: * Personal data is no longer necessary in relation to the purpose for which it was collected; * You withdraw your consent for the processing and we based our processing on your consent; * No overriding legitimate grounds for processing are presented by the controller in response to the objection by the data subject; * The personal data has been unlawfully processed; * The personal data has to be erased for compliance with legal obligations; * The data subject is younger than 16 years and consent of the holder of parental responsibility has not been obtained. The right to be forgotten does not apply for: * Exercising the right of freedom of expression and information; * Compliance with legal obligations which requires processing by law; * Reasons of public interest in the area of public health; * Archiving purposes in the public interest, scientific or historical research purposes or statistical purposes. ### 6. 5 the right to restrict processing In accordance with Article 18 of the GDPR, you have the right to restrict the processing of your personal data (meaning that the personal data may only be stored by us and may only be used for limited purposes), if: * You contest the accuracy of the personal data (and only for as long as it takes to verify that accuracy); * The processing is unlawful, and you request restriction (as opposed to exercising the right to erasure); * We no longer need the personal data for the purposes of our processing, but you require personal data for the establishment, exercise or defense of legal claims; * You have objected to processing, pending the verification of that objection. In addition to our right to store your personal data, we may still otherwise process it but only: * With your consent; * For the establishment, exercise or defense of legal claims; * For the protection of the rights of another natural or legal person; * For reasons of important public interest. We will inform you before we lift the restriction of processing. ### 6. 6 the right to data portability In accordance with Article 20 of the GDPR, you have the right to receive your personal data, which you have provided to us, in an understandable and readable format. You furthermore have the right to transmit that data to another organization without hindrance from us if our processing of the data was based on your consent and is processed in an automated manner. Where technically feasible, you have the right to have your data transferred directly by us to the organization. Exercising your right to data portability shall be without prejudice. Note that the right to data portability does not apply if: * The processing is necessary for the performance of a task carried out in the public interest. * The processing is in the exercise of official authority vested in us. * It adversely affects the rights and freedoms of others. ### 6. 7 the right to object to processing In accordance with Article 21 of the GDPR, you are entitled to object to the processing of your personal data, meaning that we have to terminate the processing of your personal data. The right of objection exists only within the limits provided for in art. 21 GDPR. In addition, our interests may prevent the processing from being terminated, so that we are entitled to process your personal data despite your objection. ### 6. 8 automated individual decision-making, including profiling In accordance with Article 22 of the GDPR, you have the right not to be subject to a decision based solely on automated processing, including profiling, which produces legal effects concerning you or similarly affects you. This right shall not apply if the decision is: * Necessary for entering into, or performance of, a contract between you and us. * Authorized by Union or Member State law to which we are subject, and which also lays down suitable measures to safeguard the data subject's rights and freedoms and legitimate interests. * Based on your explicit consent. ### 6. 9 right of appeal to a supervisory authority If you consider that our processing of your personal information infringes data protection laws, you have a legal right to lodge a complaint with a supervisory authority responsible for data protection. You may do so in the EU member state of your habitual residence, your place of work or the place of the alleged infringement. In Belgium, you can submit a complaint to the Authority for the protection of personal data: De Gegevensbeschermingsautoriteit (GBA) Drukpersstraat 35 1000 Brussel Tel.: +32 (0)2 274 48 00 Fax.: +32 (0)2 274 48 35 [commission@privacycommission.be](mailto:commission@privacycommission.be) `` ## 7. Amendments to the privacy policy In a world of continuous technological change, we will need to update this Privacy Statement on a regular basis. We invite you to consult the latest version of this Privacy Statement online and we will keep you informed of important changes through our website or through our other usual communication channels. file: ./content/docs/terms-and-policies/terms-of-service.mdx meta: { "title": "Terms of service" } SettleMint Platform -- Terms of Service DISCLAIMER: Please read these Terms of Service carefully before using the SettleMint Platform (as defined below). By using the platform, you agree that your use of the SettleMint Platform shall be governed by these Terms of Service. Version 2.0 -- October 15, 2021 If you have any questions about the SettleMint Platform or these Terms of Service, please contact us at [support@settlemint.com](mailto:support@settlemint.com). The SettleMint Platform (as defined herafter) is operated and managed by SettleMint, a limited liability company (naamloze vennootschap) having its registered office at 7Tuinen, Building B, Arnould Nobelstraat 38, 3000 Leuven (Belgium) and registered with the Crossroads Bank of Enterprises (Kruispuntbank van Ondernemingen) under company number 0661.674.810 (RLE Leuven) ("SettleMint" or "we"). These terms of service (the "Terms of Service") describe the terms and conditions under which user(s) ("User(s)" or "you") can access and use the SettleMint Platform) except when other contractual arrangements are expressly made between SettleMint and User. The general terms and conditions of the User are not applicable and are therefore expressly excluded, even if such general terms and conditions would contain a similar clause. In the event of any conflict or inconsistency between the provisions of these Terms of Service and the provisions of any contractual arrangements between SettleMint and User, the provisions of the latter shall prevail. SettleMint and the User are hereinafter jointly referred to as "Parties" and each individually as a "Party". ## 1. Description of the SettleMint platform The SettleMint Platform is a cloud-based blockchain application building, integration and hosting platform allowing developers to build and integrate blockchain applications available at [https://console.settlemint.com](https://console.settlemint.com) (the "Platform"). ## 2. Applicability 2.1. The access and use of the Platform is subject to acceptance without modification of all terms and conditions as contained in these Terms of Service. 2.2. By clicking the "I agree" button, you engage in our service and acknowledge and agree that your use of the Platform is exclusively governed by these Terms of Service. If you do not agree to any provision of these Terms of Service, you may not access and use the Platform in any manner, even if you already have an Account. 2.3. In the event the Platform uses services or components (which may include open source software) of third parties or provides access to any third party websites, services and applications ("Third Party Services"), these Terms of Service will not apply to these Third Party Services and the terms of service, license agreements and/or privacy policies of those third parties will govern your use of the Third Party Services. You shall be notified if and when such third party terms of service, license agreements and/or privacy policies are applicable. By accessing such third party service, you agree to comply with the applicable terms and you acknowledge that you are the sole party to such terms. SettleMint cannot be held liable in any way with regard to the use of the Third Party Services and the content of such third parties' terms, license agreements or privacy policy. 2.4. We reserve the right at any time, and from time to time, with or without cause to: * amend these Terms of Service; * change the Platform, including, adding, eliminating or discontinuing, temporarily or permanently any tool, service or other feature of the Platform without any liability against the User or any third parties; or * deny or terminate, in part, temporarily or permanently, your use of and/or access to the Platform as set forth herein. Any such amendments or changes made will be effective immediately upon SettleMint making such changes available in the Platform or otherwise providing notice thereof. You agree that your continued use of the Platform after such changes constitutes your acceptance of such changes. ## 3. Use of the platform 3.1. You are responsible for providing at your own expense, all equipment necessary to connect to, access and otherwise use the Platform, including but not limited to modems, hardware, server, operating system, software and internet access (the "Equipment"). You are responsible for ensuring that such Equipment is compatible with the Platform and complies with all minimum system requirements as set out on the webpage. You will also be responsible for maintaining the security of the Equipment. SettleMint will not be liable for any loss or damage arising from your failure to comply with the above requirements. 3.2. In order to access the Platform's app creation and management tools you will be required to create an account providing you access to the Platform (the "Account") and provide certain registration information. Every individual with such access Account is a "Direct User" (as opposed to "End Users" who are individuals invited by User to use the SettleMint Platform Apps created in the Platform. When creating your Account, you agree (i) to provide accurate, truthful, current and complete information and (ii) to maintain and promptly update your Account information. SettleMint reserves the right to suspend or terminate the Account of anyone who provides inaccurate, untrue, or incomplete information or who fails to comply with the account registration requirements. You shall be solely responsible for maintaining the confidentiality and security of your Account login information such as your password and shall be fully responsible for all activities that occur under your Account. You agree to immediately notify SettleMint of any unauthorized use, or suspected unauthorized use of your Account or any other breach of security. 3.3. During the Term, SettleMint may, in its sole discretion, provide you with certain updates of the Platform. ## 4. Acces to the platform ### 4. 1. license by settlemint 4.1.1. During the Term and subject to these Terms of Service and to the timely payment of the Fees, SettleMint grants you a non-exclusive, personal, restricted, revocable and subject to the conditions set forth in section 4.1.7. transferable and sub-licensable license to access and use the functionality of the Platform, including updates, solely to develop, use and host a blockchain application that you make available to End Users (a "SettleMint Platform App") (the "License"). 4.1.2. Term and Renewal. Your initial license term is of one year and will automatically renew at the end of the license term. 4.1.3. Notice of Non-Renewal. To prevent renewal of your license, you must give a written notice of non-renewal at least 60 days before the end of the license term. 4.1.4. Early Cancellation. You may choose to cancel your license early at your convenience provided that we will not provide any refunds of prepaid fees or unused license Fees, and you will promptly pay all unpaid fees due through the end of the license Term. 4.1.5. Free Trial. If you register for a free trial, we will make the applicable license available to you on a trial basis free of charge until the earlier of (a) the end of the free trial period (if not terminated earlier) or (b) the start date of your paid license. Unless you purchase a license before the end of the free trial, all your data may be permanently deleted at the end of the trial, and we will not recover it. If we include additional terms and conditions on the trial registration web page, those will apply as well. 4.1.6. You are not allowed to use the Platform in a manner not authorized by SettleMint. You shall use the Platform solely in full compliance with (i) these Terms of Service; (ii) any additional instructions or policies issued by SettleMint, including, but not limited to, those posted within the Platform and (iii) any applicable legislation, rules or regulations. 4.1.7. Provided you are offering the Platform exclusively as an integrated solution for your own use and for your proper commercial purposes to offer your End Users a SettleMint Platform App in your own name and for your proper account, the License set forth herein is transferable and sub-licensable for purposes of integration only and subject to the restrictions set out in section 4.2. ### 4. 2. restrictions You agree to use the Platform only for its intended use as set forth in these Terms of Service. Within the limits of the applicable law, you are not permitted to (or allow any other third party to) (i) access the Platform functionalities by any other means other than through the interface and Account that is provided to you by SettleMint (ii) copy, adapt, alter, translate or modify in any manner the Platform or underlying software; (iii), lease, rent, loan, distribute, or otherwise transfer the Platform to any third party; (iv) decompile, reverse engineer, disassemble, or otherwise derive or determine or attempt to derive or determine the software code (or the underlying ideas, algorithms, structure or organization) of the Platform, except and only to the extent that such activity is expressly permitted by applicable law notwithstanding this limitation; (v) gain unauthorized access to accounts of other Users or use the Platform to conduct or promote any illegal activities; (vi) use the Platform to generate unsolicited email advertisements or spam; (vii) impersonate any person or entity, or otherwise misrepresent your affiliation with a person or entity; (viii) use any high volume automatic, electronic or manual process to access, search or harvest information from the Platform (including without limitation robots, spiders or scripts); (ix) alter, remove, or obscure any copyright notice, digital watermarks, proprietary legends or other notice included in the Platform; (x) intentionally distribute any worms, Trojan horses, corrupted files, or other items of a destructive or deceptive nature (xi) use the Platform for any unlawful, invasive, infringing, defamatory or fraudulent purpose; or (xii) remove or in any manner circumvent any technical or other protective measures in the Platform. Except as expressly set forth herein, no express or implied license or any rights of any kind are granted to you regarding the Platform, including but not limited to any right to obtain possession of any source code, data or other technical material relating to the Platform. ### 4. 3. license by user By uploading, creating or otherwise sharing data on or through the Platform, you grant SettleMint a non-exclusive, royalty-free, worldwide, sublicensable, transferable, license to use, copy, store, modify, transmit and display such data and documents uploaded by you (the "User Data"), to the extent necessary and always in compliance with the provisions set forth in Article 12 of these Terms of Service. To provide and maintain the Platform, SettleMint reserves the right, but is not obliged, to review and remove any User Data which is deemed to be in violation with the provisions of these Terms of Service or is deemed inappropriate in accordance with any rights of third parties or any applicable legislation or regulation. ## 5. Ownership 5.1. As between the User and SettleMint, the Platform and all Intellectual Property Rights pertaining thereto, are the exclusive property of SettleMint and/or its licensors. For the purpose of this Agreement, "Intellectual Property Rights" means any and all now known or hereafter existing (a) rights associated with works of authorship, including copyrights, and moral rights, (b) trademark or service mark rights, (c) trade secret rights, know-how, (d) patents, patent rights, and industrial property rights, (e) layout design rights, design rights (f) semi-conductor topography rights (g) rights on trade-, brand- , business- and domain names, (h) database rights, and any other industrial or intellectual proprietary rights or similar right (whether registered or unregistered), and (i) all registrations, applications for registration, renewals, extensions, divisions, improvements or reissues relating to any of these rights and the right to apply for, maintain and enforce any of the preceding items, in each case in any jurisdiction throughout the world. 5.2. All rights, including Intellectual Property Rights, titles and interests in and to the Platform or any part thereof not expressly granted to the User by these Terms of Service are reserved by SettleMint and its licensors. Except as expressly set forth herein, no express or implied license or right of any kind is granted to the User regarding the Platform, including any right to obtain possession of any software code, data or other technical material related to the Platform. 5.3. Feedback. If you provide SettleMint with any feedback or suggestions regarding the Sites or Services ("Feedback"), you hereby assign to SettleMint all rights in such Feedback and agree that SettleMint shall have the right to use and fully exploit such Feedback and related information in any manner it deems appropriate. SettleMint will treat any Feedback you provide to SettleMint as non-confidential and non-proprietary. You agree that you will not submit to SettleMint any information or ideas that you consider to be confidential or proprietary. ## 6. Suspension for breach If SettleMint becomes aware or suspects, in its sole discretion, any violation by you of these Terms of Service, or any other instructions, guidelines or policies issued by SettleMint, then SettleMint may suspend or limit your access to the Platform. The duration of any suspension will be until you have cured the breach which caused such suspension or limitation, except when such breach is incurable. ## 7. Support In case you need technical support, you can contact SettleMint on the following Email address [support@settlemint.com](mailto:support@settlemint.com). ## 8. Payment 8.1. In consideration for the License and the access to and use of the Platform as set out in these Terms of Service, SettleMint will charge the usage fees as displayed on the Platform. 8.2. All payments for the use of the Platform can be made by credit card or wire transfer (upon approval by the credit committee). SettleMint will only process card transactions that have been authorized by the applicable network or card issuer. Users shall authorize their banks to hold, receive, disburse and settle funds on their behalf, including generating a paper draft or electronic funds transfer to process each payment transaction initiated by the User and relating to the use of the Platform. Subject to these Terms of Service, Users shall also authorize their banks to debit or credit any payment card or other payment method accepted by SettleMint. 8.3. If payments are made by credit card, the User shall be solely responsible for the security of its data (including but not limited to the information associated with a payment card, such as card holder, account number, expiration date and CVC (the "Cardholder Data")) in its possession or control. Users agree to comply with all applicable laws, regulations and rules relating to the collection, security and dissemination of any personal, financial or transaction information. Users agree to notify SettleMint immediately if they provide any third party with access (or otherwise permit, authorize, or enable such third party's access) to any Cardholder Data. 8.4. If payments are settled via wire transfer, the User should pay the invoices within 30 days of issuance. For later payment, interest charges of 1,5% per month or the highest permissible rate applicable by law will be charged. Under no circumstances will SettleMint refund the usage fees. YOU MUST PROVIDE CURRENT, COMPLETE AND ACCURATE INFORMATION FOR YOUR BILLING ACCOUNT. YOU MUST PROMPTLY UPDATE ALL INFORMATION TO KEEP YOUR BILLING ACCOUNT CURRENT, COMPLETE AND ACCURATE (SUCH AS A CHANGE IN BILLING ADDRESS, CREDIT CARD NUMBER, OR CREDIT CARD EXPIRATION DATE), AND YOU MUST PROMPTLY NOTIFY US OR OUR PAYMENT PROCESSORS IF YOUR PAYMENT METHOD IS CANCELED (E.G., FOR LOSS OR THEFT) OR IF YOU BECOME AWARE OF A POTENTIAL BREACH OF SECURITY, SUCH AS THE UNAUTHORIZED DISCLOSURE OR USE OF YOUR USER NAME OR PASSWORD. CHANGES TO SUCH INFORMATION CAN BE MADE AT [billing@settlemint.com](mailto:billing@settlemint.com) ## 9. Liability 9.1. To the maximum extent permitted under applicable law, SettleMint shall only be liable for personal injury or any damages resulting from (i) its gross negligence; (ii) its willful misconduct or (iii) any fraud committed by SettleMint. 9.2. To the extent permitted under applicable law, SettleMint shall not be liable to the User or any third party, for any special, indirect, exemplary, punitive, incidental or consequential damages of any nature including, but not limited to damages or costs due to loss of profits, data, revenue, goodwill, production of use, procurement of substitute services, or property damage arising out of or in connection with the Platform under these Terms of Service, including but not limited to any miscalculations, or the use, misuse, or inability to access or use the Platform, regardless of the cause of action or the theory of liability, whether in tort, contract, or otherwise, even if SettleMint has been notified of the likelihood of such damages. The limitation in this section 9.2. shall not apply to the obligations of SettleMint under section 11 ("Indemnification"). 9.3. You agree that SettleMint can only be held liable as per the terms of this section 9 to the extent damages suffered by you are directly attributable to SettleMint. You further agree that SettleMint is only liable to you directly, and not to the End Users. For the avoidance of doubt, SettleMint shall not be liable for any claims resulting from (i) your or any third party's unauthorized use of the Platform, (ii) your or any third party's use of the SettleMint Platform Apps, (iii) Third Parties Services, (iv) your failure to use the most recent version of the Platform made available to you or your failure to integrate or install any corrections to the Platform issued by SettleMint, or (v) your use of the Platform in combination with any non-SettleMint products or services. The exclusions and limitations of liability under this section shall operate to the benefit of any of SettleMint's affiliates and subcontractors under these Terms of Service to the same extent such provisions operate to the benefit of SettleMint. 9.4. To the extent permitted by applicable law, and except in the case of fraud, willful misconduct or gross negligence by SettleMint, SettleMint's aggregate liability arising from or relating to these Terms of Service will be limited to the Fees paid to SettleMint during a period of twelve (12) months prior to the occurrence giving rise to the liability. ## 10. Warranties and disclaimers ### 10. 1. by settlemint 10.1.1. General. Except as expressly provided in this section 10 and to the maximum extent permitted by applicable law, the Platform is provided "AS IS," and SettleMint makes no (and hereby disclaims all) other warranties, covenants or representations, or conditions, whether written, oral, express or implied including, without limitation, any implied warranties of satisfactory quality, course of dealing, trade usage or practice, merchantability, suitability, availability, accessability, title, non-infringement, or fitness for a particular use or purpose, with respect to the use, misuse, or inability to use the Platform or any other products or services provided to the User by SettleMint. SettleMint does not warrant that all errors can be corrected, or that access to or operation of the Platform shall be uninterrupted, secure, or error-free. 10.1.2. Network control. The User acknowledges and agrees that there are risks inherent to transmitting information and storing information on the internet and through blockchain and that SettleMint is not responsible and cannot be held liable for any loss of your data. User further acknowledges and agrees that SettleMint does not own or control any of the underlying software through which blockchain networks are formed nor, the case being, cryptocurrencies are created and transacted. In general, the underlying software for blockchain networks tends to be open source such that anyone can use, copy, modify, and distribute it. By accessing and using the Platform, you understand and acknowledge that SettleMint is not responsible for operation of the underlying software and networks that support blockchain and cryptocurrencies and that SettleMint makes no guarantee of functionality, security, or availability of such software and networks. 10.1.3. Forks. The underlying protocols are subject to sudden changes in operating rules, and third parties may from time to time create a copy of a digital asset network and implement changes in operating rules or other features ("Forks") that may result in more than one version of a network (each, a "Forked Network"). You understand and acknowledge that Forked Networks are wholly outside of the control of SettleMint. In the event of a Fork, you understand and acknowledge that SettleMint may temporarily suspend services on the Platform and SettleMint Platform Apps (with or without advance notice to you) while we determine, at our sole discretion, if and which Forked Network(s) to support. ### 10. 2. by user You represent and warrant to SettleMint that (a) you have the authority to enter into this binding agreement personally, (b) that you are liable for any User Data and that this User Data is accurate and truthful and shall not (i) infringe any Intellectual Property Rights of third parties; (ii) misappropriate any trade secret; (iii) be deceptive, defamatory, obscene, pornographic or unlawful; (iv) contain any viruses, worms or other malicious computer programming codes intended to damage the Platform or data; or (v) otherwise violate the rights of a third party, (c) that you and all transactions initiated by you will comply with all rules and regulations applicable to such transaction, (d) you are solely responsible for the SettleMint Platform Applications created by you on the Platform and (e) you will not use the Platform, directly or indirectly, for any fraudulent undertaking or in any manner so as to interfere with the use of the Platform. If SettleMint determines you have used the Platform for a fraudulent, unauthorized, illegal or criminal purpose, you hereby authorize SettleMint to share information about you, your Account or your access to the Platform with the competent authorities. You agree that any use of the Platform contrary to or in violation of these representations and warranties shall constitute unauthorized and improper use of the Platform for which SettleMint cannot be held liable. ## 11. Indemnification ### 11. 1. by settlemint SettleMint shall defend and indemnify you as specified herein against any founded and well-substantiated claims brought by third parties to the extent such claim is based on an infringement of the Intellectual Property Rights of such third party by the Platform and excluding any claims resulting from (i) your or any third party's unauthorized use of the Platform, (ii) your or any third party's use of the SettleMint Platform Apps, (iii) your failure to use the most recent version of the Platform made available to you, or your failure to install any corrections or updates to the Platform issued by SettleMint, if SettleMint indicated that such update or correction was required to prevent a potential infringement, (iv) Third Parties Services, or (v) your use of the Platform in combination with any non-SettleMint products or services. Such indemnity obligation shall be conditional upon the following: (i) SettleMint is given prompt written notice of any such claim; (ii) SettleMint is granted sole control of the defense and settlement of such a claim; (iii) upon SettleMint's request, the User fully cooperates with SettleMint in the defense and settlement of such a claim, at SettleMint's expense; and (iv) the User makes no admission as to SettleMint's liability in respect of such a claim, nor does the User agree to any settlement in respect of such a claim without SettleMint's prior written consent. Provided these conditions are met, SettleMint shall indemnify the User for all damages and costs incurred by the User as a result of such a claim, as awarded by a competent court of final instance, or as agreed to by SettleMint pursuant to a settlement agreement. In the event the Platform, in SettleMint's reasonable opinion, is likely to or become the subject of a third-party infringement claim (as per this section 11.1.), SettleMint shall have the right, at its sole option and expense, to: (i) modify the (allegedly) infringing part of the Platform so that it becomes non-infringing while preserving materially equivalent functionalities; (ii) obtain for the User a license to continue using the Platform in accordance with these Terms of Service; or (iii) terminate the Terms of Service for that portion of the Platform which is the subject of such infringement. The foregoing states the entire liability and obligation of SettleMint and the sole remedy of the User with respect to any infringement or alleged infringement of any Intellectual Property Rights caused by the Platform or any part thereof. ### 11. 2. by user You hereby agree to indemnify and hold harmless SettleMint and its current and future affiliates, officers, directors, employees, agents and representatives from each and every demand, claim, loss, liability, or damage of any kind whatsoever, including reasonable attorney's fees, whether in tort or in contract, that it or any of them may incur by reason of, or arising out of, any claim which is made by any third party with respect to (i) any breach or violation by you of any provisions of these Terms of Service or any other instructions or policies issued by SettleMint; (ii) any data violating any Intellectual Property Rights of a third party and (iii) fraud, intentional misconduct, or gross negligence committed by you. ## 12. Privacy statement SettleMint recognizes and understands the importance of your privacy and wants to respect your desire to store and access personal information in a private and secure environment. Please note that SettleMint has to be considered as the Data Processor and the User as the Data Controller for the processing of any Personal Data in accordance with the EU Regulation 2016/679 together with the codes of practice, codes of conduct, regulatory guidance and standard clauses and other related legislation resulting from such Regulation, as updated from time to time (the "General Data Protection Regulation"), via the Platform or any part thereof. Please note that SettleMint shall only process any Personal Data relating to you on the documented instructions from the Data Controller and takes appropriate technical and organizational measures against any unauthorized or unlawful processing of your Personal Data or its accidental loss, destruction or any unauthorized access thereto. In the event you as a User request SettleMint of a copy, correction, deletion of the Personal Data or you want to restrict or object to the processing activities, you shall inform SettleMint of such request within two (2) calendar days. SettleMint shall, as Data Processor, provide the User with full details of such request, objection or restriction of the User, together with a copy of the Personal Data held by SettleMint. We shall not use your Personal Data for any other purpose than instructed by the Data Controller and allowing you to make use of the features of the Platform. For the purpose of these Terms of Service, "Data Controller", "Data Processor" and "Personal Data", shall have the meaning given thereto in the Data Protection Regulation. ## 13. Terms and termination 13.1 The term of this Agreement will commence on the Effective Date and remain in effect as long as subscription and usage fees are paid, unless terminated earlier in accordance with section 13.3. The termination of this Agreement can be requested by you at any time, upon which you will pay the outstanding balance, after which there will be no further charges. 13.2. SettleMint will not be liable to you for compensation, reimbursement, or damages in connection with any termination or suspension of the use of the Platform. Any termination of these Terms of Service does not relieve Users from any obligations to pay Fees or costs accrued prior to termination and any other amounts owed by you to SettleMint as provided in these Terms of Service. 13.3. Termination for breach SettleMint may terminate with immediate effect these Terms of Service and your right to access and use of the Platform (i) if SettleMint believes or has reasonable grounds to suspect that you are violating these Terms of Service (including but not limited to any violation of the Intellectual Property Rights of SettleMint) or any other guidelines or policies issued by SettleMint or (ii) if you are suspended for non-payment for more than 30 (thirty) days. 13.4. Effects of termination Upon the termination of these Terms of Service for any reason whatsoever in accordance with the provisions of these Terms of Service, at the moment of effective termination: (i) you will no longer be authorized to access or use the Platform; (ii) SettleMint shall sanitize and destroy the Personal Data related to your Account, including but not limited to the data on the Platform within thirty (30) calendar days upon termination of these Terms of Service in a secure way that ensures that all Personal Data is deleted and unrecoverable. Personal Data that needs to be kept to comply with relevant legal and regulatory retention requirements may be kept by SettleMint beyond expiry of the period of thirty (30) calendar days as long as required by such laws or regulations, and (iii) all rights and obligations of SettleMint or the User under these Terms of Service shall terminate, except those rights and obligations under those sections specifically designated in section 14.7. Upon written request submitted by the User to SettleMint no later than fourteen (14) calendar days prior to the termination of the agreement, SettleMint shall provide the User, immediately prior to the sanitization and destruction thereof, with a readable and usable copy of the Personal Data and/or the systems containing Personal Data. 13.5. Outstanding Fees. Termination shall not relieve you of the obligation to pay any fees payable to SettleMint prior to the effective date of termination. In the event of termination by SettleMint pursuant to Section 13.3, all amounts payable by you under this Agreement will become immediately due and payable. ## 14. Miscellaneous ### 14. 1. force majeure SettleMint shall not be liable for any failure or delay in the performance of its obligations with regard to the Platform if such delay or failure is due to causes beyond our control due including but not limited to acts of God, war, pandemic, strikes or labor disputes, embargoes, government orders, telecommunications, network, computer, server or Internet downtime, unauthorized access to SettleMints' information technology systems by third parties or any other cause beyond the reasonable control of SettleMint (the "Force Majeure Event"). We shall notify you of the nature of such Force Majeure Event and the effect on our ability to perform our obligations under these Terms of Service and how we plan to mitigate the effect of such Force Majeure Event. ### 14. 2. severability If any provision of these Terms of Service is, for any reason, held to be invalid or unenforceable, the other provisions of these Terms of Service will remain enforceable and the invalid or unenforceable provision will be deemed modified so that it is valid and enforceable to the maximum extent permitted by law. ### 14. 3. waiver Any failure to enforce any provision of the Terms of Service shall not constitute a waiver thereof or of any other provision. ### 14. 4. assignment You may not assign or transfer these Terms of Service or any rights or obligations to any third party. SettleMint shall be free to (i) transfer or assign (part of) its obligations or rights under the Terms of Service to one of its affiliates and (ii) to subcontract performance or the support of the performance of these Terms of Service to its affiliates, to individual contractors and to third party service providers without prior notification to the User. ### 14. 5. notices All notices from SettleMint intended for receipt by you shall be deemed delivered and effective when sent to the email address provided by you on your Account. If you change this email address, you must update your email address on your personal settings page. ### 14. 6. survival Sections 5, 9, 10, 11 shall survive any termination or expiration of these Terms of Service. ### 14. 7. governing law and jurisdiction These Terms of Service shall be exclusively governed by and construed in accordance with the laws of Belgium, without giving effect to any of its conflict of law principles or rules. The courts and tribunals of Leuven shall have sole jurisdiction should any dispute arise relating to these Terms of Service. file: ./content/docs/use-case-guides/asset-tokenization.mdx meta: { "title": "Asset tokenization", "description": "A Guide to Connecting a Frontend to Your Blockchain Application", "sidebar_position": 3, "keywords": [ "asset tokenization", "solidity", "smart contract" ] } This guide will show you how to build an asset tokenization application using SettleMint. In this guide, you will learn: * What Asset Tokenizaton Is * The Benefits of using Asset Tokenization * Asset Tokenization Use-Cases * How to build and deploy an Asset Tokenization Application ## What is asset tokenization? Asset tokenization is the process of representing ownership rights to an asset through digital tokens on a blockchain. These tokens serve as a digital representation of the asset and are recorded and managed on the blockchain network, enabling secure ownership transfer and efficient trading. ## Benefits of asset tokenization * **Increased Liquidity:** Tokenizing assets enables fractional ownership, allowing investors to buy and sell smaller units, thereby increasing liquidity for traditionally illiquid assets. * **Accessibility:** Tokenization removes barriers to entry by enabling participation in asset ownership, allowing investors of all sizes to access previously exclusive investment opportunities. * **Efficiency:** Digital tokens can be traded 24/7, reducing settlement times, and eliminating intermediaries, thereby streamlining the process and reducing costs. * **Transparency:** Blockchain provides a transparent and immutable ledger, offering a clear audit trail for asset ownership, transfers, and transactions. ## Asset tokenization use-cases * **Real Estate:** Tokenizing real estate assets enables fractional ownership, making it more accessible to a broader investor base and facilitating efficient trading. * **Supply Chain:** Tokenizing supply chain assets such as goods, inventory, or documents can enhance traceability, provenance, and efficient transfer of ownership. * **Art and Collectibles:** Tokenizing artwork and collectibles allows for easy ownership transfer, provenance verification, and fractional ownership, making it more inclusive and liquid. * **Investment Funds:** Tokenizing investment funds allows for fractional ownership, streamlined distribution, and automated compliance with regulatory requirements. ## Building an asset tokenization application ## Part 1: resource setup ### 1. Create an application To start, you need to create an application on SettleMint. An application is a collection of the different components on SettleMint that will help run your solution. ![Create an Application](../../img/developer-guides/asset-tokenization/create-an-application.png) To create an application on SettleMint, select the application launcher in the top right of the dashboard (four boxes). Click `Add an application`. You will now be able to create a blockchain application and give it a name. ### 2. Deploy a network and node After creating an application, you can now deploy a network and node. We will use both of these resources to deploy our Asset Tokenization Smart Contract. ![Deploy a Network or Node](../../img/developer-guides/asset-tokenization/create-a-network.gif) To create a network and node, click on the `Start Here` button. Then Select `Add a Blockchain Network`. This will show all the supported blockchains on SettleMint. For this guide, select `Hyperledger Besu`. ![Configure Besu](../../img/developer-guides/asset-tokenization/configure-besu.png) After selecting `Hyperledger Besu`, you now have the option to select our deployment plan. For this guide, you can use the following settings: **Type**: Shared **Cloud Provider**: Google Cloud **Region**: Location closest to you **Resouce Pack**: Small ![Network Success](../../img/developer-guides/asset-tokenization/network-success.png) After clicking confirm, the node and network will start deploying at the same time. You will see the status as `Running` once both have been successfully deployed. ### 3. Create ipfs storage This guide uses a simple image as the tokenized asset. This image will be pinned on IPFS, so the next step is to deploy a storage service. ![IPFS Storage](../../img/developer-guides/asset-tokenization/add-ipfs.png) Click on `Storage` and then select `Add storage`. Then select `IPFS` and create an instance called `Token Storage`. You can choose the same deployment plan that you did earlier with the network and node. ### 4. Deploy a private key To get access to the node you deployed, you will need to generate a private key. ![Create a Key](../../img/developer-guides/asset-tokenization/create-key.png) To create a key, click on the `Private Keys` option, then select the `Accessible EC DSA P256` option. Create a name and select the node that you deployed in the earlier step. ## Part 2: the smart contract Now that you have deployed the needed resources, you can create and deploy the Asset Tokenization smart contract. ### 1. Create a smart contract set To create a Smart contract set, navigate to the `Dev tools` section in the left sidebar. From there, click on `Add a dev tool`, choose `Code Studio` and then `Smart Contract Set`. You will now be given the option to select a template. Choose the `Empty` option. Create a name and select the same deployment plan as you did earlier. For more information on how to add a smart contract set, [see our Smart Contract Sets section](/building-with-settlemint/dev-tools/code-studio/smart-contract-sets/add-smart-contract-set) ![Create a Smart Contract](../../img/developer-guides/asset-tokenization/create-empty-smart-contract.png) ### 2. Opening the integrated development environment IDE To add and edit the smart contract code, you will use the IDE. ![Open Fullscreen](../../img/developer-guides/asset-tokenization/open-fullscreen.png) Once the resource has been deployed, select the `IDE` tab and then `View in fullscreen mode`. ### 3. Adding the smart contract code With the IDE open in fullscreen, create a new file for your Asset Tokenization smart contract. ![Create Asset Contract](../../img/developer-guides/asset-tokenization/create-asset-contract.png) 1. On the File Explorer on the left side, select the `Contracts` option. 2. Right Click and select `New File...` 3. Create a new file called `AssetTokenization.sol` Before adding the contract code, you'll need to install the OpenZeppelin contracts dependency. This provides the base contracts we'll inherit from for features like upgradability and access control. Open the terminal in the IDE and run: ```bash npm install @openzeppelin/contracts-upgradeable ``` This package provides the base contracts we'll use like `UUPSUpgradeable`, `OwnableUpgradeable`, and `ERC1155SupplyUpgradeable`. After installing the dependency, copy and paste the Solidity code below:
Solidity Code ```solidity // SPDX-License-Identifier: MIT // SettleMint.com pragma solidity ^0.8.13; import "@openzeppelin/contracts-upgradeable/proxy/utils/UUPSUpgradeable.sol"; import "@openzeppelin/contracts-upgradeable/access/OwnableUpgradeable.sol"; import "@openzeppelin/contracts-upgradeable/token/ERC1155/extensions/ERC1155SupplyUpgradeable.sol"; /** * @title AssetTokenization * @dev A contract for tokenizing assets using ERC1155 standard with upgradeable functionality. */ contract AssetTokenization is Initializable, UUPSUpgradeable, ERC1155SupplyUpgradeable, OwnableUpgradeable { /** * @dev Struct representing an asset. * @param assetId Unique identifier number. * @param name Name of the asset. * @param symbol Symbol of the asset. * @param maxSupply Maximum number of tokens for the asset. * @param faceValue Initial value of the asset. * @param maturityTimestamp Maturity date in the value of a unix timestamp. * @param assetUri URI for the asset metadata. */ struct Asset { uint256 assetId; string name; string symbol; uint256 maxSupply; uint256 faceValue; uint256 maturityTimestamp; string assetUri; } /// @notice Mapping from asset ID to asset details. mapping(uint256 => Asset) public assetToDetails; /** * @dev Event emitted on asset transfer. * @param from Address from which the asset is transferred. * @param to Address to which the asset is transferred. * @param assetIds Array of asset IDs being transferred. * @param amounts Array of amounts of each asset being transferred. */ event AssetTransferEvent(address indexed from, address indexed to, uint256[] assetIds, uint256[] amounts); /** * @dev Initializes the contract. */ function initialize() external initializer { __ERC1155_init(""); __Ownable_init(msg.sender); __UUPSUpgradeable_init(); } /** * @dev Creates a new asset. * @param assetId Unique identifier for the asset. * @param name Name of the asset. * @param symbol Symbol of the asset. * @param maxSupply Maximum supply of the asset. * @param faceValue Initial value of the asset. * @param maturityTimestamp Maturity date of the asset in unix timestamp. * @param assetUri URI for the asset metadata. */ function createAsset( uint256 assetId, string memory name, string memory symbol, uint256 maxSupply, uint256 faceValue, uint256 maturityTimestamp, string memory assetUri ) external onlyOwner { require(assetToDetails[assetId].assetId != assetId, "Asset already exists"); Asset memory asset = Asset(assetId, name, symbol, maxSupply, faceValue, maturityTimestamp, assetUri); assetToDetails[assetId] = asset; } /** * @dev Mints a specified amount of an asset to a recipient. * @param assetId ID of the asset to mint. * @param amounts Amount of the asset to mint. * @param recipient Address to receive the minted assets. */ function mint(uint256 assetId, uint256 amounts, address recipient) external onlyOwner { require(assetToDetails[assetId].assetId == assetId, "Asset does not exist"); require(totalSupply(assetId) + amounts <= assetToDetails[assetId].maxSupply, "Max supply exceeded"); require(assetToDetails[assetId].maturityTimestamp > block.timestamp, "Asset is already matured"); _mint(recipient, assetId, amounts, ""); } /** * @dev Mints multiple assets in a batch to a recipient. * @param assetIds Array of asset IDs to mint. * @param amounts Array of amounts for each asset to mint. * @param recipient Address to receive the minted assets. */ function mintBatch(uint256[] memory assetIds, uint256[] memory amounts, address recipient) public onlyOwner { uint256 length = assetIds.length; for (uint256 i = 0; i < length; i++) { require(assetToDetails[assetIds[i]].assetId == assetIds[i], "Asset does not exist"); require( totalSupply(assetIds[i]) + amounts[i] <= assetToDetails[assetIds[i]].maxSupply, "Max supply exceeded" ); require(assetToDetails[assetIds[i]].maturityTimestamp > block.timestamp, "Asset is already matured"); } _mintBatch(recipient, assetIds, amounts, ""); } /** * @dev Burns a specified amount of an asset from the sender. * @param assetId ID of the asset to burn. * @param amounts Amount of the asset to burn. */ function burn(uint256 assetId, uint256 amounts) external { require(assetToDetails[assetId].assetId == assetId, "Asset does not exist"); _burn(msg.sender, assetId, amounts); } /** * @dev Burns multiple assets in a batch from the sender. * @param assetIds Array of asset IDs to burn. * @param amounts Array of amounts for each asset to burn. */ function burnBatch(uint256[] memory assetIds, uint256[] memory amounts) external { uint256 length = assetIds.length; for (uint256 i = 0; i < length; i++) { require(assetToDetails[assetIds[i]].assetId == assetIds[i], "Asset does not exist"); } _burnBatch(msg.sender, assetIds, amounts); } /** * @dev Returns the URI for a specific asset ID. * @param id Asset ID to query the URI for. * @return URI of the specified asset ID. */ function uri(uint256 id) public view override returns (string memory) { return assetToDetails[id].assetUri; } /** * @dev Updates the state on asset transfer and emits the transfer event. * @param from Address from which the asset is transferred. * @param to Address to which the asset is transferred. * @param assetIds Array of asset IDs being transferred. * @param amounts Array of amounts of each asset being transferred. */ function _update(address from, address to, uint256[] memory assetIds, uint256[] memory amounts) internal override(ERC1155SupplyUpgradeable) { super._update(from, to, assetIds, amounts); emit AssetTransferEvent(from, to, assetIds, amounts); } /** * @dev Authorizes the upgrade of the contract to a new implementation. * @param newImplementation Address of the new implementation. */ function _authorizeUpgrade(address newImplementation) internal override onlyOwner {} } ```
### 4. Change the deployment configuration With the code pasted in the IDE, you now need to change the deployment settings to include the smart contract you have just created. ![Edit Deployment Contract](../../img/developer-guides/asset-tokenization/edit-deploy.png) In the file explorer on the left, select the `ignition` folder. Then open the `main.ts` file under `modules`. Replace the content of `main.ts` with the code below:
Ignition Module Code ```javascript // SPDX-License-Identifier: MIT // SettleMint.com import { buildModule } from "@nomicfoundation/hardhat-ignition/modules"; const AssetTokenizationModule = buildModule("AssetTokenizationModule", (m) => { const assetTokenization = m.contract("AssetTokenization"); return { assetTokenization }; }); export default AssetTokenizationModule; ```
### 5. Deploy the contract With those settings changed, you are now ready to compile and deploy your smart contract. ![Compile Contract](../../img/developer-guides/asset-tokenization/compile-contract.png) To compile the smart contract: 1. Select the `Task Manager` on the left menu 2. Click `Foundry - Build` or `Hardhat - Build` to compile the contract 3. A terminal window below will show the status of the compiling contract To deploy your smart contract: 1. Select the `Hardhat - Deploy to platform network` option 2. The terminal will open to show the status of deploying your contract 3. The terminal will show the contract address of your smart contract ![Contract Address](../../img/developer-guides/asset-tokenization/contract-address.png) The contract address can also be found in `deployed_addresses.json` in the `deployments`folder created when deploying the smart contract code. You will need it later for the integration. ## Part 3: connect the resources ### 1. Upload an image to ipfs You will now upload the image to the IPFS storage service you deployed earlier. ![Asset Image](../../img/developer-guides/asset-tokenization/asset.png) Save the image above to your computer. It is what you will use to represent your asset. ![Add to IPFS](../../img/developer-guides/asset-tokenization/add-to-ipfs.png) To upload this image to IPFS: 1. Click on Storage 2. Select File Manager 3. Select the `Import` option ![Set Pinning](../../img/developer-guides/asset-tokenization/set-pinning.png) After the image has been imported, select the `Share Link` option by clicking on the 3 dots next to the file size. Save this URL as you will use it later in this guide when building the integration. Select the `Set pinning` option. This will make sure your file remains on IPFS. ![Set Local Node](../../img/developer-guides/asset-tokenization/set-local-node.png) Choose the local node option and click `Apply`. ### 2. Get the json-rpc endpoint To connect to the network that you have created, you need to get your JSON-RPC connection URL. ![JSON RPC Node](../../img/developer-guides/asset-tokenization/json-rpc.png) The URL can be found by: 1. Selecting `Blockchain nodes` 2. Clicking on the `Connect` tab 3. Copy the `JSON-RPC` URL Save this URL as you will use it later in this guide when building the integration. ### 3. Creating an access token To connect to your node and storage, you will need an access token. We recommend you use an application access token. You can create an application access token by navigating to the application dashboard, and then clicking on the `Access Tokens` section in the left sidebar. ![API Keys](../../img/developer-guides/asset-tokenization/access-token-node-storage.png) You can now create an application access token with an expiration and the scopes you want to use. For this guide, we recommend you create an access token scoped to your node and storage. You will now see your access token. Copy the token since you cannot see it again! For more information on how to use access tokens, [see our Access Tokens section](/building-with-settlemint/application-access-tokens). ### 4. Setup integration studio deployment The final step is to create a deployment of the `Integration Studio`. ![Create an Integration](../../img/developer-guides/asset-tokenization/create-an-integration.png) To create an integration studio deployment: 1. Click on `Integration Tools` on the left menu 2. Name the Integration Studio 3. Choose the same deployment plan you have used in this guide ![Open an Integration](../../img/developer-guides/asset-tokenization/open-integration.png) Open your Integration Studio by selecting the `Interface` tab and then opening it in fullscreen mode. For this guide, import the template below into the Integration Studio. ![Import an Integration](../../img/developer-guides/asset-tokenization/import-integration.png) To import the below JSON file: 1. Click on the hamburger icon in the top right next to the `Deploy` button. 2. Select the import option 3. Paste the below JSON code into the window
JSON Code ```json [ { "id": "8154b1dd0912e484", "type": "function", "z": "a781da6f697711d2", "name": "Set Global Variables", "func": "const glbVar = {\n privateKey: \"PRIVATE_KEY\",\n privateKeyAddress: \"ADDRESS\",\n smartContract: \"ADDRESS\",\n accessToken: \"ACCESS_TOKEN\",\n rpcEndpoint: \"RCP_ENDPOINT\",\n abi: [\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"target\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"AddressEmptyCode\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"sender\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"balance\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"needed\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"tokenId\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"ERC1155InsufficientBalance\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"approver\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"ERC1155InvalidApprover\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"idsLength\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"valuesLength\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"ERC1155InvalidArrayLength\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"operator\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"ERC1155InvalidOperator\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"receiver\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"ERC1155InvalidReceiver\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"sender\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"ERC1155InvalidSender\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"operator\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"address\",\n \"name\": \"owner\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"ERC1155MissingApprovalForAll\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"implementation\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"ERC1967InvalidImplementation\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [],\n \"name\": \"ERC1967NonPayable\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [],\n \"name\": \"FailedInnerCall\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [],\n \"name\": \"InvalidInitialization\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [],\n \"name\": \"NotInitializing\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"owner\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"OwnableInvalidOwner\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"account\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"OwnableUnauthorizedAccount\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [],\n \"name\": \"UUPSUnauthorizedCallContext\",\n \"type\": \"error\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"bytes32\",\n \"name\": \"slot\",\n \"type\": \"bytes32\"\n }\n ],\n \"name\": \"UUPSUnsupportedProxiableUUID\",\n \"type\": \"error\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"account\",\n \"type\": \"address\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"operator\",\n \"type\": \"address\"\n },\n {\n \"indexed\": false,\n \"internalType\": \"bool\",\n \"name\": \"approved\",\n \"type\": \"bool\"\n }\n ],\n \"name\": \"ApprovalForAll\",\n \"type\": \"event\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"from\",\n \"type\": \"address\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"to\",\n \"type\": \"address\"\n },\n {\n \"indexed\": false,\n \"internalType\": \"uint256[]\",\n \"name\": \"assetIds\",\n \"type\": \"uint256[]\"\n },\n {\n \"indexed\": false,\n \"internalType\": \"uint256[]\",\n \"name\": \"amounts\",\n \"type\": \"uint256[]\"\n }\n ],\n \"name\": \"AssetTransferEvent\",\n \"type\": \"event\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": false,\n \"internalType\": \"uint64\",\n \"name\": \"version\",\n \"type\": \"uint64\"\n }\n ],\n \"name\": \"Initialized\",\n \"type\": \"event\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"previousOwner\",\n \"type\": \"address\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"newOwner\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"OwnershipTransferred\",\n \"type\": \"event\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"operator\",\n \"type\": \"address\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"from\",\n \"type\": \"address\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"to\",\n \"type\": \"address\"\n },\n {\n \"indexed\": false,\n \"internalType\": \"uint256[]\",\n \"name\": \"ids\",\n \"type\": \"uint256[]\"\n },\n {\n \"indexed\": false,\n \"internalType\": \"uint256[]\",\n \"name\": \"values\",\n \"type\": \"uint256[]\"\n }\n ],\n \"name\": \"TransferBatch\",\n \"type\": \"event\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"operator\",\n \"type\": \"address\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"from\",\n \"type\": \"address\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"to\",\n \"type\": \"address\"\n },\n {\n \"indexed\": false,\n \"internalType\": \"uint256\",\n \"name\": \"id\",\n \"type\": \"uint256\"\n },\n {\n \"indexed\": false,\n \"internalType\": \"uint256\",\n \"name\": \"value\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"TransferSingle\",\n \"type\": \"event\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": false,\n \"internalType\": \"string\",\n \"name\": \"value\",\n \"type\": \"string\"\n },\n {\n \"indexed\": true,\n \"internalType\": \"uint256\",\n \"name\": \"id\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"URI\",\n \"type\": \"event\"\n },\n {\n \"anonymous\": false,\n \"inputs\": [\n {\n \"indexed\": true,\n \"internalType\": \"address\",\n \"name\": \"implementation\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"Upgraded\",\n \"type\": \"event\"\n },\n {\n \"inputs\": [],\n \"name\": \"UPGRADE_INTERFACE_VERSION\",\n \"outputs\": [\n {\n \"internalType\": \"string\",\n \"name\": \"\",\n \"type\": \"string\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"assetToDetails\",\n \"outputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"assetId\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"string\",\n \"name\": \"name\",\n \"type\": \"string\"\n },\n {\n \"internalType\": \"string\",\n \"name\": \"symbol\",\n \"type\": \"string\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"maxSupply\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"faceValue\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"maturityTimestamp\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"string\",\n \"name\": \"assetUri\",\n \"type\": \"string\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"account\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"id\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"balanceOf\",\n \"outputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"\",\n \"type\": \"uint256\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address[]\",\n \"name\": \"accounts\",\n \"type\": \"address[]\"\n },\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"ids\",\n \"type\": \"uint256[]\"\n }\n ],\n \"name\": \"balanceOfBatch\",\n \"outputs\": [\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"\",\n \"type\": \"uint256[]\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"assetId\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"amounts\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"burn\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"assetIds\",\n \"type\": \"uint256[]\"\n },\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"amounts\",\n \"type\": \"uint256[]\"\n }\n ],\n \"name\": \"burnBatch\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"assetId\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"string\",\n \"name\": \"name\",\n \"type\": \"string\"\n },\n {\n \"internalType\": \"string\",\n \"name\": \"symbol\",\n \"type\": \"string\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"maxSupply\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"faceValue\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"maturityTimestamp\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"string\",\n \"name\": \"assetUri\",\n \"type\": \"string\"\n }\n ],\n \"name\": \"createAsset\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"id\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"exists\",\n \"outputs\": [\n {\n \"internalType\": \"bool\",\n \"name\": \"\",\n \"type\": \"bool\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [],\n \"name\": \"initialize\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"account\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"address\",\n \"name\": \"operator\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"isApprovedForAll\",\n \"outputs\": [\n {\n \"internalType\": \"bool\",\n \"name\": \"\",\n \"type\": \"bool\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"assetId\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"amounts\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"address\",\n \"name\": \"recipient\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"mint\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"assetIds\",\n \"type\": \"uint256[]\"\n },\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"amounts\",\n \"type\": \"uint256[]\"\n },\n {\n \"internalType\": \"address\",\n \"name\": \"recipient\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"mintBatch\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [],\n \"name\": \"owner\",\n \"outputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"\",\n \"type\": \"address\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [],\n \"name\": \"proxiableUUID\",\n \"outputs\": [\n {\n \"internalType\": \"bytes32\",\n \"name\": \"\",\n \"type\": \"bytes32\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [],\n \"name\": \"renounceOwnership\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"from\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"address\",\n \"name\": \"to\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"ids\",\n \"type\": \"uint256[]\"\n },\n {\n \"internalType\": \"uint256[]\",\n \"name\": \"values\",\n \"type\": \"uint256[]\"\n },\n {\n \"internalType\": \"bytes\",\n \"name\": \"data\",\n \"type\": \"bytes\"\n }\n ],\n \"name\": \"safeBatchTransferFrom\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"from\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"address\",\n \"name\": \"to\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"id\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"uint256\",\n \"name\": \"value\",\n \"type\": \"uint256\"\n },\n {\n \"internalType\": \"bytes\",\n \"name\": \"data\",\n \"type\": \"bytes\"\n }\n ],\n \"name\": \"safeTransferFrom\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"operator\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"bool\",\n \"name\": \"approved\",\n \"type\": \"bool\"\n }\n ],\n \"name\": \"setApprovalForAll\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"bytes4\",\n \"name\": \"interfaceId\",\n \"type\": \"bytes4\"\n }\n ],\n \"name\": \"supportsInterface\",\n \"outputs\": [\n {\n \"internalType\": \"bool\",\n \"name\": \"\",\n \"type\": \"bool\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [],\n \"name\": \"totalSupply\",\n \"outputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"\",\n \"type\": \"uint256\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"id\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"totalSupply\",\n \"outputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"\",\n \"type\": \"uint256\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"newOwner\",\n \"type\": \"address\"\n }\n ],\n \"name\": \"transferOwnership\",\n \"outputs\": [],\n \"stateMutability\": \"nonpayable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"address\",\n \"name\": \"newImplementation\",\n \"type\": \"address\"\n },\n {\n \"internalType\": \"bytes\",\n \"name\": \"data\",\n \"type\": \"bytes\"\n }\n ],\n \"name\": \"upgradeToAndCall\",\n \"outputs\": [],\n \"stateMutability\": \"payable\",\n \"type\": \"function\"\n },\n {\n \"inputs\": [\n {\n \"internalType\": \"uint256\",\n \"name\": \"id\",\n \"type\": \"uint256\"\n }\n ],\n \"name\": \"uri\",\n \"outputs\": [\n {\n \"internalType\": \"string\",\n \"name\": \"\",\n \"type\": \"string\"\n }\n ],\n \"stateMutability\": \"view\",\n \"type\": \"function\"\n }\n ]\n\n}\n\nglobal.set('privateKey', glbVar.privateKey);\nglobal.set('privateKeyAddress',glbVar.privateKeyAddress)\nglobal.set('contract', glbVar.smartContract);\nglobal.set('accessToken', glbVar.accessToken);\nglobal.set('rpcEndpoint', glbVar.rpcEndpoint);\nglobal.set('abi',glbVar.abi)\n\nreturn msg;", "outputs": 1, "timeout": "", "noerr": 0, "initialize": "", "finalize": "", "libs": [], "x": 460, "y": 80, "wires": [ [ "a7c63a0fd0d1a779" ] ] } ] ```
### 5. Interact with the smart contract The Integration Studio allows you to interact with your smart contract and add business logic. Go to the newly created `Asset Tokenisation` tab in the Integration Studio. ![Asset Imported](../../img/developer-guides/asset-tokenization/asset-imported.png) The first function you need to complete is to set the global variables of the integration. ![Set Global Variables](./../../img/developer-guides/asset-tokenization/set-global-variables.gif) To do this, click on the middle item in the diagram labeled `Set Global Variables`. There you will you a variable called `glbVar`. Here is where you will enter the information to start interacting with your smart contract. ![Set Global Variables](../../img/developer-guides/asset-tokenization/globalvariables-settings.png) 1. **privateKey** - Enter your private key that you created in [Part 1 / Step 4](#4-deploy-a-private-key) 2. **privateKeyAdress** - The address created after completing [Part 1 / Step 4](#4-deploy-a-private-key) 3. **smartContract** - The address of your deployed smart contract after completing [Part 2 / Step 5](#5-deploy-the-contract) 4. **accessToken** - The API key created when completing [Part 3 / Step 3](#3-creating-an-access-token) 5. **rpcEndpoint** - The JSON RPC URL that was shown when completing [Part 3 / Step 2](#2-get-the-json-rpc-endpoint) With this information entered, click on the blue square next to the `Inject` item. Now you need to create an asset by creating an asset name, asset symbol and assetUri. ![Change Asset Name](../../img/developer-guides/asset-tokenization/assetname.gif) To create an asset, double click on the `Inject` option next to the `Initialise Asset` item. In this window you can set: **msg.assetName** - Bond **msg.assetSymbol** - BND **msg.assetUri** - The IPFS URL of the asset you created after completing [Part 3 / Step 1](#1-upload-an-image-to-ipfs) From here you can now click on the other `inject` options to: 1. Create an Asset 2. View the Asset 3. Mint the Asset 4. View the Balance ![Asset Name](../../img/developer-guides/asset-tokenization/asset-debug.png) To see how the interactions with your smart contract, choose the `Debug` option under the deploy button. ## Great job You have now created and deployed an Asset Tokenization smart contract using SettleMint! Find other guides in our [Guide Library](/developer-guides/guide-library) to help you build with SettleMint. ``` ``` file: ./content/docs/use-case-guides/attestation-service.mdx meta: { "title": "Ethereum attestation indexer", "description": "A comprehensive guide to implementing and using the Ethereum Attestation Service (EAS) for creating, managing, and verifying on-chain attestations", "keywords": [ "ethereum", "eas", "attestation", "blockchain", "web3", "smart contracts", "verification", "schema registry", "resolver" ] } import { Callout } from "fumadocs-ui/components/callout"; import { Card } from "fumadocs-ui/components/card"; import { Steps } from "fumadocs-ui/components/steps"; import { Tab, Tabs } from "fumadocs-ui/components/tabs"; ## 1. Introduction to eas ### What is eas? Ethereum Attestation Service (EAS) is a decentralized protocol that allows users to create, verify, and manage attestations (verifiable claims) on the Ethereum blockchain. It provides a standardized way to make claims about data, identities, or events that can be independently verified by others. ### Why use eas? * **Decentralization**: No central authority is needed to verify claims. * **Interoperability**: Standardized schemas allow for cross-platform compatibility. * **Security**: Attestations are secured by the Ethereum blockchain. * **Transparency**: All attestations are publicly verifiable.