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  1. Home
  2. Best Practices

Best Practices

Guided by the objective to deliver a targeted, democratic, and industry-driven initiative to support European interests in standardisation within the Blockchain/DLT domain, the SEEBLOCKS.eu team has embraced the challenge of identifying best practices that will make it easier for companies to comply with current regulations.

Given that existing regulations often provide only broad guidelines on desired behaviours, leaving significant room for interpretation and uncertainty in practical implementation, the team has focused on addressing this challenge. Specifically, they have identified six key areas of interest (Sustainability, Scalability, Accountability, Privacy, Security and Trust) in which best practices have been developed to bridge the gap between abstract regulatory principles and concrete technical solutions. In doing so, SEEBLOCKS.eu aims to establish a standardized and compliant blockchain ecosystem that not only aligns with European regulatory frameworks but also promotes innovation, while ensuring security, transparency and trust.

Each best practice is indexed and classified according to the areas of interest, within a taxonomy that refines the special goals and requirements associated with those areas. A detailed description of each best practice is provided, along with references to additional published material.

The European Blockchain Sandbox

Valuable work in the identification of best practices is also being carried out by the European Blockchain Sandbox. The SEEBLOCKS.eu team has provided a report that aims to identify and highlight the best practices that characterise successful blockchain applications by analysing the use cases presented in their reports, in order to better understand the factors that contribute to effective and compliant blockchain adoption in Europe.

In addition, we recommend to the reader the following report: Beck, R. & Agerskov, S. (Eds.). (2024). Ethical Guidelines for Blockchain Systems. Copenhagen, Denmark: European Blockchain Center. It may be accessed here.

We hope that you will enjoy exploring this collection and deepening your knowledge of blockchain best practices.

Ensure private key security

Implement strategies to protect private keys, such as using hardware wallets or multisignature wallets and educate users in this regards.
Requirement category Privacy, Privacy protection of sensitive data

Implement smart contract security measures

Implement robust security measures during the development and deployment of smart contracts to prevent vulnerabilities that could be exploited.
Requirement category Trust, Mitigation of vulnerabilities

Regular security audits

Conduct regular security audits helps identify and mitigate vulnerabilities within the blockchain network.
Requirement category Trust, Mitigation of vulnerabilities

Prevent collusion and centralized control.

Design decentralized consensus mechanisms (e.g., PoS, DPoS) with anti-sybil checks and stake diversification rules.
Requirement category Trust, Decentralization

Store sensitive information off-chain

Store sensitive information off-chain in secure and privacy-preserving systems, referencing the data on-chain through hashes or identifiers.
Requirement category Privacy, Privacy protection of sensitive data

Use governance mechansims

Establish governance mechanisms (e.g., DAO voting) to reverse dishonest transactions post-audit.
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Utilize zero-knowledge proofs

Enable privacy-preserving proofs (e.g., zk-SNARKs) to verify ownership without exposing sensitive data.
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Adopt decentralized storage

Adopt decentralized storage for ownership documents to prevent tampering.
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Implement Time-Locked Transactions

Use time-locked transactions to prevent sudden, unauthorized asset movements.
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Enforce Legal Smart Contracts

Enforce legal smart contracts with penalty clauses for unauthorized transfers or breaches.
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Integrate fraud detection systems

Integrate fraud detection systems (e.g., AI-driven anomaly detection) to flag suspicious transactions.
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Deploy on-chain asset registries

Deploy on-chain asset registries with immutable proofs of ownership (e.g., ERC-721 for NFTs, ERC-3643 for securities).
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Use multi-signature wallets

Implement multi-signature wallets for asset control, requiring multiple approvals for critical transactions.
Requirement category Accountability, Safeguard to protect ownership against fraud and manipulation

Open-Source Code Publication and Third-Party Audits

Publish open-source code and undergo third-party audits (e.g., CertiK, OpenZeppelin) for smart contracts.
Requirement category Accountability, Enable third-party verification of compliance

Employ randomization algorithms

Employ randomization algorithms, such as the Snake Optimization Algorithm (SOA), to enhance blockchain scalability
Requirement category Scalability, Optimize transaction processing and resource distribution

Implement sharding with Plasma

Combine sharding with Plasma enabling parallel transaction processing and reducing congestion.
Requirement category Scalability, Increase the transaction processing capacity

Implement sharding techniques

Implement Sharding to allowe the network to handle more transactions simultaneously without overburdening individual nodes.
Requirement category Scalability, Increase the transaction processing capacity

Increase Block Size

Increase the block size in a blockchain network which allows more transactions to be included in each block.
Requirement category Scalability, Increasing the number of transactions processed per block

Utilize immutable ledger

Leverage blockchain’s immutable ledger for real‑time, auditable tracking of environmental, social, and governance (ESG) metrics, ensuring transparent, tamper‑proof reporting that reduces greenwashing.
Requirement category Sustainability, ESG Reporting Integration

Modular Blockchain Solutions

Develop modular blockchain solutions to adapt to varying industry demands and large-scale deployments.
Requirement category Scalability, Layered System Design

Use Energy-Efficient Mechanisms

Use energy-efficient mechanisms (e.g., Proof of Stake) to ensure scalability and reduced resource usage.
Requirement category Scalability, Efficient Consensus Mechanisms

Use permissioned blockchains

Use permissioned blockchains for scalability and secure cross-border collaboration.
Requirement category Scalability, Permissioned Blockchain

Auditable logging of activities

Implement tamper-evident logging to provide an auditable trail of all activities in the blockchain system. Then transactions can be traced back to their origin.
Requirement category Trust, Ethical Guidelines for Blockchain Systems, Privacy, Traceability

Transparent transactions and operations

Ensure all transactions and operations are transparent and verifiable by stakeholders.
Requirement category Trust, Transparency, AMLD - Anti-Money Laundering Directive, AMLD Recital 14 - Enhancing transparency, MiCA, MiCA Art. 30

Partner with credible organizations

Partner with credible organizations and stakeholders to enhance trustworthiness.
Requirement category Trust, Reputation and Credibility, Ethical Guidelines for Blockchain Systems

Use of distributed consensus mechanisms

Use distributed consensus mechanisms and decentralization to enhance trustworthiness.
Requirement category Trust, Decentralization, Ethical Guidelines for Blockchain Systems

Incentive mechanisms to build trust

Design incentive mechanisms to reward behaviors that build trust and enhance security while penalizing harmful or malicious actions.
Requirement category Trust, Incentivization, Ethical Guidelines for Blockchain Systems, MiCA, miCA Art. 45 - Remuneration policy

Reliable validation mechanisms

Use reliable data validation mechanisms to ensure the accuracy and integrity of data recorded on-chain.
Requirement category Security, Data Integrity, Ethical Guidelines for Blockchain Systems, GDPR - General Data Protection Regulation, GDPR Art. 5(1)(c) on Data Minimization

Secure Backups

Maintain secure, encrypted backups of critical blockchain data and configurations.
Requirement category Security, Backup and Disaster Recovery

Use standardized protocols

Use standardized protocols to ensure secure communication and data exchange across blockchain networks.
Requirement category Security, Interoperability, eIDAS, eIDAS art. 12 on cooperation and interoperability, MiCA, MiCA Recital 71 on liquidity management

Harden Blockchain Nodes

Harden blockchain nodes with firewalls, intrusion detection systems, and regular updates.
Requirement category Security, Enhance Node Security

Encourage Ethical Blockchain

Encourage ethical use of blockchain technology
Requirement category Security, Education and Awareness, Ethical Guidelines for Blockchain Systems

Training on Blockchain Security Requirements

Train all stakeholders, including developers, administrators, and end-users, on blockchain security requirements.
Requirement category DORA - Digital Operational Resilience Act, DORA Art. 5 on framework for ICT risk management, DORA recital 16 on consistency with cybersecurity strategies, Security, Education and Awareness

Use Decentralized Identity Frameworks

Use decentralized identity (DID) frameworks for secure and privacy-preserving user authentication.
Requirement category Security, Access Control and Identity Management, eIDAS, eIDAS Art. 6ss on electronic identification

Enforce Strict Access Controls

Enforce strict access controls to blockchain nodes, APIs, and sensitive operations.
Requirement category Security, Access Control and Identity Management

Appropriate Consensus Algorithms

Select a consensus mechanism (e.g., Proof of Work, Proof of Stake, Byzantine Fault Tolerance) appropriate to the use case and ensure it resists common attacks (e.g., Sybil attacks, 51% attacks).
Requirement category Security, Implement Consensus Mechanism Security, MiCA, MiCA Art. 92 on prevention and detection of market abuse

Periodic Security Assessments

Conduct periodic security assessments to identify and mitigate vulnerabilities.
Requirement category DORA - Digital Operational Resilience Act, DORA Art. 24-27: Testing of ICT tools and systems, Security, Security Assessments, MiCA, MiCA Art. 19(7) - information on risks

Regular cryptographic protocol updates

Regularly update cryptographic protocols to protect against emerging threats (e.g., quantum computing).
Requirement category Security, Cryptographic Standards, GDPR - General Data Protection Regulation, GDPR Art. 32 on Pseudonymisation and Encryption

Robust cryptographic Algorithms

Employ robust, up-to-date cryptographic algorithms (e.g., AES-256, SHA-256, elliptic curve cryptography) to secure data, transactions, and communications.
Requirement category Security, Cryptographic Standards, GDPR - General Data Protection Regulation, GDPR Art. 32 on Pseudonymisation and Encryption

Ensure traceability mechanisms

Ensure traceability mechanisms respect user privacy by balancing accountability with pseudonymity.
Requirement category GDPR - General Data Protection Regulation, GDPR Article 30 on Records of processing activities, Privacy, Traceability

Confidential transactions

Implement confidential transactions to hide transaction details while ensuring validity.
Requirement category Privacy, Confidentiality, MiCA

Share only necessary data

Enable users to share only necessary data with specific parties by using selective disclosure mechanisms.
Requirement category eIDAS, eiDAS2 Recital 15, Privacy, Selective Disclosure

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