Thousands of new blockchain companies and projects have hit the market in the past few years. One company just added the word “blockchain” to its name and watched its stock value soar. That maneuver failed in the long run. We hope the large amount of failed blockchain ventures we have seen in the past will be followed by the emergence of successful ones. If you are looking into developing a blockchain based business or application, make sure to ask yourself these four vital questions to help you assess your likelihood of becoming and industry survivor or another casualty.
Are You Providing A Legitimate Solution to A Problem?
Blockchain aside, for any product or service to be successful, it needs to provide a viable solution to a need or problem shared by many. If your product is not solving a real world problem, then it better be so innovative that it is going to be desired by many. If you cannot say it will be either of those two, then you should stop now and reconsider its purpose. If you do feel confident in at least one of the above, then the next question to ask is whether or not the solution that you are creating really needs to be blockchain built.
Does Your Application Need to Be on a Blockchain?
The first thing to consider when answering this question is why you are using blockchain. Is it because of its capabilities or because of its current buzz-worthiness?
To refresh your recollection on What is Blockchain, blockchain technology is currently the most secure technology available to digitally store data and record transactions. Blockchain has proven to be a technology that can solve many problems but, it is not yet an ideal technological solution for everything. Its key attributes are its security, transparency and lack of need for a third party intermediary to execute its transactions. So far Data privacy, peer to peer payments and supply chain management have been the most popular applications of blockchain technology. All three of those applications utilize blockchain’s key features. They are not the only successful use cases of blockchain, but they are very good ones. You should approach building your blockchain application as an effort to take advantage of its key features.
The second consideration should be whether or not using a blockchain application will create significant innovation?
Blockchain technology can be difficult to explain, understand and implement. Try explaining blockchain to a customer or investor in a few minutes and see how well you do. Considering the learning curve and potential costs of training, adaptation and integration, the value add of using a blockchain application should be at least a 5x multiple over whatever current solutions exist. Otherwise, it just may not be worthwhile from a cost/benefit perspective. The fact that it is being built on a blockchain should almost be an afterthought in comparison with its potential upside.
If your analysis concludes that blockchain is needed and is the best solution, you should next explore if the target market is ready for your blockchain application
Is Your Blockchain Built Application Market Ready?
The technological sophistication of blockchain has been an impediment to its larger adaption. Many blockchain based solutions just aren’t ready for the mainstream. As an innovator, great value can be gained when you are the first to market. However, a lot can be lost when you arrive too far ahead of the market. A smart business move is to either build it for when the market hits or build it and create the market yourself. When the market is made, and whether or not you can afford to wait it out is the harder part to judge. At this nascent stage making predictions within the blockchain industry is very difficult. However, considering the large failure rate we have seen, it is in your best interests to try.
Coin or No Coin?
Not every blockchain application requires the use of its own token or coin, and not all blockchain applications should have one. If you are creating a token or coin to be used within your blockchain application, stop and make an honest assessment of how necessary it is to the intended functioning or your blockchain ecosystem. Is the token being used solely for functionality to represent digital assets and effect the automation of transactions? Are you planning to create a native currency for trade within the application and for secondary markets? If you are looking to create a native currency, is it really, REALLY necessary? Make sure you understand the difference between a currency, a utility token and security token before making your final decision. **Hint**- the SEC is treating almost every token as a security token. Whichever function your token or coin is intended to have, be prepared follow compliance regulations if you plan on offering it to the public. Each should have an intrinsic value within the platform. Do not issue a new token or coin just because that is what you have seen from so many other companies. Definitely do not issue a token or coin just because you think it is an easy way to raise funds. If that was your plan, stop now because you are already going down the wrong path.
Everything falls into one main question. Why are you creating a blockchain application? If you have concluded that: (1) you are providing a viable solution to an industry problem, (2) blockchain is by far the best solution; and (3) the market is ready or soon to be ready for adoption, then it sounds like go time. If you are having a difficult time finding answers to those questions then take a step back and re-evaluate. Blockchain is not a cure all. It may re-shape the world but you should not try and re-shape blockchain to be a fit for everything. And, you do not want to waste time and money developing a blockchain application that truly does not make sense.