There’s not a single doubt about the flexibility and security brought about by blockchain and distributed ledger technology (DLT).
It has been tagged as the next big thing that will transform the world. Some say DLT will do to the world what the internet did many years back.
However, while the technology has experienced growth in leaps and bounds, over the past years, we have witnessed thousands of blockchain projects fail woefully with millions of dollars gone down the drain.
Therefore, it’s worth asking: What separates successful blockchain projects from those that bite the dust after just a short while?
Challenges within the blockchain community
According to reports from the China Academy of Information and Communications Technology (CAICT), over 80,000 (92 per cent) blockchain projects launched over the years, have already failed with an average lifespan of 1.22 years.
Organisations and projects have sprung up, showed promising concepts and excellent whitepapers. They raised hopes for a better (and profitable) future, yet failed to withstand the test of time.
The majority of these projects fail at the proof-of-concept stage, while some never even make it to that point — they are just dead-on-arrival. Only a few blockchain projects get to actual execution and scale.
This is enough to cause any to pause and truly reflect asking: What could be the problem? These failures might not be surprising, as many of these projects were not able to find what it takes to succeed and scale truly.
It would be interesting to highlight some of the factors that have led to the success and sustainability of blockchain platforms that are still going strong to date.
This will help other blockchain startups in establishing a solid ground for upcoming projects.
Enterprise partnerships help in achieving scale
While blockchain has its outstanding capacities, it should be understood that the technology is not the universal solution to all business woes.
In many cases, blockchain can serve strongly as a complementing technology with the capacity to enhance business operations, and not necessarily to disrupt them entirely.
Some disruptive projects can be described as solutions that are looking for problems. If you try to disrupt an entire industry too much, chances are you will get little cooperation with potential partners.
We can highlight success stories among blockchain startups that have partnered with existing enterprises to improve service delivery and enhance the way they do business.
Take the e-commerce supply chain, for example. E-Commerce companies are more widely-known for the front-facing part of their business, which involves online transactions, fulfilment and delivery. But for consumers, little is known about what happens behind the scenes.
This is what a partnership between Walmart China, VeChain, and PwC are addressing through DLT. The Walmart China Blockchain Traceability Platform (WCBTP) will keep track of products like packaged fresh meat, rice, and vegetables through the supply chain. This aims to enhance accountability across 23 product lines, which will be expanded to 100 by year-end.
With this platform, Chinese consumers can get detailed information about products by scanning a code on their smartphones, including location reports, source, and real-time tracking.
It is quite essential to conduct due diligence on areas that truly require blockchain and meet the need there. E-commerce and supply chain management are good examples of traditional businesses now being complemented by distributed ledger tech.
Projects like VeChain, which recently marked its one-year anniversary, have shown how relevant targeting and application of blockchain solutions can result in sustainable projects that scale faster.
Tapping the right target market helps in sustainability
The blockchain craze has gotten every entrepreneur jumping on the bandwagon mostly motivated by the fear-of-missing-out.
These projects end up with no form of originality or real idea concept but are just a bunch of copy-paste materials and concepts with no depth. Many have poorly-designed or plagiarised whitepapers.
Leveraging blockchain solutions should go beyond just jumping on the bandwagon and an opportunity to make money. Project founders must conduct adequate research and due diligence in understanding the needs of whatever target market and exploring means to satisfy them effectively.
This will help in developing concepts that have depth and which can withstand the test of time and can truly scale.
To again highlight the complex business of supply chain and logistics, a good example here would be the Blockchain in Transport Alliance (BiTA) formed by UPS and FedEx to facilitate transparency in supply chain and provide a platform for adequate record-keeping of information leveraging blockchain technology.
Case in point: The trucking industry is in itself a US$4.6 trillion industry as of 2018, and businesses are scrambling to define the industry’s future amidst a general slowdown. In logistics, automation, security, and transparency are key considerations in meeting customer expectations — both in the consumer-facing and B2B aspect.
With blockchain implementation, rich data, internet-of-things, and real-time updating can make logistics more efficient and secure. The BiTA aims to establish a common standard of implementation of blockchain and Distributed Ledger Tech to ensure everyone can gain from the benefits.
Technical know-how is necessary to scale
The bandwagon approach has turned everyone into a blockchain expert. However, the problem with some projects is the lack of technological know-how on the part of the project’s management.
While the vision is there, the technical personnel do not have the capability or means to execute a project that could go to scale. Here we go back to the challenge of using blockchain as being the “universal solution” that can solve all business challenges. Well, sometimes it’s not.
To illustrate, for those who look to build a powerful blockchain to scale for a global audience. Ethereum founder Vitalik Buterin has spoken on the need to focus on the three fundamental properties of distributed networks, decentralisation, security, and scale.
Many projects can achieve two of these — decentralisation and security — but rarely do blockchain projects successfully address the issue of scale. Even Bitcoin itself has been bogged down by scalability issues, due to the limited block size in its initial implementation.
The Bitcoin creators’ intent is unclear at this point, but there is an ongoing debate as to whether this limitation has resulted in a scalability issue with the platform.
To mitigate this challenge, blockchain experts should be able to design their platforms with such future-proofing in mind in the first place.
A balance in overcoming business and technical challenges
Before embarking on a blockchain project, it is essential to consider the market, the technology, and the ecosystem, which can make or break your platform.
Ask yourself if it is viable, scalable, and usable. Conduct adequate research, find or build knowledge and technical know-how, and partner with the right people.
Distributed ledger technology will transform the way we do business, but for that to happen, we will need products and platforms that will stand the test of time.
Editor’s note: e27 publishes relevant guest contributions from the community. Share your honest opinions and expert knowledge by submitting your content here.
Image Credit: Unsplash