Satoshi Nakamoto had a very simple vision – to create a democratic financial system that is beyond the control of single entities like governments and banks who are famous for manipulating financial systems for personal gains and causing millions of people to suffer the consequences, as seen in the global financial crisis of 2007-08.
This vision led to the creation of two powerful synonymous innovations: Bitcoin, a digital currency with a finite supply which can be sent from one person to another over the internet, without the involvement of third parties, as well as a decentralized network/database in which anyone can participate in to verify and keep a copy of records and transactions carried out on the network, this decentralized network is called Blockchain.
Blockchain technology has been termed the ‘disruptive innovation’ of the century, as was the internet. During the dotcom bubble era, investors were looking for the next company stock with a “.com” after its name to invest in, with a huge ROI. They couldn’t care less about the fundamentals of the company.
2017 to 2018 was a great period for the blockchain industry as billions of dollars were raised through Initial Coin Offerings (ICO)— many thanks to Ethereum. There was so much money moving around that the dotcom bubble effect was triggered, any traditional company that added “Bitcoin” or “Blockchain” to its name saw their stock price increase with massive gains.
A New York-based beverage maker, Long Island Iced Tea, changed its name to “Long Blockchain Corp, and saw its shares soar 200% in the open market. Lots of companies followed suit, there were so many that the United States Security and Exchange Commission (SEC) had to step in to issue a warning against companies abusing the name “Blockchain”.
It’s 2021, the new trend is DeFi (Decentralized Finance). Tons of DeFi projects have kicked off. Some have been quite successful, some have been exploited through a bug in their codebase and some were outright scams.
However, lots of blockchain projects will/have been developed, some have failed and many more will fail. That’s the harsh reality and this is why
- No product-market fit
Nothing hits harder than reality. There’s a solid reason why 90% of traditional startups fail. Startups armed with a proper business strategy, an experienced growth hacking team, a bank account full of cash, yet, still fail.
The market dictates the success of a project. Blockchain projects tend to pay more focus on the technical design of their products, as opposed to the economic design. For instance, building a solution to bank the unbanked without using data about the daily livelihood of the unbanked to develop the product/solution seems, like a death-on-arrival approach.
After building a “brilliant” solution with millions of dollars in cash burnt, these projects go to market only to discover that it doesn’t suit the users, then they try to rewire the entire technical structure and slowly die off from the code complications and cash burn.
Sometimes, Blockchain startups find product-market fit especially in emerging markets but still fail due to unanticipated events that hit quicker than Mike Tyson’s punch – government regulations and legal restrictions.
2. Speculations and no clear roadmap
Blockchain is simply an augmenting technology, merely amplifying or simplifying the things we already do, rather than a disruptive technology requiring major changes in habits, behaviour and market conduct.
The superman complex most blockchain projects possess is alarming. It is so ridiculous that a project intended to save the fishes of the Pacific Ocean through blockchain technology, and successfully raised decent money in its ICO.
Launching a blockchain project which is totally based on a 100-years-from-now futuristic vision, is a daunting challenge that crumbles the project. In most cases, for such projects, the only thing that sees some development is the token price, the real solution never sees the light of day.
3. The tech is young and experimental
During the period the Internet started gaining popularity, several applications and businesses built on it failed. It is simply a rite of passage in the world of innovation and technology. Several failed attempts lead to the development of the subsequent innovation. Bitcoin wasn’t flexible enough for applications to be built on it and Ethereum was born. Bitcoin hasn’t failed yet but you get the point.
Blockchain technology is quite young, complex and experimental. Scalability, consensus mechanisms and on-chain governance are still one of the problems being sorted out. It might take some time to perfect but there has been tremendous progress.
4. Lack of expertise and talents
The required technical expertise and talents needed to build is lacking. There are over 18 million software developers worldwide and less than 200,000 Blockchain developers.
The highly skilled talents from the small pool of available ones, are poached by giant corporations who are looking to explore the technology and set a leading pace in their dominant sectors. The first-mover effect is an advantage in the business world. The consequent result is often poor execution by the smaller projects.
5. Poor marketing & communication
On both B2B and B2C levels, Lots of blockchain projects have failed at marketing their solutions to consumers of their products. The norm is to communicate the features of the solutions rather than benefits – 30 seconds block finality, layer 2 plasma chains etc. Forgive my language but that’s point blank intellectual masturbation. No one cares except fellow techies who understands whatever that is.
Marketing has to speak to the hidden desires of the target prospect. Read slowly- Tell people how you’re going to solve their problem. Giant corporations might not have much interest in a tech solution that secures data of end-users. They will definitely pay more attention if the benefits of the technology are communicated – Save server costs in millions of dollars, generate more revenue and put the company in a dominant position ahead of peers. Do I hear Apple inc. screaming Take my money?
In the B2C context, an average person is not bothered about having economic freedom from financial institutions. However, a blockchain project with a solution that can help he/she receive money into a bank account within minutes, from far-away countries— a process that would normally take 2-3 days to complete— will arouse the interest of people. One project I particularly admire is Celo. Good communication & Marketing ✅ Comprehensive User research ✅ A product that solves existing problem for millions of people (Valora) ✅ Strong & Active community ✅
Understanding the potential consumers of the products of your once-in-a-lifetime-blockchain project is very important! Who are they? What are the existing solutions they use? What are the problems they have with the existing solutions? How can your blockchain product make life easier for them? These questions should stem from intensive research to understand who you’re really building for.
What does the future hold?
Personally, I believe Blockchain is the future. As someone living in a developing country, I can tell this technology is more than a speculation. It’s a need!
No doubt there will be lots of blockchain project failures, from self-induced reasons to on-chain hacks to market rejection. It’s only going to get better with time. Blockchain projects need more active engineering support, business mentorship, educational support, marketing talents, communication, user research, and market analysis.
As we forge ahead in this industry, building needed solutions upon preceding technologies will see more success rates and market acceptance than futuristic bets. Also, as the industry matures, more talents will join to build a society with a foundation of trust and accountability.