Why more than 90% of blockchain projects fails and why this is good

Ivan Vankov (gatakka)
5 min readApr 19, 2018

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IT industry is not famous of good success rates, on average more than half of the projects fail for one reason or another. But 90% is too much even for IT. So why is that? You can find many answers, from bad management to aliens (yes, aliens) and probably most of them are objective reasons (except for aliens). Here I will try to give you my point of view, I may be wrong, but in the past couple of years spent in consulting and working on blockchain projects I have seen a lot, except for aliens.

Blockchain + random word

Blockchain is the new cool kid in school, everyone is fascinated by it without completely understanding what this technology is. Lets look the history, because history is one of the best teachers. Long long time ago, before 10–15 years, something called document database became mainstream. People were so exited, flexible storage, no schema, hierarchical structures, extreme horizontal scalability, and they decide to use them for everything, even for accounting and payment systems. And soon people realize, that this was a terrible idea. As result of those failures couple of good use cases emerged. People continue to use relational databases where it makes sens, and document databases where they have supreme advantage over other technologies.

Same is happening now, this is a new technology, people are experimenting where it will work and where it will not. New models are tested, new type of architecture, integrations and interactions. After couple of years those models and good practices will be a common knowledge to everyone in IT, the same way as “Do not store money as float type in DB”.

Here is an advice for you, if you are planing to build anything using blockchain. When you are done with the idea and have good overview how the system will work, then try to model same system and functionality using conventional technologies like databases. Then ask your self what is the difference between the two, is there anything in blockchain architecture that makes the product better. Be as objective as possible, and do not use cliches like “it is more secure”, more on that later.

If you are modeling process around central entity, then blockchain is not for you. Blockchain is distributed. Start thinking about processes between organizations and multiple parties in distributed dynamic way. This is where the real value of blockchain is — facilitating interactions between parties that do not trust each other without the need of central point.

It makes “it” more secure

Nope, a very big nope. Blockchain do not make anything more secure. If you are hacked and data is stolen, then you have data leak. If someone makes a DoS attack, then you have a DoS attack. If someone decide to alter the data, then you are save, because most of the blockchains implementations will make it clear that some info was changed, and you can take actions.

So, blockchain makes data more secure in terms of data forgery, but not in any other case. Your security will be as strong as the weakest link, in general case this are the users. And if you are acting as a central authority, then is difficult to convince the people about the validity of the data. Blockchain is distributed — many copies in many places that can be verified separately.

How this is related to project failure? For example you are hacked soon after the project goes live, or you are going to VC for investment and the VC is not happy about the real possibility of hack in the feature.

ICO

ICO allows people to get funds for almost anything. This is not bad, but this removes the filters. When you are looking for investment for your ideas, people that will give you money makes a lot of thinks to validate your idea. How effective it will be, market share, potential competition, and then they validate your idea by giving you money. VC (and not only) try to be as objective as possible. You have emotions, you have limited scope over the problem, you probably have far less experience than them. Before ICOs, many ideas were rejected even before they were born. ICOs allows this unverified ideas to “go live”. Again, this is not bad, this is testing with someone else money. One successful use case will create a tons of related projects and specialized derivatives. Actually this is real business model from long time ago, take proven idea, specialize the idea, sell it to this small but specialized market with little competition, then start looking for another successful model.

Revolution

Every one try to revolutionize something with blockchain. Mass media and social expectations push you to this behavior, always to look for the maximum, for the extreme, for unique and different, but the reality is very different. People do not like revolutions, especially if they are involved in it. People will do everything that they can do so tomorrow to be the same as yesterday. Same apply for business. Do not try to revolutionize, try to evolve. Fix problems one by one, step by step. Make one small process or interaction more efficient, then another. There is a huge resistance against such huge changes. And problem is not only psychological, it is also an economical. So when you are planning, think for revolution as the final goal, but make the actual execution in small, well thought, incremental steps.

First to the market

All of you probably thinking that first to market is a huge advantage. Sorry, but is not. Good idea and even better implementation are more important. First to market is paving the road with a lot of efforts. Later you can easily drive on this paved road with the fraction of this initial efforts. Think of it as first settlers in America (and not only), most of them died horribly. Next one were prepared. Do not compromise quality for speed of delivery to market — NEVER. And if you are not convinced, look it from this point of view. Lets assume that you have genius idea and you are rushing to market compromising features and functionality. Competition see the idea and while you are struggling to improve the implementation, they are live with better implementation, most likely with a small set of the features, but features that are actually working. Who will win?

But Facebook was first and later no one was able to take there market, even Google, Microsoft, Apple … Good observation with a small difference, Facebook became huge before anyone try to compete with them, and most importantly, they try to “revolutionize” the social media. People already have habits in Facebook, Google provide something completely different, people resist changes, people stays in Facebook. Google try to push people there using “force”, resistance became stronger, people stays in Facebook. It is so simple, and because of this simplicity most of the people do not believe that this is the real reason.

Conclusion

I want to say thank you to all people that are experimenting, this give to all of us a good cheat sheet what is working and what not, what was tried and why it fail, where this technology is working and where is not. This trend will continue for about 2–3 years more, and then good practices and models will be established. Next will be the second phase — improvement of this good practices and process. At this period blockchain will become completely obsolete as technology, or will start to have real impact.

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