Why Some Blockchain Projects Fail
by Patrick Lee, CEO of Boogle Group
Here’s a surprising fact. According to financial consulting firm Deloitte, only 8 percent of blockchain projects out of 86,000 on Github have been successful. The majority don’t make it past their first birthday. Another report by China Academy of Information and Communications Technology calculated that 92% of blockchain projects have failed since the inception of blockchain around ten years ago, with an average lifespan of 1.22 years.
Here are three reasons why I think these projects fail:
1. Fear of Missing Out
We forget how often blockchain projects fail because we hear more “success” stories from the past couple of years, and most blockchain projects have started out with Initial Coin Offerings (ICOs).
Yes, there is indeed an increasing rate of ICO funding which we can take as a sign of acceptance of blockchain technology worldwide but more than 99% fail. According to CoinSchedule, the total amount raised by ICOs in the year 2018 was $21,483,484,047 which is almost three times more than the rise in 2017 amounting to an equal of $6,576,372,746. Given the insane success of most ICOs, scammers have been flooding the market creating bogus dapps, or coins, to get their fill of the ICO pie and creating an “ICO bubble”.
Besides scammers, too many investors have been crippled with FOMO (Fear of Missing Out) throwing millions of dollars at anything with the word blockchain sending a strong message to startups to use blockchain technology at all costs and think about the details later.
2. No Business Model
Developers need to stop these “get rich quick schemes”, throwing blockchain at every problem without taking the time to pick projects which can bring in true value, based on a concrete business model. We have to stop falling in love with our solutions, even before the problems have been identified. True entrepreneurship is in the long run game.
Unless you keep pivoting your business model, you can’t keep going around in search of problems with a “solution” in hand. As entrepreneurs, we always need to pinpoint a specific business challenge first. We need to dig deeper to see the pain points which exists, if there’s a real demand for the solution, and whether the market has a large enough potential.
In my earlier article “Would a Tokenized World Change How We See Value?” I stressed the importance of utility tokens. Most ICOs do not maximise their token utility when this should be absolutely integral and is of utmost importance to increase the overall value of your final product.
If you are an ICO developer, then ask yourself this question: Take away your tokens would your business still be there?
If the answer is no, then why the need for tokens? Most people get tokens just to “HODL” (blockchain industry speak for buy and hold) it and buy more Bitcoin and Ethereum in the future. Utility tokens increase value the more use there is for the token, so why not create value with the tokens.
If tokens are necessary for your business, then you need to understand its role and maximize its utility. Tokens can be multi-purpose tools which can bring in a lot of much added value to your business. Your business model should be such that you are exploiting your tokens to the maximum possible limit. That’s the awesome sauce right there.
3. Over-enthusiasm in applying ‘blockchain’ to everything.
Not every problem has a solution on blockchain. Let the problem we choose to solve, be what leads us to using blockchain, instead of starting with using blockchain as a technology, and then force fitting the jigsaw puzzles together afterwards.
This cartoon summarizes it all for me. Just because blockchain is the latest tech buzzword does not mean entrepreneurs, investors, and developers would need to rush into it.
Since the crypto winter of 2018, things are looking up now as more entrepreneurs and investors are more cautious about blockchain startups, but young developers especially need to develop a problem-solving mindset to sharpen their business skills in order to provide something valuable with blockchain, to the world. Then, we can become true entrepreneurs together.
What do you think? Are there any other reasons entrepreneurs going into this space should look out for?
