Starting a Blockchain Project in 2023

If you’ve been following our articles and social media feeds, then you know we’ve discussed this topic in the past. As 2023 begins, especially after all the global volatility of 2022, we wanted to create an updated guide for those starting a blockchain project this year.

Big Changes in 2022

Even though 2022 started off optimistically after the previous year’s historic crypto highs, these hopes were quickly dashed by the end of Q1 with the events unfolding in eastern Europe and the steady fall of crypto prices. Things for crypto did not improve. Luna imploded, then FTX, and the collapse of hundreds of affiliated and affected companies damaged public trust in the crypto-space, and by extension the blockchain sector. Token Sales also proved to be increasingly difficult sells for investors, who were more cautious with their money particularly after the FTX debacle.

NFTs, one of the hottest trends in 2021, continued to slump in 2022 and hit rock bottom in the summer. As many predicted, it turned out that NFTs are more of a speculative “tulip” bubble than anything else. However, additional use cases for NFTs eventually did pop up, trying to bridge the gap between real and digital world. We’ll see how they fare in 2023.

Similar to NFTs, the metaverse continued to be hyped in 2022, however as yet very little has come of that hype. In fact, companies like Meta that went all in saw their stock prices drop throughout the year as investors soured on the metaverse hype. Time will tell if all the promise of a virtual universe actually comes true.

All together, the events in 2022 showed that speculative use cases for blockchain technology are not sustainable in a world that’s more concerned at the moment with real issues like war, supply chain failures, inflation, and pandemic. For blockchain projects to be successful, just being a cool new technology is not enough; they will need to present real world value to businesses navigating these hard times.

New year = New Context

We can expect big changes in 2023, and things are still uncertain. However, we can make some safe bets. First and foremost, the issue of regulations and jurisdictions will become increasingly important as more countries introduce regulation packages on cryptocurrencies, and by extension tokens and other digital assets. In addition to governmental oversight, the established financial industry is also moving into the space, leveraging their position and deep pockets to replace a thriving competitive market with their own solutions that are integrated into their own product lines.

The good news for those of us in the enterprise blockchain space is that the market will most likely shift towards more industrial use cases, education, and training. What 2022 showed is that businesses need more knowledge of how the technology works and how it can be applied to actually create real value.

Another safe bet to make is that fundraising to be quite difficult this year. More companies to go bankrupt from the FTX fallout, and in general this will cast a black cloud over the crypto and and crypto-adjacent spaces. This means that token sales will be more difficult than ever before. Investors are going to need far more than a good story about new technology or marketing value; real world impact is going to be more important than in the past to accomplish fundraising.

Special Considerations in 2023

This year, enterprise blockchain projects will need precise budget planning to deal with the difficulties in fundraising that the “crypto winter” has caused. They will need to show their potential investors a crystal clear value proposition and strategy on how to achieve goals.

To help with this budgeting, new projects should weigh the build vs. buy question more carefully than in previous years. Purchasing technology allows startups to better plan their go-to-market timelines and budgets, and can give them access to more advanced tech than otherwise possible without any nasty cost overruns. In the past, startups have tended to build from scratch. We’ve seen how that approach has fared when markets crash and investors tuck tail.

Finally, new projects will need as close to a perfect product and market fit as possible, before the first line of code is written or the first whitepaper is published. This means a real use case in a specific industry, with a demonstrable need that can be solved by your product. This means no fat; only lean, mean, problem solving machines.

Evergreen Considerations

Does Your Project Actually Need Blockchain?

This might seem like a strange place to start, but it’s a very important question. Despite all the hype around crypto and DeFi, blockchain technology is simply a tool, and as with any tool it does a few specific things very well. It is not a magic, fix-all. There is often general confusion around what blockchain is and what it’s really good for, as it too can become swept up in all the crypto hype. As a young technology, blockchain still has room for improvement in order to meet its true potential. What it can do now, it does very well; but like any tool, it has limitations.

We’ve discussed the question “what is blockchain actually good for?” in previous articles, but very simply there are a lot of situations where distributed ledger technology just should not be used. Applications that require high speed for example, or high volumes of data storage are not a good fit for blockchain. If, however, you can make use of time-stamping or need to work with digital assets in a token economy, then you can’t really do better than blockchain.

Designing for Success

To better answer that question, it’s worth thinking about what success looks like when it comes to blockchain in business. We see three possible scenarios in which a blockchain project is set up for success. The first case is where you take an existing business model and make it cheaper, faster, and/or safer, and thus more competitive, by using inherent blockchain advantages. Again, this only works if the underlying model can actually benefit! As always, pick the right tool for the job. The second case is using or creating a brand new business model and then finding a way to attract a large number of users right from the start, even if that comes at an initial loss, like so many NFT projects are doing right now.

With digital platforms like this, a large user base makes practically anything possible. The final option, while not our favorite , has proven quite successful for some in the past (remember ICOs?); issue a token, detach the project from a real world value, and allow the price of the token to float freely so as to tap into the rich pool of crypto speculators. Why detach? Because if the price can only move within real-world boundaries it is simply not interesting enough for the kind of speculative audience which still makes 99% of all token buyers worldwide. But again, we don’t recommend this approach.

Legal Frameworks and Jurisdictions

Once you’ve decided that blockchain really is the best choice for your business, the next step should be to figure out the legal frameworks required for your jurisdiction. Too many projects wait until it’s too late to figure this out; it really should be done first, especially in 2023 as regulation packages are currently being considered and implemented in the post FTX world; the regulatory landscape is constantly in flux. As a new technology, legislation and regulation around blockchain, crypto, and DeFi (and they are often lumped together), particularly when it comes to trading tokenized assets, varies drastically from country to country. You’ll need to decide if you want to risk setting up a business inside a country that hasn’t passed any blockchain legislation, as future laws might not be in your favor. Some popular “friendly” jurisdictions that offer clear regulations for, blockchain and crypto projects include Singapore, Malta, Liechtenstein, and Switzerland.

Consider also the other companies that may be in your industry, as there might be additional resources for new blockchain startups. The Zug region of Switzerland, for example, is home to Crypto Valley, an area full of blockchain and crypto companies, including Ethereum. Here there are a number of associations, accelerators, incubators, and other helpful resources and partnership opportunities for new companies. Once you’ve decided on a use-case, business model, and location, it’s on to the next big decision.

Choosing a Blockchain Infrastructure

To build or to buy? That’s always the question. When it comes to enterprise blockchain applications, we always think it’s best to buy (though we might be a little biased.) Here’s our argument: blockchain technology is still new, complex, and rapidly changing. It’s a highly specialized industry that, when used for enterprise, can be responsible for millions of dollars/euros/francs etc. The risks, along with the barriers to entry if you go it alone, are very high. Most people who want to explore the ocean or take to the skies wouldn’t build their own submarine or airplane. It’s the same with blockchain infrastructure; building from scratch requires expertise, time, money, and effort that the vast majority of companies simply don’t have, especially not startups. It makes sense to use an existing infrastructure that can be extended and customized, not only for the cost savings, but also for the reliability and support down the road.

Selecting a technology partner is a big step towards making your project a reality. Make sure they understand what you want or, if you aren’t quite sure yourself, make sure they are flexible and willing to offer advice and expereince. After all, in such a young industry, adoption benefits everyone, and sharing knowledge is a huge part of making that happen. Ask your provider about their plans for future proofing and blockchain flexibility, as you can be certain that protocols will continue to change each year. A good infrastructure provider should see these things coming down the line and be flexible enough to help you adapt your solution.

Finally, get as clear a picture as possible about fees and costs. As the old saying goes, you get what you pay for, but with such a new tech, you can end up paying a lot more than you bargained for, particularly if you need to transact on a public blockchain or integrate new tech with existing software and protocols. A good infrastructure provider should be transparent about fees upfront, and have an idea about long term costs as well.

Testing, Testing, 1–2–3

You’ve made it this far, now it’s time to start building. But whether you buy an infrastructure or build your own, one important thing needs to be kept in mind; whatever happens on a blockchain, stays on a blockchain. While this is one of the reasons why blockchain is such a secure, trust-less ledger, it also means mistakes are literally permanent. And when you’re developing a new token economy solution for a business, there are going to be tweaks and changes along the way. This means that any erroneous transactions or early tests could end up in your permanent chain, especially messy if you’re running on a public blockchain like the Ethereum Mainnet, which is likely because it happens to be the world’s most popular public blockchain with the largest user base and most universal protocols.

Additionally, each transaction on a public chain like Ethereum can be very costly, especially at the moment, making thorough testing and development prohibitively expensive in a live environment. These “gas” costs have been so high, in fact, that they have squeezed out many young projects due to un-affordable prices. Fortunately, there are new blockchains popping up regularly, you just have to be careful to pick one that will actually help your project in the long run, rather than constrain it.

Additional Considerations

There are a few more additional things to consider before you double down on either an infrastructure provider or start developing a platform from scratch. All of these issues stem from the fact that blockchain is a new technology and the space is rapidly evolving. Remember, NFTs went from unknown to mainstream popularity in just a few months. The first thing to keep in mind is future proofing: what happens if the blockchain you select to launch your project on is no longer supported in 5 years? What happens when the few multi-chain protocols evolve, or when new protocols come out? You’ll need a way to move existing ledgers to new chains, or update tokens. This is another reason why an infrastructure provider makes sense, especially for startups.

Another factor that really came to the forefront of blockchain and crypto conversations in 2021 was the issue of environmental impact. Certain cryptocurrencies, like Bitcoin, are famously power hungry, requiring massive amounts of energy to mine and to validate transactions. There have been multiple solutions presented, such as Ethereum’s recent consensus mechanism shift that drastically improved its efficiency. Even so, not all blockchain or token solutions are equally friendly to the environment, and in an era of #climatecrisis and increased focus on corporate responsibility, especially in the social media crucible that is the blockchain/crypto/DeFi space, this issue should be taken seriously.

Finally, whether you choose an infrastructure provider or develop a solution yourself, you’ll need to think about future support and maintenance, both logistically and in terms of fees. Especially if you decide to build from scratch, you’ll need to think about bug fixes and patches, customer support, protocol changes, and feature upgrades. This is a big part of the future sustainability of your project, particularly if your blockchain solution has a customer facing side, such as an app. If your solution uses blockchain only in the backend, behind the scenes, then your priority will be on maintaining stability and reliability rather than customer support.

Realizing a Successful Blockchain Project

We’ve reached the part of the timeline where you’re ready to start actually building something. It may seem like there’s a lot of hoops to jump through before you even get started… and you’d be right. Blockchain is still brand new, and most people are still figuring out what it’s good for, how to use it, and where it fits into the current business, financial, and political ecosystems. But don’t worry, the number of resources grows every month, and there are lots of helpful, interesting people out there willing to support your project in some way. In many ways, there’s never been a better time to build with blockchain, whether you’ve got a fresh startup brewing or you’re looking to integrate new technologies into an existing business. Good luck!

At CoreLedger, we believe that blockchain is a practical technical solution to improve and solve a wide variety of issues across industries and sectors, which is why we try to cut through the hype and focus on real-world applications, not just what’s technically possible.

CoreLedger’s mission is to help businesses of all sizes quickly and affordably access the benefits of blockchain technology. From issuing a simple token to enterprise-grade token economy solutions, we have all the tools and components you need to quickly and affordably integrate blockchain into your business whether you’re a new startup or a big multinational enterprise.

Interested in our results-focused, real-world approach? Visit our website for more information, or get in touch with us directly to discuss your project.