Keep this in mind when engaging in a blockchain project
For the first time we came across blockchain in 2009 — me and my friend and business partner Maksim Akulshin (now the CTO at eCoinomic.net). At that moment we’d just launched out SIIS, out IT enterprise, and were considering bitcoin among other business lines. Yet, having carefully studied this area, we decided it was too risky and adventurist for a startup.
We revisited the idea of a blockchain-related project almost 8 years after that, and, to my opinion, we are right on time. The market is ripe and active, the users and technologies are ready, the related legislation is evolving, slowly but surely.
I do not consider myself a great authority on this field. Yet, I believe I’ve gained certain experience while implementing a fairly large and complex project that awakens interest of those more or less familiar with fintech. Here I’d like to share some advice for those who consider launching a blockchain-based project. So, what is needed for successful development and launch:
- Most people have no clue about what you’re working on — bear with it.
99% still do not understand what blockchain is. Moreover, blockchain and cryptocurrency (think bitcoin) ae re inevitably equated! Great many believe that if one runs a blockchain business, it is definitely all about speculating. They give you sly winks and knowing smiles. Will it rise or fall? Is it a bubble or not? Did you get some yourself? But to conflate blockchain with bitcoin is just like claiming that a car is definitely a taxi or, let’s say, Uber. A car is basically the technology, while taxi is the use of this technology. I often bring this example to clarify the difference between blockchain and bitcoin: blockchain is a technology, and bitcoin, although the first, is nothing more than one of the many ways of its implementation. Still, at the end of the day, no one really has to understand how does it work. Your job is to create a product, that will be simple and convenient for its users and won’t require deep knowledge and analysis.
- Low transaction rate — accept it (for now).
VISA is capable to proceed 56,000 transactions per second, while bitcoin — only 7.
ETH and altcoins save the day to some extent, but this situation is not to change dramatically at this point. The problem of the low transaction rate within blockchain is a direct consequence of principles of the network itself.
Too much time is required to synchronize the network and confirm transactions. They face this for the first time, for the second time, for the third and for the fourth, in general, always. In a way, this explains the diversity of currencies: everyone is trying to invent and improve something. Technical solutions that allow for increasing the transaction speed hundreds and thousands of times, and even overtaking Visa, exist, but the mainstream use of such solutions is unlikely in the near future.
What to do? At this stage, do not consider blockchain as an efficient and competitive payment system. For example, at eCoinomic we use blockchain only for the loan-processing smart contract.
- Put 100% of your time into the project.
Another key point: blockchain is the area where the founder’s or mastermind’s duties can’t be limited to representative or managerial functions — they must put 100% of their time into the project, especially at the initial stage, be involved into every detail, understand the technical side of the project (and how else can they attract investors and partners who may ask any questions about mechanics of the project?), consider probable fluctuations of the regulatory environment, work closely with the team and much more.
For the most part, blockchain projects are international by nature. This means that their founders and top managers constantly have to be on the move, travel throughout the world a lot, take part in all prominent meetings, conferences, summits in person, correspond with clients and investors, reaching out to the world’s experts and advisors of the industry, be aware of the latest developments and the industry trends. In this case, you feel the project better, you understand clearly wishes and trends of the market. And since blockchain is the growing market, being in a state of formation, it is important to oversee everything at every minute and keep the nose to the wind.
- Plan thoroughly.
At the planning stage, it is important to estimate everything, consider different patterns, determine whether the project is scalable, assess risks, and ultimately choose the ideal development path. At the same time, the main thing is not to rush, even if you want to launch the production as soon as possible and give the result to your users. Careful preparation takes 90% of time spent on the project. Without it, too much would have to change and you’ll have to revise the original decisions. Along with that, remember that making alterations in a working blockchain network is not an easy matter. And even if everything is planned very well, be prepared for something going wrong with the project. In order not to be confused, it is better to think of emergency options in advance. What if some stage doesn’t work out as planned? How will the audience take it — and it’s not only about your investors, but anyone interested in the project? Are there competitors, and will all of you fit into the market should they outrun you at one time or another? And lots of other issues that you’d rather solve before they emerge on the table.
- Avoid blockchain for blockchain’s sake.
Blockchain and cryptocurrency became so fashionable and attractive, that this hype went beyond the professional community. It attracted interest among financiers, governments, and even celebrities. Some of them already issue their own crypto, conduct ICOs… It’s not that the blockchain is not for everyone, but it’s crucially important to understand, if you personally have a need for blockchain. Why do you need this technology? Wouldn’t a cloud database make more sense for your needs?
What you certainly should not do is to try building a business just for the sake of hype. No one needs blockchain for the sake of blockchain. A trending project can easily fail, and its price may be prohibitive — after all, investments in blockchain run at millions of dollars. If your project is already at the Pre-ICO stage and hasn’t managed to raise a per cent of the required amount within the allotted period, give it up — the risk of failure is too high.
- Don’t run from tough questions.
If you are not intimidated by financial losses and waste of time, do not forget about reputational risks. How will users respond to the service, how will investors react to the fail, what kind of articles about you will come up in search engines, will you have the opportunity to continue your business after the failed project? Ask yourself all the most awkward questions about the project and answer them honestly. In addition to reputation, fundraising may involve various legal risks when attracting financing, while SEC and similar regulators are after ICOs around the world, and this doesn’t always come to a rosy end. Remember, blockchain is not so much a fashionable technology as it is, above all, a powerful and serious tool. It will significantly change the nature of many industries and help companies become more efficient through solving specific problems in the near future. And any tool can be used or misused, one can even try driving nails with a saxophone.
To sum up, that’s what I say: the blokchain has many benefits, but it is not without its flaws. On the plus side — you will definitely be noticed if your project solves an existing problem. Blockchain is popular, and gets major attention. The downside is that this technology still has its weaknesses related to both the speed of work and with speculative behaviour. Everyone expects quick fortunes from this industry, and structural projects take time.
So if you decide to build a blockchain project, first — figure out, why would you need that. A good idea will always find its application. Money is never more important than reputation. At the same time, it is now possible to join at least the second, if not the first, wave of blockchain companies, that can grow into something bigger with their bright ideas. Blockchain is now at the dawn of development, this is the time of experiments, and if you are up to something outstanding — why not to try?
Aleksei Smolianov, CEO eCoinomic.net
