Why many Blockchain Projects stall after POC?

This is a very simple post about our experience at Chainyard in delivering real business value to our customers who want to explore opportunities leveraging the blockchain to solve problems or realize new revenue generating ideas. Having been involved in over forty projects or initiatives in the past 6 years, I try to present our ideas on what companies must do as their first step in the journey.

This post was triggered when last week, I did a Google search to see how many supply-chain blockchain projects really made past production and are generating revenue. Interestingly, almost all the resulting links talk about the advantages of blockchain, outlining the same or similar use cases.

Blockchain has been pitched as the silver bullet or the miracle extension to address gaps in traditional processes and solutions, or experiment with new revenue generating business models. Many organizations have fallen into the blockchain panacea and have invested in proof-of-concepts and MVPs, often with minimal success. Thus in their organization, the blockchain takes low priority and the initiatives get placed on back burner.

Blockchains have demonstrated some success in the public DeFi and Fintech space, but many of the companies engaged are startups or private companies. While many of us are aware of some of trade networks such as Tradelens, Chronicled, IBM Food Trust, BurstIQ and Trust Your Supplier, none of them provide insights into where they are on their journey. Very few enterprise blockchain solutions have made it to production and are currently in the proof-of-production phase.

Early public blockchain solutions were constrained by resource intensive consensus protocols, higher gas prices caused by crypto speculators, network scalability, protocol security to name a few. On the other hand, enterprise blockchains had their own set of challenges such as identifying the common business trust issue, member enrollment and participation, scaling up nodes for the consensus protocol to be effective, cost of infrastructure to operate the solution etc. Many solutions could probably suffice with a distributed database or a decentralized ledger technology, if not a central database.

Today there are more complex use-cases fueled by past learnings and newer concepts such as hybrid blockchain architecture, network-of-networks, tokenization, NFT (non-fungible-tokens), decentralized finance, layer-2 solutions, multiple exchanges and wallet solutions, and many more blockchain technology platforms. Blockchains alone do not fit the purpose but have to be combined with IOT and AIML to build robust solutions. Governments have also become more informed and are in the process of enacting new policies and regulations on the use of crypto and digital currency. Countries such as China and India are considering banning crypto currencies and mining.

Chainyard is a recognized blockchain services boutique consulting firm with a global foot print. As a blockchain leader at Chainyard, I have been engaged with several client opportunities who have requested our capabilities to build their PoC or our expert “consulting and advisory services” to realize their idea or project. I have seen the impacts of not properly vetting an idea or cutting back on the necessary due diligence.

Our approach has always been a twostep process. In step one, mid-level business analysis, architecture, technical design and implementation strategy of the project or initiative should be conducted. This allows the customer to understand all the options available and minimize or address potential risks with just a small upfront investment. Step two is the implementation phase.

Implementing a blockchain enabled solution requires addressing the three areas that include the business, technology, and operations dimensions.

From a business perspective the following areas should be addressed

• The Business Model: This aspect deals with the actual business of the organization such as the “idea”, use cases, key stakeholders, participants involved, assets being transacted, transactions, information model, workflow etc.
• The Investment Model: Here we identify the sources of funds to implement the solution. Some companies raise money through traditional means and others have issued tokens through processes such as crowd-funding, tokenization, or ICO (initial coin offerings).Others require the entire step one report to be documented in a way that allows them to seek funding from investment companies.
• The Incentive Model: For the solution to be successful there has to be adoption by the business network participants. It is important to quantitively define how stakeholders get rewarded and how do business participants benefit. If tokens are involved, questions such as how do tokens appreciate?; What kind of rewards do token holders earn? Can they reinvest, transfer or redeem their tokens? must be answered.
• Legal and compliance specifically when dealing with asset tokens or crypto: Many countries have regulations and reporting requirements on crypto as well as investments and earnings. In addition, there are privacy regulations and data security requirements that must be understood, especially if the stakeholders cross geographic boundaries. These legal aspects often come to bite if not understood early on.

Blockchain concepts and platforms have evolved considerably since its early beginnings, and influence technical considerations. Hence, technology must address many areas summarized below :

• Public, Private or Hybrid approach: Many of the early projects fell into two camps consortium based enterprise blockchains and public blockchains, However building consortium or private blockchain solutions were a lot more challenging. Again, today, there are many third party solutions already available and one has the option to simply plug into one of those. Hence it is important to understand which architecture best suits for this business case.
• Choosing the right technology components: In the enterprise space, there are many platforms and supporting technologies nurtured by the Hyperledger Foundation. In the public arena, there are a plethora of blockchains, layer 2 solutions, dAPPs, wallets, exchanges, DeFi and NFT platforms, opensource smart contracts, and development tools. Apart from picking the right architectural and design components, one has to dig deeper and understand subscription models, transaction fees, licensing costs which will also influence the architecture.

Lastly, it is very important to look at the Operational Model which often gets ignored. Many projects fail since a proper estimate of the costs involved has been ignored. Getting the solution operational requires estimating various costs that impact the cost per transaction.

• Capital expenses to set up the infrastructure, implement the solution and other miscellaneous items including legal fees
• Ongoing operations costs including infrastructure operations, transaction fees, gas fees if applicable etc.
• Governance of the business model and the technology platform

Technically, building the PoC is not the real challenge since many important considerations are overlooked or stubbed. Our twostep approach has shown success with our customers. The underlying philosophy behind the approach is a methodology “invest, build, deploy, earn” iteration. It is an agile approach that wraps around the traditional agile project management methodologies. More than proving a technology, it focuses on ROI. The average typical duration of step one is somewhere between 6 to 8 weeks and results in a Business and Systems Architecture.

For more discussions on this topic, please feel free to connect with us at Chainyard, send me an email or look me up on linkedin.