Blockchain and cryptocurrencies have been at the heart of discussions during the past five years. Some people have challenged the very core ideas about the existence of blockchain technologies and cryptos. In other instances, blockchain and cryptos have become a roller coaster ride. We have gone from hype to deep dips, and blockchain technologies have been considered both the catalyst for future technological advancement and a significant source of scams.
We know that timing means everything in business. So, it is worth asking if now is the time to introduce a blockchain-based business? Alternatively, what if it is not about timing but which specific applications and use-cases can make the breakthrough? Emerging communities of blockchain innovators I earlier visited Crypto Valley in Zug, Switzerland. Zug has been one of the places where special regulations for cryptos have been introduced. Consequently, Crypto Valley has built a technology and business community to accelerate blockchain and cryptocurrency businesses. The community and ecosystem include startups, accelerators, investors, advisors, and offers help from local authorities. My friend in the community said they have seen business activities growing this year. After the 2017 ICO hype, many parties in the blockchain business had hangovers. It has taken some years to get back to an actual business track. We can see the same situation in other places than Crypto Valley too. We can divide the challenges of blockchain business into three levels:
Moving beyond Proof-of-Concept Many larger companies have also developed Proofs-of-Concept (PoC) with blockchain. We have all heard about cases for supply chain, settlements and money transfers but are yet to see the momentum move from PoC’s to more significant scale production. There are several reasons for this, but at the same time, it is good to remember that enterprises like to try many things. They even have units to explore new avenues and squeeze startups to make them free with promises about future opportunities. But management often hesitates to adopt new solutions for larger-scale use. At the same time, many parties also make significant money with cryptos. They have become alternative investment instruments, and when prices have gone up, many parties have made good money with trading. Some of these ‘assets’ are also political, where investors like to see assets and instruments outside government control. Blockchain-based finance services constitute a distinct domain. They most probably will have a significant impact on the finance sector. But the timing is tough to predict when regulations, security requirements, and political issues (yes, governments want to control money) cause all kinds of delays and complexities. Nonetheless, if we think of blockchain technology as the basis of digital services, it is easier to predict the progress. The question is finding a stable enough platform, using suitable usability applications, and a sustainable business model. It is not easy to find these, but there are so many intelligent people working on these aspects globally that we will start seeing them soon. The real value is the crucial factor in finding the most valuable opportunity It is also advisable to ignore unrealistic services and business models. If your token is embedded in specific applications that people do not want to use, it has no value. If there is no way to use your sovereign digital identity, it has no value. If you have an NFT (non-fungible token) for an item that no one is interested in using or seeing, it is of no value. If you can create an app marketplace with many valuable and useful applications with NFTs, people will be more willing to use them and pay for NFTs. If you have a messaging service that offers real user value over other ways to communicate and uses a digital identity service, then the identity starts to have value. If a token is linked to a valuable service to confirm transactions, it has value. This sounds oversimplified, but it is so easy to forget these basic natural laws with new technologies. Now we can see applications, startups, and investors (Andreessen Horowitz is the best known) that we can expect real business built on blockchain. We don’t know yet which applications, when exactly, and in which sector the big breakthrough will happen, but we know for sure that it always requires a lucky coincidence of many factors. Yet, when there are enough activities, enough smart people and enough money, it will happen sooner than later. Maybe then the roller coaster will stop. |
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January 2023
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