The success of blockchain solutions depends not on how much it applies blockchain technology, but on whether it solves the problem.
In some articles, blockchain applications are described as a solution looking for problems, which means that the application has no real problems to solve. Unfortunately, this phenomenon is widespread.
Over the past few years, I have come into contact with many entrepreneurial teams and companies that focus on blockchain applications and provide blockchain solutions. One of the problems I’ve found is to find real problems for solutions like I mentioned above. Blockchain technology, for example, is untamable, so teams are trying to apply this functionality to product traceability. Some teams believe that the future development of blockchain technology lacks a technical component, so they focus on providing such solutions. Other teams are trying to commercialize a theoretically viable technology right now. These strategies either underestimate the complexity of the overall solution or get too far ahead of it.
Take the tide at the flood
A key factor in turning technology into a solution is timing. On the one hand, too advanced products will not be accepted by the market in time, and they cannot create commercial value, hysteretic products, on the other hand, will not be accepted too, no matter how superior the performance is, and how many resources the product promoter has. IBM’s PC operating system OS2 is the most representative example of this. Unfortunately, in the current blockchain application market, these two situations are both existing.
To be fair, when a new technology comes along, it’s hard to tell whether it will deliver real value now or it is ahead of time. On the one hand, it depends on the specific operator’s judgment of the feasibility of the solution, on the other hand, it depends on how much resources the operator can mobilize. For operators with mass resources, there is no pressure for them to achieve business value in the short term, so the technology can be ahead of time. Such applications are particularly visible in infrastructure. Since these operators have mass resources, they will strive for more ambitious goals. But such strategies may also be too far ahead to keep up with the tide. For example, one of the companies I worked for rented a data center site, which is built by a cable company, however this cable company apparently did not hold out for widespread use of its service. So timing is important even for well-resourced operators.
Specific to the blockchain application field, the participants providing infrastructure construction face the same risks. The infrastructure includes blockchain infrastructure, digital asset generation platforms, wallets, hosting, trading platforms, and even stablecoins. The underlying and instrumental applications of these technologies do not generate value directly, and relevant business applications are needed to realize their value. If the applications start early, they probably won’t be able to stick with it.
Know your position
To avoid finding problems for solutions, the team must be clear about what it is pursuing. If the team is focused on research, it doesn’t have to worry about whether it will produce immediate business value, just focus on the area it studies. For example, the bottom layer of Internet of Things, communication between computers, distributed storage of data and so on. But for companies that focus on providing specific solutions, they can’t be obsessed with certain technologies and should instead focus on providing a solution using technologies already in the market. The goal is to solve problems, not to develop and perfect technology.
In providing such a solution, it is important to avoid technologies that are still in their early stages of development, because they would take a lot of time to refine and all the elements needed to make it widely available. Such an operation would consume a lot of resources, take a long time and be very risky. To use a popular metaphor, it is just like a person who wants to open a restaurant, must start by farming and raising pigs.
Minimize the cost
When developing and promoting a new product, there is a great deal of uncertainty about whether the market will accept it now. In order to stay in the game until the market really takes off, an important factor is to minimize operating costs. Bitcoin is the best example of this. Due to the superiority of Bitcoin, it relies on its incentive mechanism to attract resources in the society to jointly support its operation. So it went online in early 2009 and has grown to be a $200 billion-plus product today. The current DeFi variants are excellent designs for this as well. DeFi runs without human involvement and requires no additional capital or physical input. Thus, the application of DeFi can be continuously improved to meet the real needs of the market.
Match product functions with market demands
In the process of developing technical products, the most important thing is to match product functions with market demands, which is commonly known as Product Market Fit (PMF). Only when a product can solve the problem that needs to be solved in reality, can it be promoted quickly. In such a landing process, the superiority and complexity of the technology is not the key. Instead, the proper application of a technology that can solve a real problem is the most critical. The most representative example here is Facebook. The technology Facebook uses is just plain website technology. But Facebook’s ability to meet the social needs of the masses has made it one of the world’s most valuable companies.
In my blockchain tutorial, I proposed that in a successful blockchain-based application, the proportion of blockchain in the overall solution could not even exceed 10%. The success of a solution is not how much it has applied the blockchain technology, but whether it has properly applied the functions of blockchain technology to solve an urgent problem. The traditional blockchain technology includes many features, such as full network consensus, full node accounting, tamper-resistant information, and direct digital asset exchange between point to point. In a successful solution, as long as a few of them, or even one of them can be applied properly, it would be perfectly fine.
Article from Gu Yanxi, Founder of Liyan Consulting
Translated by Yang(Milian Tech)