By Michael Harris
Data Scientist at BlockAble
When designing a new blockchain application, what comes to mind first, what the application does, or the fact that it will use blockchain? If you are a blockchain enthusiast, maybe the latter, but if you are a successful businessperson, you generally think about what you want the application to do first, and then find the right tool for the job. In some cases, blockchain is the right tool. In many cases, it’s not.
There have been a lot of flashy ICOs over the past few years, and over 50% of them have only managed to flop and end up with their tokens worth next to nothing. But there have also been quiet moves by existing companies to include blockchain into the new products they are building, or into their existing products. In many cases, it’s only a small part of a larger whole.
Blockchain = Magic Glue?
Imagine for a second that instead of computers and blockchain, we were talking about house building, and a newly designed type of glue that was game changing stuff. This glue was so powerful it could last forever. Suddenly new construction companies started popping up all over the country talking about how great this glue was, and how the house was built using the glue and would last forever. Fast forward a year, and most of them are out of business. Why? Because nobody actually wants a house that is made primarily out of glue. They just want a normal house that is a bit more durable, and is bit higher quality than a normal house.
But the purpose of glue isn’t to replace existing building materials, it’s to help hold them together. If you decide to build a house using magic glue, and the customer tells you they want a brick house with solar panels, what do you do with the glue you are so set on using? Do you replace the mortar with glue? Is that a good idea? Is it desired by the customer? Is it affordable? There is a lot of mortar used in building a brick house, and mortar is pretty cheap, while when you compare liter to liter, this new magic glue is pretty expensive in comparison. Sure, for normal gluing purposes you don’t need much, but if you are trying to use it as filler you are going to need a lot more.
That same analogy works with blockchain. When you take an idea for a product, and imagine how the user will use it, why they will use it, and what it needs to do, you can build a great product. You don’t go into it saying that you will use blockchain from day zero, you design the product first, and then when deciding how to solve the problems, you realize that blockchain will solve the problem for you.
That’s what SecureKey is doing, in their soon to be launched identity verification system. They already have several existing products, including their Concierge service which is used by a lot of major industry partners, including all the major Canadian banks and the government of Canada. They are now building a digital identity network that uses Hyperledger Fabric as part of the software stack. Blockchain isn’t the majority of their framework, it just provides a crucial strategic function that helps everything work more smoothly. Is it 5% Blockchain? We don’t know, because the ingredients list for their new app hasn’t been published, but we expect that it’s in that ballpark.
Or look at GetGems, who decided to bring cryptocurrency to social media, and apparently didn’t consult their future users about what they actually wanted. So while the idea seems exciting on the surface, very few users actually downloaded their application, so it hasn’t been very successful. How much blockchain have they used? We don’t know, but it likely was a very large part of their product plan from the very beginning. There is a lot of emphasis on blockchain in this project, so we could estimate it at around 50%. The problem with this application is not so much the use of blockchain as the fact that they started from day zero with the intention of using it, and built their product around blockchain, rather than the other way around.
T-Mobile is building a new project called Hyper Directory specifically to solve several of the problems they face in their enterprise cloud platform. They are using it as a source of truth in identity and permissions management, helping to identify who gave permissions, when they gave the permissions, and making it more transparent overall. In their case, they are using blockchain specifically to solve some of the challenging difficulties of their already existing product. They are using it strategically, and for very specific purposes. While Hyper Directory might be as high as 20% blockchain, if you look at their enterprise cloud as a whole, the blockchain component is likely less than one percent.
In our magic glue example, if we look at history, an actual example of a real world “magic glue” is concrete. It’s a very useful construction material that can be used for just about anything. But just because you can make a concrete canoe, doesn’t mean that the general public will buy a concrete canoe. You can use it to make the entire house, but it’s instead used mainly for the foundation, and not for the entire building. Except, of course, in the projects where its essential, like a skyscraper. Before you start building something though, instead of deciding that you want to use concrete, you should first decide if you are building a house or a skyscraper.
The moral of the story is that while blockchain is a fabulous new technology, it doesn’t do everything. In order to make a functional product, you need to first design it based on how it will be used, and why it will be used. You need to have a very solid business plan first, one that ignores the technical details of how, and focuses on the what and the why. Only once you have figured out exactly what needs to get built, and why it needs to be built, do you start to figure out what the technology stack looks like, and that is the stage at which its appropriate to decide if blockchain is a good fit for your business. If you start from day zero saying that you want to build something with blockchain, your business likely won’t get very far off the ground. If you can explain your business plan entirely without mentioning blockchain or cryptocurrency, to someone that has no technical background, you will be in a great position.
Start with the problem you are solving, and find the best solution to that problem. Sometimes it will include blockchain, most of the time it won’t. But don’t presuppose that blockchain is a good idea from the beginning, even if on the surface it looks like a good fit.
At the top level, excluding all implementation details, can you explain your business plan without using anything blockchain related? If you were a car company, and you decided to make your cars lighter weight, you wouldn’t start by saying that you should make a car out of plastic. You start by saying that you want to make a lightweight car. When you go to the engineers and suggest that they use more plastic because it’s lighter than steel, they will smile and nod and design a new car that uses aluminum and fiberglass (and maybe a bit more plastic). While implementation is a very important step to launching any new product, a high level business plan that ignores implementation to focus on the what and why is a good first step.