Blockchain has been viewed as a technology that is capable of changing the way businesses transact in the global economy. The ability of the technology to facilitate transfer of funds in a secure manner while ensuring data integrity has immensely contributed to its popularity.
Startups that want to solve day to day problems are increasing using blockchain technology. For instance, URAllowance is developing family smart contracts, IOU is creating online customer satisfaction solutions, and NoizChain is enhancing interactive advertising.
At the same time, using blockchain technology, BQT is facilitating hedge fund and cryptocurrency trading, Gath3r is optimizing web mining, while mortgage lending and investing platform, HFC Coin is solving problems in the mortgage industry.
But application of blockchain in the corporate world is not as easy as it sounds. A recent report by Forrester Research shows that up to 90% of active blockchain initiatives in the US will be abandoned while majority of blockchain-based projects will be put on hold this year.
At the same time, at least 90% of projects that are being tested will not form part of operations in companies that initiated them. It is also evident that companies that have been aiming to integrate the distributed ledger technology in their businesses are slowing down, even backtracking on their goals.
First Steps With these statistics in mind, it is important for businesses to consider various factors before incorporating blockchain technology in their operations. According to Reginald Ringgold, CEO of BlockVest, a business must first define the gaps the technology will address because not all problems can be addressed by blockchain.
Reginald Ringgold, CEO of BlockVest says, “First and foremost a business should ask itself whether it makes sense to integrate Blockchain into its current business operations. Often I find that businesses try to do an ICO or create a Token for a Crowdfund offering just for the purpose of raising capital or being relevant, not realizing that without proper due diligence and steps to ensure your operating with a culture of compliance, you could end up with more problems that a normal startup is faced with.”
A business should also outline the benefits of using blockchain clearly in order to validate its investment in the technology. Engaging stakeholders to establish this is critical because implementing blockchain entails weighing the benefits against cost.
According to Joseph Oreste, founder and CEO of Qupon, the aim and speed at which verification and recording of transactions happens is key because it determines the overall cost.
He says, “Confirmation times and transactions per second are two important factors. The rest really depends on what the business is trying to use it for. They will need to decide if they private ledger or a public ledger will do? The costs are much higher if setting up a private system.”
Oreste further notes that evaluating risks vis a viz benefits could provide a way forward. “It is very early in the evolution of decentralized technology, caution is prudent, but there are clear leaders in the space. Companies will have to weigh their own risk/reward metrics to determine whether they should adopt one of the leading solutions," he adds.
Readiness Preparation is a critical in determining the suitability of blockchain technology for a business. It is essential for a company to get correct information and technological knowhow on blockchain before integrating the technology in its operations. This enables the business to determine whether blockchain will serve the intended purpose, evaluate its compatibility and ability of technology to accommodate large number of transactions.
According to John Hoelzer, CEO and founder of ONe Network, companies also have to evaluate blockchain's scalability and privacy.
He says, "There are a lot of decisions to be made when an existing business is looking at using Blockchain Technology for their business and sector. Privacy, Scalability, Speed, Immutability of the blockchain they choose. These are only some of the points to consider. As time goes on and the technology and platforms mature, points such as speed and scalability will not be much of a factor. But for now they are. In many cases it may be more prudent and cost efficient to partner (financially or otherwise) with some of the startups that are currently building out new solutions on the chain. As this will allow for proof of concept and may be solutions the companies can incorporate in the long run."
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.