Blockchain: To Use Or Not to Use

If you were fundraising in 2021, a surefire way to bleed a VC dry was to include the word blockchain in your pitch. Everybody was doing it, and founders, desperate to pump up their cash reserves, saw an easy out. Believe it or not, it’s happening even today.

There’s one catch: if you raise millions of dollars claiming to build a revolutionary product, which by the way is only revolutionary because you’re shoehorning blockchain into your tech stack, sooner or later people will come knocking at your door, demanding to see it.

At best, blockchain was a superfluous addition to your product. In that case, you will have expended crucial resources (time & money) to integrate one of the least developer-friendly technologies into your software.

At worst, blockchain was the core, and for all the wrong reasons. The very innovation meant to elevate you above your competition delivers the coup de grâce.

But what are these wrong reasons and when is blockchain a superfluous addition? Or conversely, when to use blockchain?

That’s a hard one to answer.

If you’re an engineer, you’ll be mesmerized by the technology itself i.e. a marvel of distributed computing. But you’ll be hard pressed to list down its use cases. ”Why not just use a database?” will often be a nagging thought in your head.

But it’s probably because engineers tend to suffer from tunnel-vision. At least the junior ones. They’re far removed from a deep understanding of how economy operates today.

On the other hand, we have entrepreneurs, businessmen, investors or really anybody who has somewhat understood the concept of money, value exchange and economy. In that realm, all of a sudden, blockchain starts to make sense. Almost too much sense.

Interestingly, this is where the slippery slope is. The optimistic, forward-thinking stance of our latter group screams the words “this should be on-chain” whenever they spot any exchange of value in its most basic form.

From there, vaguely understood characteristics such as “distributed”, “transparent” and “immutable” elevate the blockchain ecosystem from a mere value-exchanging apparatus to a sophisticated data or computing solution. Which it might become one day, but not today.

Anyhow, the result is an overwhelming tendency to turn a blind eye to blockchain’s very real technical limitations (or the lack of benefits in some cases). In other words, the allure of blockchain today lies more in its theoretical potential than its practical capabilities.

Even if it were a polished data/computing solution right now, the fact of the matter is that most data do not need to be thrown on-chain. And most computation can stay locked up in AWS’ data centers.

Use Cases for Blockchain

“But — what is it good for???”

The answer lies somewhere in between the engineer’s stance and the maximalist’s stance. Here, I’ll try my best.

Whenever you need to power a transparent and globally decentralized economic system to facilitate value exchange across entities which are not governed by the same interests, blockchain is your best bet.

Verification Systems

Admittedly, there are some fringe use cases which I’ve omitted. For instance, one could make a great case for the “immutability” aspect of blockchain (think e-voting or identity verification), but the regulatory landscape for such scenarios is frozen in time. Any progress would be at a glacial pace, and only after we’ve realized the technology’s worth on the economy side. If you think about it, powering economic systems is still a massive opportunity, still something that reaffirms the tech’s “revolutionary” status.

Loyalty programs

Take consumer brands for example, they all implement some form of loyalty rewards. But if you’re envisioning a platform where multiple brands rally together, letting consumers freely and openly trade their rewards across brands, you will pick blockchain.

Gaming

What about gaming? Many games today launch with their own “economy”. But if you wanted to fuse and interlace economies of multiple games, each developed by separate publishers, you will pick blockchain.

At times, I dream up a single, public and decentralized trade system for arbitrary assets (the ‘backbone’). If such a system could be willed into existence, of course using the blockchain, then any consumer product/platform with any skimpy notion of a “custom economy” could simply tap into the backbone to unlock massive value-add for its users.

But the problem…

Oh, but who am I kidding? Ethereum already exists and barring its heartbreakingly high fees, it seems to be doing a pretty good job of being the backbone. Of course, the fees pose a real nasty problem. In fact, tokenization, at its heart, is quite literally an attempt at shifting the global economy on public and globally decentralized networks. Now this is a use case I can get behind. What about privacy concerns? I’m sure they’re easily remedied through proper implementation.

You might have noticed that all well-grounded applications of blockchain require change and adoption at the highest level. Truly justifiable use of this technology exists only when SMEs, enterprises or governments jump in and collaborate. Startups and players on the bottom rungs can only prepare the ground and oil the wheels. They can only make ready the infrastructure that enterprises will need when they do take the leap.

Naturally, we had dozens of clients who sought to shoehorn blockchain into their solutions which wouldn’t have made long-term sense. In most cases, we try to thwart them off, and that process has become easier overtime. But sometimes, the allure of being on the ‘frontier’ is stronger than the need to serve a real use-case — possibly, a remnant of the ‘growth at all costs’ mentality of the foregoing years.

We stand as level-headed consultants, and if you were to pitch us an on-chain pipe dream, we will push back. If you’re curious about whether your idea should be on-chain or not, let’s get in touch.