Last week we looked at community and how to spot a real one. This week I want to talk about the use-cases for blockchain, and how to determine whether or not a project really needs it.
At its most basic level, a blockchain introduces a new way to manage and protect data. Its key features, such as decentralisation, immutability, and transparency, are able to secure data with no need for a trusted authority (otherwise known as “trustless”). But is blockchain all it’s cracked up to be? Is the particular blockchain being used for a project, the right kind?
Public blockchains sometimes can’t compete with centralised databases in terms of speed and come with significant transaction fees that depend on the number of transactions. Equally, building a private blockchain is expensive. The project you are considering creating or investing in might not need decentralisation and tokenisation at all, and a traditional data management model might simply be more appropriate and cost-effective – therefore, why is an ICO being considered at all?
Ask yourself two basic questions. 1) Can blockchain help reach the project goals and solve real industry issues? If the answer is yes, then 2) is it possible to solve those issues without blockchain?
If a project doesn’t make it past both questions, then I’d avoid it.
Many projects have no adequate alternative to blockchain if they are to accomplish their mission, of course. For example, identity management and authentication can be significantly improved by the blockchain. Other strong examples include the digital assets market, most relevant to the gaming industry (look at ICO-funded projects like TriForce, who are building their own blockchain to solve this big problem).
There are many strong blockchain use-cases, but it’s important you question the need for one every time.