One cannot doubt the continuously escalating interest in the use cases of blockchain technology in business. However, according to Gartner, only 3% of company CIOs have adopted the technology in their business, using it only to improve existing processes.
Blockchain technology brings disruptive innovations to the market or aid in global expansion, but what hinders enterprises from thoroughly implementing blockchain projects and forgoing old business models?
These hindrances can be due to common blockchain mistakes affecting developers and the maturity of the technology, or lack thereof. This lack of understanding of the new technology leads many enterprises to launch blockchain projects that are likely to fail.
Indeed, the success of enterprise blockchain projects heavily depends on a company’s ability to identify and address the common blockchain mistakes that plague the industry. This article will tackle the most common blockchain mistakes and how your enterprise can avoid them.
1. Confusing protocol with a complete business solution
One of the most common missteps organizations can make when dealing with blockchain technology is assuming that the currently available foundational-level technology is a comprehensive application solution.
Blockchain technology provides innovative solutions in money transfers, governance, data storage, verification, supply chain management, and more. However, it requires further development before businesses can integrate their full potential. Blockchain technology requires applications on top of it to be able to perform or address specific needs.
According to Adrian Leow of Gartner, “It helps to view blockchain as a protocol to perform a certain task within a full application.” The protocol must include a user interface, business logic, and interoperability features to function as a whole system.
2. Assuming the current technology is ready for production use
There are many blockchain projects among startups and venture backing in the market. These include projects focusing on privacy, tokenization, universal computing, payment processing systems, decentralization, and smart contracts.
The confusing variety of offerings in the current blockchain market, coupled with the lack of maturity of blockchain solutions, can be the source of blockchain mistakes by enterprises.
Then, how can business owners deal with this issue? One solution is to define each project’s timeline and establish task progression. For example, a company can adopt blockchain technology for simple functionalities and slowly move to complex solutions. That way, companies can adopt the technology to accomplish business goals as it progresses.
3. Failing to have a grasp of the technology in its entirety
Organizations make one of the biggest blockchain mistakes by ignoring all the crucial features of the technology. Instead, decentralized ledger technology is the primary blockchain feature that enterprises focus on adopting.
However, this diminishes the value of many of its essential innovations, such as smart contract capabilities, decentralized consensus, and tokenization.
Fortunately, companies can avoid this common mistake of undermining blockchain functionalities by defining and clarifying all the possible use cases of blockchain in their enterprises before integrating the technology into their projects.
Clarifying blockchain use cases beforehand can help your organization maximize blockchain technology and enable its seamless transition.
4. Blockchain as a storage mechanism
At the moment, blockchain technology only supports the “create” and “read” model for database management, compared to traditional database management technology that offers the complete “create, read, update, delete” model.
Blockchain platforms provide an immutable, trusted, and authoritative record of events. Hence, it only enables users to add to a sequential document of significant events, not edit or delete said information. Web3 projects such as Arweave leverage this feature to create a decentralized storage platform, but this might not be a good fit for organizations that cannot operate with limited data management capabilities.
Companies typically get confused about the differences between blockchain storage and distributed database management systems. As a result, adopting decentralized storage can create a lack of alignment between enterprise projects. Businesses must weigh the trade-offs between data management systems and decentralization to ensure that blockchain is a good fit for their company’s needs.
5. Network governance and privacy
For decentralized blockchains such as Bitcoin, governance is critical. Yet their established governance only addresses technical issues, leaving human behavior and motivations ungoverned.
Issues in decentralized blockchain governance can pose significant challenges to an enterprise blockchain, as users or participants control entirely the decisions made in the blockchain. For instance, a majority vote can completely move the development of a blockchain in a different direction and affect certain use cases of an organization.
Companies should be wary of the threats of blockchain governance issues for their blockchain projects. Furthermore, more prominent enterprises venturing into the blockchain should attempt to develop groups to establish governance models. The collaborative consensus among large corporations can provide credibility to governance models, resulting in practical solutions.
6. Inadequate investment of resources
Another major blockchain mistake would be to undermine one’s lack of resources. This becomes prominent when blockchain professionals doubt the areas in which they must invest their resources. Likewise, access to knowledge, time, and funding pose significant roadblocks.
First, enterprise blockchain projects should consider investing substantial time in recruiting blockchain professionals into their teams, or outsourcing tech support who are experts on these. Hiring professionals with backgrounds in programming and understanding scripting software that can interact with a blockchain network can help an organization better understand the technology and determine investments that can help with its integration.
Second, enterprises should compensate for their lack of resources. For example, if a firm doesn’t know how to market a planned blockchain solution to potential investors, bringing marketing expertise into the team would be crucial.
Similarly, failure to plan the sources for funding blockchain projects can be a costly mistake. Acquiring investors from initial coin offerings or seed sales are great options for funding but keep in mind the difference between technical and non-technical contributors for proper governance and efficient resource management.
7. Assuming platform interoperability
Expecting that today’s blockchain platforms can interact with upcoming platforms can be detrimental to blockchain enterprises. Most blockchain technologies are still in the early stages of development and still lack business roadmaps that can help organizations forecast their interoperability in the future.
Companies should view discussions about interoperability with a grain of salt since blockchain interoperability and future compatibility are currently only possible at the most basic level.
Blockchain technology has the potential to be the next big thing in emerging technologies. As a result, enterprises are rushing to adapt and improve on the developing technology to become established leaders in the market when the technology matures.
Unfortunately, most of the “proofs of concept” for blockchain tech fail to get through the initial conceptualization and experimentation phase.