There are at least three fundamental reasons for using blockchain technology in a project nowadays.
First and foremost, it’s so hyped and trendy. “A blockchain-based project” – doesn’t it sound cool? All your team members could add such an impressive line to their CVs, no matter if they know what it means or not quite.
The second reason is also important. Implementing blockchain in your business, you’ll be able to issue your own cryptocurrency and hold an ICO. The crypto market keeps booming, but remains immature, giving you a chance to attract some investment without any real use case for your groundbreaking blockchain innovations.
Looking at many blockchain-based projects out there, the third reason seems optional and not as significant as the previous two. However, your company might actually need a blockchain to accomplish its ambitious goals.
Now, let’s take it seriously. The ICO market is yet premature, hypes fade, and trends change, while you expect your business to last. That’s why you should better consider a real, indispensable use case as the only reason for using a public blockchain or building a private one.
Essentially, blockchain introduces a new way to manage and protect data. Its key pillars, such as decentralization, immutability, and transparency, are able to secure data with no need for a trusted authority. But all the advantages come at a price. Public blockchains usually can’t compete with centralized databases in terms of speed of execution and also have significant transaction fees that depend on the number of transactions within a system and are hard to predict. At the same time, building a private blockchain is likely to be much more expensive than using a well-established cloud service. Your business might also not need decentralization and tokenization at all, and a traditional data management model might simply be more appropriate and cost-effective for your company.
To find out if your project needs the blockchain technology, ask yourself two basic questions. The first one is: can blockchain help you reach your project goals and solve some issues of the respective industry? If the answer is yes, proceed to the second question: is it possible to solve those issues without blockchain? If the answer is yes again, better focus on traditional technologies first.
However, there actually are a number of projects which have no adequate alternative to blockchain if they are to accomplish their mission and make a breakthrough in certain industries and sectors. For instance, let’s take a look at identity management and authentication, that can be significantly improved by the blockchain tech. Identifying data stored on the blockchain in a hashed form allows for safe authentication to third-party services without disclosing actual personal information. Apart from such an authentication system, blockchain can also improve and secure more specific aspects of identity management such as age verification or voting admission.
There are more than 20 companies leveraging blockchain technology to offer new authentication solutions. Without a comprehensive analysis, it’s hard to say which of the project teams have the expertise to achieve their objectives, but they do have a real use case behind their efforts.
Another good example is the digital items’ market that is currently most relevant to the gaming industry and definitely needs a breakthrough to fulfill its potential. Marketplaces for trading in-game assets exist for years, and their overall trading turnover is estimated at $4 billion. But the market still faces major issues restraining its further development. Security problems are the most destructive ones, as account hijacking and extremely high fraud rates prevent digital items from becoming a real commodity like any traditional goods. The DMarket project uses blockchain to bring security to the industry by making all item transactions irreversible and undisputed.
Aside from making gamers the real owners of their earned or purchased in-game items, blockchain also allows for tracking transaction history and thus is able to add value to certain digital items like the ones that were owned by an eSports champion or any other celebrity.
Provenance verification as a blockchain use case applies to many other industries as well. One of the blockchain-based projects is even called Provenance and uses a distributed ledger to ensure transparency in product supply chains.
These are just a few examples of projects that really need the blockchain technology to achieve their goals. Your project may well be among them, as there probably are dozens of industries and sectors that could be disrupted by blockchain. But it is also possible that traditional data management systems are enough to satisfy all your company needs, while an own blockchain will only bring extra expenses and headaches.