5 Key Challenges in Running a Blockchain Project
Blockchain technology is here to stay, this is an established fact, but in what capacity? Many people believe it will provide the opportunity to change the world, some are on the fence and then there are those who have a vested interest in ensuring it can’t or doesn’t do what it’s touted to do.
Today we look at some of the biggest challenges in getting blockchain to the point of mass adoption and some of the key challenges projects face daily. This is designed to give you a look at the industry through the eyes of a founder and operator.
1. Building an Audience before you have a product
It’s the adage of not opening your restaurant before you have a kitchen. However, in blockchain it is a delicate balance between the communication of the restaurant yet to open and establishing the engagement of the people most likely to frequent it. Many people hold tokens which are in essence the access to this restaurant when it opens. Ironically this is generally a different set of people to the speculators that accumulate the tokens. This makes for a very challenging ask for most projects.
So much has been made of the promise vs the actual delivery of blockchain projects that several famous memes have surfaced.
To calm the masses, blockchain projects feel the need to rush the product to market and as a result the outcomes have been less than desirable. However, it is common for projects to predict a deliverable timeline and miss this deadline time and time again to get their product perfect. This is a combination of the pressure felt from investors who demand returns and speculators who hold the tokens.
Striking the balance is something most projects are still learning how to master, and it isn’t for the faint of heart. Open communication is imperative and keeping people up to date with what is being built and when it is to be delivered is paramount to a projects ongoing success.
But as is the case with anyone who has money on the line, comments and narratives are fueled by emotion and therefore projects who stand the test of time, I tip my hat to.
The introduction of farming and staking has seen speculators and holders gain the ability to get a return on their holdings but also comes with an element of risk and is generally an interim measure as most projects have an imbalance between tokens going out and purchases coming in.
2. It is still the ‘wild-wild west’ from a regulatory perspective
Due to technology always outpacing legislation, there are those who will look to exploit the system and more importantly, prey on people who lack knowledge. This makes for a very volatile investing and trading environment and can hurt the adoption of what is otherwise promising tech.
Due to the lack of regulatory presence, we often see projects lead by anonymous teams. Some of these anonymous teams exist for the reason of the hazy legislation and the fear of being held to account for laws retrospectively applied. Others are anonymous teams already working in high profile business sectors and are ‘testing the waters’, hence we see some complex structures and algorithms in the DeFi space, and lastly and unfortunately most commonly, anonymous teams exist for the obvious reason of having the ability to escape or rug pull.
Even the high liquidity and most popular coins and tokens such as Bitcoin, Ethereum and Litecoin can still be subject to the shady practices of unregulated exchanges or investment scams. These are all inevitable phases we go through when a new technology coupled with access tokens which users see as an investment, are subject to unregulated conditions. This makes for ongoing volatile market conditions.
3. Difficulty in executing the technology causes token holders to lose faith
Whilst the blockchain technology currently under development and in early deployment, shows signs of revolutionary benefit to the end users, it is also slow to build and secure. With banks and existing regulated players carrying out tasks at an ever-decreasing cost to the end user, there is little to coax the blockchain users away from their current products and to replace their use with a new, often more cumbersome version of what is already working adequately for them.
Bitcoin and its decentralized nature, means it is here to stay and it can obviously make the current institutions and systems rethink the way they operate and to some extent, hold them to account. However, the new technology being built must either integrate with existing systems, or replace them and the middlemen entirely, which is not a quick transition by any means.
The development and deployment of new technology, has thousands of companies, bodies and shady operators promising the delivery of working tech. All looks good on paper, and all seems well when vetting the partners to work with, but few can deliver on those promises, making for difficult situations for those waiting on the delivery. Even if you are fortunate enough to have received the tech you have paid for, it is extremely difficult to then find reputable people or companies who can provide proper auditing services as many of these systems have never been deployed.
Token and coin holders have different expectations than a general end consumer, as many of the token holders never plan to use the tokens to grant access to the built products and services but rather see it as a speculative investment. The inevitable delays in releases, coupled with those wanting to see immediate returns in volatile markets can make for a hostile environment.
4. The blockchain industry runs on two extremes, FOMO and FUD
FOMO or the Fear Of Missing Out, is a common phenomenon which sees speculative token holders, fear they will miss out on the opportunity to hold tokens when adoption begins or at least the project hits mainstream consciousness. This is a genuine condition and is widely known and accepted in the industry. FOMO can be perpetuated through a number of channels and for a number of reasons. This could be related to upcoming product releases, announcements of partnerships, positions held by big accounts with large social followings for personal gain or simply an actual enthusiasm for what a project is doing or promising to build. As a result of some of this behaviour and this is extremely popular with teams who are anonymous, you will see coordinated P&D groups established in Telegram or other social media channels. This is an unfortunate side effect of token holding working simultaneously with new technology being developed.
FUD is the Fear of Uncertainty and Doubt, and is a common term used across the industry and generally related to negative news or perception of a project. FUD is a combination of substantiated and unsubstantiated reports or news and is often fueled by paid members of rival projects, perpetuated by faceless or anonymous accounts on social media and is generally done to either promote rivals or to obtain a position at a rate below the current market rates by getting people to sell due to the fear of negative sentiment. The difference between the two types of FUD are simple to determine as the latter will generally have new or anon accounts established across multiple channels and they will personally attack the teams or make claims that are largely non-sensical or loosely based on fact. This however is enough to cause an element of doubt. Any project facing serious allegations will have legal proceedings brought against them and will not be subject to trial by social media nor answerable to social media.
5. Established industry sectors have a lot to lose if blockchain succeeds
The financial sector is hoping for this movement, to go away, or at least is so heavily regulated that the competitive landscape is fair and equal at a minimum. However, this technology isn’t likely to go away, so the only question that remains is, how heavily will it be regulated?
Banks and financial institutions have been vocal in expressing their doubts and concerns with the technology and have been quick to criticize those who invest or promote its use.
Charlie Munger, a famous investor, and close friend of legendary investor Warren Buffett labeled bitcoin as “rat poison”, such the disdain for the trading of cryptocurrency by more well-known investors.
‘Of course, I hate the bitcoin success and I don’t welcome a currency that’s useful to kidnappers and extortionists, and so forth. Nor do I like just shoveling out a few extra billions and billions of dollars to somebody who just invented a new financial product out of thin air. So I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization. And I’ll leave the criticism to others.’ — Charlie Munger
These institutions generally have significant lobbying and voting power and can have a big say on future direction and help impede growth or advancement. However, these rules and regulations are and should be subject to continual review and technology ensures they are.
Although there is much against projects succeeding in the blockchain industry, there are too many people now paying attention for it to simply disappear. This industry is here to stay, and we as project owners are the ones who must overcome the hurdles to ensure its rightful adoption.
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