Seven Mistakes to Avoid in Blockchain Projects
Interest in blockchain continues to be high, but there is still a significant gap between the hype and market reality. Only 11% of CIOs indicated they have deployed or are in short-term planning with blockchain, according to the Gartner 2019 CIO Agenda Survey of more than 3,000 CIOs. This may be because the majority of projects fail to get beyond the initial experimentation phase.
“Blockchain is currently sliding down toward the Trough of Disillusionment in Gartner’s latest Hype Cycle for Emerging Technologies,” said Adrian Leow, senior research director at Gartner. “The blockchain platforms and technologies market is still nascent and there is no industry consensus on key components such as product concept, feature set and core application requirements. We do not expect that there will be a single dominant platform within the next five years.”
To successfully conduct a blockchain project, it is necessary to understand the root causes for failure. Gartner has identified the seven most common mistakes in blockchain projects and how to avoid them.
No. 1: Misunderstanding or Misusing Blockchain Technology
Gartner has found that the majority of blockchain projects are solely used for recording data on blockchain platforms via decentralized ledger technology (DLT), ignoring key features such as decentralized consensus, tokenization or smart contracts.
No. 2: Assuming the Technology Is Ready for Production Use
The blockchain platform market is huge and largely composed of fragmented offerings that try to differentiate themselves in various ways. Some focus on confidentiality, some on tokenization, others on universal computing. Most are too immature for large-scale production work that comes with the accompanying and requisite systems, security and network management services.
No. 3: Confusing a Protocol With a Business Solution
Blockchain is a foundation-level technology that can be used in a variety of industries and scenarios, ranging from supply chain over management to medical information systems. It is not a complete application as it must also include features such as user interface, business logic, data persistence and interoperability mechanisms.
No. 4: Viewing Blockchain Purely as a Database or Storage Mechanism
Blockchain technology was designed to provide an authoritative, immutable, trusted record of events arising out of a dynamic collection of untrusted parties. This design model comes at the price of database management capabilities. In its current form, blockchain technology does not implement the full “create, read update, delete” model that is found in conventional database management technology.
No. 5: Assuming That Interoperability Standards Exist
While some vendors of blockchain technology platforms talk about interoperability with other blockchains, it is difficult to envision interoperability when most platforms and their underlying protocols are still being designed or developed. Organizations should view vendor discussions regarding interoperability as a marketing strategy. It is supposed to benefit the supplier’s competitive standing but will not necessarily deliver benefits to the end-user organization.
No. 6: Assuming Smart Contract Technology Is a Solved Problem
Smart contracts are perhaps the most powerful aspect of blockchain-enabling technologies. They add dynamic behavior to transactions. Conceptually, smart contracts can be understood as stored procedures that are associated with specific transaction records. But unlike a stored procedure in a centralized system, smart contracts are executed by all nodes in the peer-to-peer network, resulting in challenges in scalability and manageability that haven’t been fully addressed yet.
No. 7: Ignoring Governance Issues
While governance issues in private or permissioned blockchains will usually be handled by the owner of the blockchain, the situation is different with public blockchains. Governance in public blockchains is mostly aimed at technical issues, while human behaviors or motivation are rarely addressed.