The economy is rough. Crypto companies are collapsing. Scandals abound. And yet, blockchain tech is still, as they say, “early.”
I spent 18 months leading engineering at a blockchain startup and have three key industry failure takeaways you need to know about where we are today with the technology.
1. The Absence of Foundations
Building a product in the blockchain space before 2022 was like arriving at a construction site without the necessary materials or equipment. Not only did you need to build the structure, but you also needed to mine and smelt the ore to create the building blocks.
Blockchain technology first gained popularity through its initial and most basic application: cryptocurrencies. Bitcoin officially emerged in 2009, a year after the academic paper introducing it was published. But blockchain has the potential to do so much more than just facilitate cryptocurrency transactions. It’s a technology that has the power to validate data independently of any one company or person.
The future of blockchain depends on the tools that are available. We progress by building on previous innovations. With Bitcoin (and later Non-fungible-tokens, NFTs) being the first uses of blockchain to gain mainstream visibility, the early stages of creating the tools and building blocks to enable more complex ideas were skipped before the public had a chance to evaluate or speculate.
In 2021, my team was working on ideas for a blockchain-first login system, but we had few options and no viable solutions for using a third-party service or leveraging another company’s offerings for this task. And our core business was not about developing new login methods for websites. So, we needed to build our own solution, which was good, but probably not as good as the solutions that future startups would dedicate their entire business to developing.
Technology matures rapidly in terms of speed, but incrementally in terms of the building blocks that enable that growth. With blockchain, we skipped the foundation layer and went straight to the mass market.
2. The Lack Of Product Focus
I attended several (9) conferences on blockchain technology between 2021 and 2022 and found that while they were exciting and fun, the value varied greatly. Initially, many of the talks centered around the basics of the technology, such as how to mine, save data to a blockchain, or mint non-fungible tokens (NFTs). Other talks were about how people were earning off crypto, or flipping NFTs for a project. At best they were pitches for a new NFT drop (a drop is when a new collection of NFTs is released), or a wild party celebrating one.
In contrast, when I attended conferences on artificial intelligence, the talks were more focused on real-world applications and products that were being developed. The companies and startups presenting at these events were showcasing how they were using AI to solve real problems and drive their business forward. Maturity was at a different level, and the speakers cared EVEN MORE about the industry of their problem domain than AI. AI was only exciting because of the problem solving it enabled.
Blockchain startups have historically been focused on the hype and potential for funding rather than solving real-world problems with the technology. Instead of being driven by a passion to address a specific issue, they are primarily focused on creating a “blockchain company” and trying to cash in on the hype surrounding the technology. This was driven by the mass visibility into the space driving popular interest which leads to venture capital interest.
3. The Challenge of Reaching Mainstream Users
The blockchain industry currently lacks a mainstream user base. The majority of people who use or are involved with blockchain are those who work in the industry.
The blockchain space is still in its early stages, and as such, it is still a niche market. While there is a lot of enthusiasm and hype surrounding the technology, the reality is that it is still not widely adopted by mainstream users. This presents a unique challenge for companies operating in the space, as they are primarily selling to other companies and enthusiasts who are already familiar with blockchain technology.
To truly reach maturity, the blockchain space needs to shift its focus from selling the technology itself to selling the value it provides to users. This means creating solutions that are accessible and easy to use for the average person, rather than just catering to a small group of enthusiasts. By doing this, blockchain technology can become more widely adopted and integrated into everyday life, making it an invisible yet powerful tool for improving our lives.
What’s Next For Blockchain
I’m excited for the blockchain space to take a step back and for funding to slow down.
This will allow for the development of necessary building blocks that will add significant value to the technology.
As attention shifts to other areas, like artificial intelligence, we’ll see companies that have been quietly working on these building blocks succeed. This will lead to the seamless integration of blockchain solutions into products and websites across the internet, in a supporting role. Blockchain will become as computer science solutions should be, invisible and everywhere.