Developing a Blockchain Strategy

In a period where excessive capital is chasing too few opportunities, it’s important for

investors and leaders to have an approach to assess the feasibility of both blockchain and

crypto projects. This article hones specifically in on blockchain and factors for consideration,

to support stakeholders in navigating the current stage in the Gartner hype-cycle…which is

almost definitely nearing its peak.

It's possible that some senior leaders feel pressured into considering a blockchain project,

either because they heard it’s the next big thing or they want to stay ahead of their

competitors and be seen as ‘technologically progressive’. To support leaders, a useful

method is to determine an assessment criteria which removes opinion and subjective noise,

from the decision-making process.

For those not too involved with business case assessment methodologies, it’s not too

dissimilar from setting up your dating criteria. You’re trying to be open-minded and not

overly rigid, but sometimes there are blatant red-flags that you just can’t ignore e.g. liking

coriander or going AWOL all weekend & hitting you back up on a Monday. On that note, all

coriander lovers – you can stop reading now; for everyone else, let’s dive into a broad

assessment framework for determining blockchain project suitability.

1. Defining the problem you’re trying to solve

The saying ‘if you can’t explain something simply, chances are that you don’t fully

understand it’, also applies to determining a business problem. Blockchain can provide

benefits under the right circumstances; if a business can articulate their problems, it

becomes easier to cross-reference blockchain benefits against them. Although very high

level, two key benefits include:

 Provision of trust

o Visibility over interactions between two parties

o   Historical record keeping

o   Confirmation/validation of a transaction

 Security in transactions

o   Exchange of money, information or assets

o   Option for anonymity (if applicable)

o   Enabling digital sign-offs/agreements/contracts 

Evidently, most stakeholders would agree that they would like trust and transaction

security, but to some degree, that could be afforded by an encrypted spreadsheet. As such,

it is essential to dive deeper and ask some more targeted questions, to further understand

suitability.

2.  Is Blockchain right for you, or are you reaching?

‘The first principle is that you must not fool yourself, and you are the easiest person to fool’

– Richard Feynman. This statement can be applied to most things in life e.g. you’ve just had

an intense workout and so you probably should get a large pizza with garlic bread as a

treat…or it’s been a tough work week and so tequila is definitely on the cards this Friday.

The point is that within reason, you can convince yourself of anything and so having a

suitability criteria can reduce any external persuasion.

Repeatable and recurring transactions

A transaction or interaction that frequently occurs, and requires a third party to ensure

trust/security, could be reduced via a blockchain solution. This could involve tying up

a deposit in a smart contract and once the terms have been met, releasing the funds back to

the depositor.

Record keeping & reporting

Blockchain is best suited to recurrent activities, as this is where real economies of scale are

realised. These activities could involve daily transactions where it is crucial to maintain a

record, such as for reporting purposes e.g. regulators. This may partly be why many of the

proposed use cases revolve around supply chains, tax reporting and accounting but as seen

in the case of Hedera, Blockchains can be useful to form a community of similar

organisations on a private network.

Stakeholders, volume and compliance

Although a wider network is what enables the useability and popularity of a blockchain to

grow (assuming it’s public), this can further emphasise the use case. If you’re an

international bank for example, your stakeholder reach will be vast and incur many different

considerations across legislative, compliance, reconciliations etc.

Traceability

In the case of assets, this may be a useful opportunity to support in enhancing trust

amongst parties and verifying the authenticity (where applicable). Although there are cases

being touted across real-estate to luxury goods, LVMH have taken initiative and

collaborated in the development of Aura blockchain, in partnership with Prada and Cartier.

The aim of this being to reduce the impact of the counterfeiting market and provide

consumers with increased peace of mind that their purchase is the real deal.

3. Blockchain Economics 

As questions begin to be asked of the business rationale behind pursuing a blockchain

solution, ultimately the economic viability of the project will be a key decider e.g. in what

ways would this solution enhance organisational efficiencies, incur cost savings and/ or

boost profitability.

To achieve the aim of efficiency gains, a business retains the opportunity to:

1.    Build a solution from scratch, 

2.    Build on a public blockchain e.g. Ethereum

3.    Collaborate with a competitor/community of similar organisations

If option 1 is selected, this would assume that the business is relatively mature and has the

resources at its disposal to commit to such a significant endeavour. The blockchain build

itself, may be months (even a year away) from beginning, as stakeholder mapping would be

required. This exercise would involve:

Seeking out employees: Developers, legal support, business development etc.

Determining the technical architecture: Layering – application, network, protocol

Scoping the applicable regulatory landscape: Who, how, when and in what format

Developing an internal governance committee: Directors across technology, finance, legal,

public relations

Seeking out advisors: Former founders, consultants and subject matter experts

Strategising capital allocation across the life of the projects: Determining value realisation,

metrics, go/no-go criteria

The above points are extremely high level, regarding the initiation of a blockchain build from

zero to one. 

Option 2 would see the business operating on what has been referred to as ‘Enterprise

Ethereum’ which currently has over 200 member firms, with some of the larger names

being Microsoft, JP Morgan and Mastercard. In adopting ‘EE’, firms avoid much of the heavy

lifting associated with building a new solution and gain access to an array of stack features

which include:

Asset Management: Creating, issuing and managing digital assets across your ecosystem

Capital Markets: Automate servicing activities and accelerate time to capital

Decentralised Finance: Launch and participate in p2p networks and marketplaces

Global Trade: Expediting trade financing and prevention of fraud/counterfeiting

In addition, all of the above comes with specialised support teams which can assist with

management of transactions, issuance of privacy keys, implementation of software and

24/7 system support – sounds like a pretty good deal.

For organisations interested in seeing what’s behind door number 3, logging

onto Hedera’s website will inform you far more succinctly than I would. Technically it isn’t

blockchain technology, but is referred to as directed acyclic graph technology – which has

similarities. They already have a series of implemented use cases of how collaborative,

private-public transactions can work in practice.

4. Key considerations

It’s evident that we’re near the peak of the hype-cycle for all things blockchain and crypto,

and as a result it can do everything and anything…supposedly. What we’re seeing is that

tangible use-cases are still in their infancy and so before signing off on a blockchain journey,

leaders must consider whether alternative options may be better suited to their needs. 

If they are looking for a centralised payments system to enhance client interactions, they

may look into  VisaNet. Alternatively, centralised and decentralised database systems are

provided through both Amazon and Microsoft, or a cloud based system provided by Oracle.

In short, there are many alternatives to blockchain and they are worth being cross-

referenced against a business need.

Asides from the array of commercial, technological, legal, regulatory, political and

competitive considerations associated with embarking on a blockchain implementation,

organisations need to consider the internal changes that will be required. As a cross-

functional solution, it’s important to take the organisation on the journey to ensure that:

 Employees are trained (where relevant) and understand the ‘why’ behind the

implementation and what it means for their departmental role

 IT support teams are well resourced to support blockchain-specific requests, which

again will either incur training or outsourcing of specialists

 Consumers and wider external stakeholders are considered prior to implementation

e.g. is there coopetition, is the solution suited to the consumer etc. 

 Project management, delivery, hypercare and ongoing support for the solution and

its core users

Conclusion

There is no denying that blockchain is the flavour of the month and that it could probably fix

all of your problems (theoretically), but in reality – the situation is expensive, complicated

and legislatively difficult to navigate. Although this article barely scratches the surface of the

associated components of assessing project feasibility, it provides a brief insight into the

volume of pre-work required for any ambitious professional looking to present a business

case to their leadership team.