What is the California Gold Rush teaching us about blockchain?

It’s estimated that during the California Gold Rush, around 300,000 people from the entire continent migrated to the west coast trying to get rich. Some of them knew what they were doing, had some luck, hit the motherlode, and built a new life for themselves and many further generations. Unfortunately, most of them failed miserably.

The story can be a profound lesson for many businesses who feel like blockchain is the one way to succeed in the tech world. Just like prospectors in the 19th century, modern entrepreneurs often are motivated by the successes of others and do not focus on their own business and its needs. And don’t get me wrong, there’s a lot of gold, but certainly not enough for everyone, especially not for those who pick the wrong tools for the job.

Why is blockchain so tempting to use for different projects?

While the widespread enthusiasm for blockchain can be misleading for many businesses, there is no doubt that it has incredible potential for many industries. The most notable aspects are security, transparency, efficiency, and many ways to reduce operational costs. Existing businesses are looking for ways to maximize their profits, and new companies are trying to find their place in the blooming blockchain environment.

It attracts investors

Whether there’s a valid reason to use it in a project or not, blockchain as a sexy buzzword can play a significant role in talks with investors. The positive media coverage and a relatively stable rise of cryptocurrencies in the last few years changed the way people look at the technology. It’s no longer viewed as something juvenile and unreliable. Once blockchain was embraced by some of the biggest companies in the world, it also became a strong argument for founders looking for funding.

It opens many new possibilities

Blockchain can be truly revolutionary for a broad range of sectors and industries, starting with entertainment, decentralized finance (DeFi), and ending with voting and healthcare. The potential seems limitless, but there always should be a good reason to use blockchain.

There’s a great rule of thumb for this technological conundrum. If you’re not sure why exactly you need blockchain, most likely, you don’t need it at all.

Of course, blockchain might be the right path for you after all!

It feels like every week there’s a new fascinating blockchain-based business emerging. From industrial use to entertainment and even the government sector. It’s entirely possible that your idea will be the next big thing. If you believe that it might be the case, let’s not waste any more time and discuss the project!

But, if you’re not exactly sure about the blockchain part of your project, make sure to read the rest of the article.

Blockchain can be an actual project blocker

Without a doubt, there are many potential use cases for blockchain. The technology opens new opportunities in numerous industries, and its role in the tech world is undoubtedly going to grow for years to come. However, you shouldn’t feel in any way obliged to use it in your project if there’s no real reason for it. It won’t improve anything by default. On the contrary, it can make the whole development process much more cumbersome and expensive.

The cost of blockchain development

Skilled blockchain developers are a rare breed. Even though the technology has been available for several years, very few specialists are available for grabs. Most of them are already doing their own projects or are working in software development agencies like ours. And those who might be available usually are very difficult to find, let alone hire. It’s fair to say that skilled blockchain developers are among the most expensive specialists on the IT market. Of course, there’s a good reason for it. The list of skills that blockchain developers should have is pretty long and significantly different from the required tech stack in most programming jobs. You can read more about it in the article by our CTO, Krzysztof Fonał:

10 most essential blockchain developer skills

What’s crucial, it’s not only money that matters for many blockchain specialists. Like many skilled professionals, blockchain developers want to work on projects that are interesting to them. Just throwing numbers may not be enough. In the current state of the market, they can browse through offers and finally choose the one that’s most appealing to them for many reasons other than salary.

What about product maintenance?

Let’s say you’ve managed to release the product. It works perfectly well, for now. But your business will grow, and like any other software, your product will need maintenance, updates, fixes, and further expansions. You will need ongoing support from a blockchain-savvy team. That’s why the maintenance of blockchain products can get significantly more expensive than any other software.

Additional fees

Any software, in order to work, requires energy and computational resources. It cannot simply exist in a vacuum. Traditionally, we would use users’ computers, servers, or cloud services to run our software. However, in the case of decentralized blockchain software, we use virtual machines. Let’s take the Ethereum Virtual Machine (EVM) as an example. It’s described as a single entity that runs on thousands of computers with the Ethereum client. What does it mean for our software?

Most importantly, cost. Each process or transaction that our application performs on a blockchain requires so-called gas, which is a fee for the energy and computational power of the EVM. The more complex the process is, the more expensive it will be. What’s more, the price of gas can vary significantly depending on the current network load. The gas fee is one of the crucial reasons why some blockchain projects are discontinued even as early as the initial planning phase. A gas fee can be a severe blocker that makes software completely unprofitable.

However, we can expect the situation to change rapidly in 2022. More and more blockchains follow the path of Ethereum and implement smart contracts with smaller fees. And, of course, Ethereum also is expecting some major changes with the long-awaited Eth2 and the proof-of-stake evolution.

If you’re interested in cost estimation for your blockchain project, make sure to read this article by our CEO, Adrian:

How to prepare a blockchain project for a fixed-price estimation?

Maybe you need blockchain for your project after all?

In the last few months, I’ve held dozens of conversations with founders, investors, and corporate product owners. A vast majority of them approached us due to our experience with blockchain projects (which you can read more about on Clutch). What’s interesting, after consultation, many of them realized that they don’t actually need blockchain for the project.

However, some of them do. You can be sure that we’ll discuss all the possibilities with you and choose the best way to move forward. If it turns out that your project is blockchain-ready, we’ll make sure to choose the right blockchain, whether it’s Ethereum, Cosmos, Cardano, or anything else. There are significant differences between them, and the right choice is fundamental for final success.

Feel free to arrange a call with me, and we’ll figure out if your project really needs blockchain.