Why the Chasm of Blockchain Complexity is Killing Your Blockchain Ambitions

First published on Nasdaq, Inc. on Oct 9, 2023

Blockchain technology has the potential to create massive benefits and opportunities for organizations, especially those in the banking and financial services industry.

Yet many organizations today struggle to adopt blockchain in ways that will enhance their operations and bring value to their customers. Only as few as 15% of blockchain projects today make it past launch and prove sustainable. Not being able to harness blockchain technology means missing out on opportunities for security, privacy, scalability, and network-building.

Helping banks and financial institutions succeed with blockchain is why I left the banking industry after a decade to co-found SettleMint. I saw how blockchain could solve real business problems, especially when I was tasked in 2014 with implementing blockchain as part of a Blockchain Center of Excellence.

Today, my mission is to simplify the blockchain journey for enterprises. To help do so, here are some of the reasons why you can't get your blockchain implementation out of the lab and off the ground — and what you need to do to finally launch it so that you can stay competitive as blockchain moves from top priority to a deeply embedded and essential part of financial markets infrastructure.

The Chasm of Blockchain Complexity

Organizations who want to stay at the forefront of innovation in their industry and find new ways to bring value to their customers already know the importance of embracing technology and transformation. Since its creation in 2008, blockchain technology has proven its value in providing more transparency and security in trustless environments, and today, 83% of financial services leaders see a compelling business case for blockchain in their organization.

Yet while many have high ambitions for what blockchain can do for business, most blockchain projects get stuck. 85% of organizations never see the true potential of their blockchain projects realized, and of those that do, 90% of blockchain projects that have been implemented will require replacement in 18 months.

What's getting these organizations stuck? There are a number of factors that can be summed up by one big obstacle: blockchain complexity. This creates a chasm where there is ambition on one side and massive opportunity on the other, but no viable bridge between the two. Most organizations struggle to cross the chasm because of the following reasons, yet they must if they want to realize the potential blockchain offers for today and the future.

Reason 1: There’s a lack of in-house developer expertise in blockchain.

Organizations who want to implement a blockchain project are often stymied by a lack of in-house developers with the requisite skillset to build those blockchain applications. Blockchain projects have added considerations and requirements that make them different from other software development projects, and hiring external experts can be prohibitively expensive.

Bridging the chasm: Instead of looking to external expertise, upskilling the developers you already have to make them blockchain proficient, so that every developer can be a blockchain developer. This has the additional advantage of providing your in-house talent with a totally new skill set and should be part of the organization's talent retention plan for skilled Web 2.0 developers. Additionally, leverage blockchain transformation tools and platforms that abstract away the complexity and take care of most of the work, making the learning curve much flatter for your in-house talent and making your time to market much quicker. Empowering them with the right tools means that your developers can focus on the business value of the project while also building innovative new products and services.

Reason 2: There’s a lack of appropriate tools.

Another factor is a lack of tools to help bridge that chasm. Organizations who want to build blockchain projects have either needed to build from scratch, which is challenging if you lack the expertise, or source from third-party managed solutions, which can be costly. Commonly, available tools only cover part of the software development project, but not every layer is needed to develop the solution for the use case, or it’s “stack to build” and you still need other products to bring an app to life.

Bridging the chasm: Look instead to tools that can help you bridge that chasm, like platforms with abstraction layers at all levels in the application development stack, removing the need to insource highly-skilled talent or the need to build your project from scratch. Blockchain transformation platforms can give you the tools to implement and manage your blockchain project through templates, integrations, and other features. Complete blockchain transformation platforms that cover all layers in the application stack remove the unnecessary need for re-tooling and re-training at each layer of the stack.

Reason 3: The project doesn’t integrate with existing systems.

Another factor that's holding back blockchain projects is that the project doesn’t integrate with the existing tech stack, legacy systems, or client-facing applications. As a result, blockchain projects are pigeonholed into limited scope stand-alone applications. This constrains the ability of the project to scale and bring value to the world.

Bridging the chasm: Ensure that at the technical level, new blockchain infrastructure can “plug into” existing systems and workflows, which allows for peers in the blockchain network to continue to use their own existing systems. Developers can make sure this happens by keeping the network structure agnostic at the blockchain protocol level. Using methods and tools that provide a bridge between the on-chain and off-chain worlds to smoothly exchange data will be another component in crossing the complexity chasm.

Reason 4: There's a lack of a clear path forward.

Finally, many simply lack a clear path forward for the project. Organizations who want to adopt blockchain technology may get excited at the prospects and jump in before they have a plan of how to move forward. However, there’s no clear use case for blockchain that will bring value and growth to the organization. Not having clear planning for resources, budgets, or strategy will impact forward progress as well.

Bridging the chasm: Start by identifying a use case for blockchain, typically where multiple parties can benefit from sharing data, but where those parties face a barrier to coordination, such as the inability to trust each other. Once you've identified your use case, build out a structured approach that includes the technology, the people, the processes, the resources, the funding, and all other components. Launching a successful blockchain project needs an ecosystem of support that includes partners, experts, and community networks as well.

The Way Forward is Blockchain Transformation

Blockchain has the potential to create $3.1 trillion in new business value by 2030. But reaping the benefits of blockchain requires an organization not just to adopt a new technology, but to embrace blockchain transformation, a commitment to bringing value to customers through new processes, job roles, culture, and operations centered around blockchain. In order to prepare for the future of banking, and to keep ahead of your competition as blockchain initiatives quickly grow, start building your blockchain transformation strategy today.

💡 Stay in the loop with Chief Digital Heroes! Join me, Matthew, in engaging conversations with industry leaders leveraging Blockchain Transformation to fast-track value creation in banking and finance. Dive into these illuminating discussions, where my guests and I share valuable insights gained while navigating complexity and capitalizing on the opportunities unleashed by blockchain. Subscribe now for a firsthand look at the lessons we've learned on this transformative journey.