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How to know if a company using blockchain is all hype or the next big thing

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After a 2018 lull, blockchain has returned to the public consciousness in force recently thanks in part to Bitcoin’s bull run and Facebook’s announcement regarding GlobalCoin.

In this environment, it’s trendy to work on blockchain. What I’m noticing with a lot of projects, though, is plenty of hype and little substance.
The reality is that blockchain is extremely complicated and requires a lot of time and resources to apply correctly.

Nevertheless, as you survey the blockchain landscape, how can you tell if a project is credible or fake? What are the “tells” of an illegitimate project?

Below is a series of questions to help you separate the wheat from the chaff.

Is a network involved?
Blockchain and cryptocurrency are efficient ways to transfer and measure value in and around networks, where there are buyers and sellers, producers and consumers, or creators and distributors. Consider the value of networks, where network effects make the whole more valuable than the sum of the parts. I call this the network surplus, and it is difficult to quantify. Standard currencies do not account for this dynamic value, which is why blockchain and cryptocurrency can be so transformative in the media industry.

As a separate example, let’s examine Bitcoin. The value of this cryptocurrency is in storing and verifying independent, decentralized, peer-to-peer transactions. The work of verifying the transactions and adding them to the blockchain digital ledger (i.e. mining) is rewarded via bitcoin.

When you evaluate a blockchain project and it’s not clear how the technology is being utilized to connect stakeholders in a marketplace, or why cryptocurrency is being used in place of standard fiat, chances are the project does not make sense.

What are people paying for?
Free is not a business model.

If a blockchain project claims that it is free, it is a waste of time. The truth is, for any legitimate blockchain project to be anchored in reality, it must be supported by an economic model that makes sense. For instance, the value of Ethereum represents the cost of maintaining a network that enables transactions and storage.

As Tiereon CEO Wayne Vaughan said in this CoinDesk article, “Data can’t live forever if no one pays the bills.”

Is it a public or private blockchain project?
Blockchain enables independent parties to transact without a “trusted” 3rd party to interfere. Decentralization is a key component since traditional ways to transact require an intermediary – such as a bank – which poses some risks.

Private blockchain (a.k.a. Enterprise blockchain) is a centralized system which defeats the purpose and renders the technology unnecessary. It’s the equivalent of an extremely expensive database.

There’s a reason why JPM Coin, KodakCoin, and others have been met with resistance and/or skepticism.

Is the team legit?
The common thread of sketchy ICOs and shady pump-and-dump schemes is the people behind them are unscrupulous.

Blockchain projects have a high failure rate because they’re tough to pull off and it’s a nascent technology. Absent a strong team with a proven track record and strong business or tech pedigree, the degree of difficulty becomes nearly insurmountable.

Do your homework and ask yourself if the people behind the project are trustworthy or do they seem like hype men for their coin? See: Justin Sun.

Is the goal fundraising?
Plenty of blockchain projects utilize ICOs to enrich themselves and to circumvent traditional fundraising avenues, which require periods of due diligence with professional investors who scrutinize businesses with exacting detail.

Always follow the money. When huge swaths of coins find their way into founders’ digital wallets before their projects have proven anything, that’s a huge warning sign.

Do you buy the concept?
Any legitimate blockchain project has a whitepaper that clearly articulates the specific use case for the technology.

Do your due diligence and read the whitepaper thoroughly. The devil is in the details. Do you understand the vision? Is the vision materializing? Is the team accountable to what is outlined in their whitepaper?

Be careful when the whitepaper conflicts with the reality of the project.

Contributed article by Martin Floreani, Founder & CEO of Rokfin

Source: https://cryptonewsreview.com/how-to-know-if-a-company-using-blockchain-is-all-hype-or-the-next-big-thing/

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