The “life and death crisis” of product positioning — Can your blockchain product survive this year?

For a long time, developers have always had an incredible and fatal conceit: they firmly believe in the existence of mythical power in black technology. With it, they can quickly create a "thunder hammer" that detonates the market and subvert everything, and the blockchain industry is no exception. However, eight years after its birth, the only blockchain product with global influence is still the one of the founder, Mr. Satoshi Nakamoto. And whether in China or the United States, there are only a few that have a preliminary market and user scale. More of them disappear in the ebb and flow and perish in the rolling bubble. We cannot deny that the product creation of technology entrepreneurs is a complicated process: there are influences from the founder, team, operation, capital, environment, supervision, etc. But more often, the characteristics of the technology itself also determine the future success or failure of the product to a certain extent. Blockchain does have great possibilities, but it is by no means omnipotent. As the old saying goes, "there is no silver bullet".

If we want to achieve commercial success, we might as well make a simple analysis of blockchain technology from the following four perspectives. What scenarios is it suitable for?

Three laws of blockchain product creation

(1) “Don’t use a cannon to fight a mosquito”: Blockchain technology is more suitable for asset networks: (Assets Over IP)

Unlike the Internet, the information network architecture is completely open. Blockchain first appeared as the underlying network protocol of Bitcoin. The upper layer of this electronic currency was originally designed to be used as a peer-to-peer digital cash, and hoped to be widely used in the world, although the dream of this world Internet currency has not been fully realized. At present, more countries regard Bitcoin and other digital assets as digital commodities. However, this network design has a profound impact on various blockchain systems in later generations. Basically all existing blockchain networks refer to the Bitcoin code, such as Ethereum, Corda, Hyperledeger, Factom, and Domain Coin. Most of these networks have the following characteristics:

1.1 What is circulated on the Internet is no longer "information" that is correct or incorrect, cheap, of varying lengths, and in a messy format, but scarce "assets" that need to be protected to a certain extent. (Assets here are broad in scope, whether they are equity, bonds, tokens, lottery tickets, or some valuable proof of rights)

1.2 The logic of the entire network operation also revolves around this point: encryption, signing, verification, transaction, confirmation, reading, writing, and executing contracts, etc. The operation of the entire network follows certain rules and has a certain delay: including the generation of blocks, chains or other "ledgers" or data records, and global status records. And constantly discard redundant, erroneous, and invalid data through Merkle tree pruning operations.

We might as well look at this network from two aspects: on the one hand, it is an overall "cheap" network, and the construction of the network infrastructure is shared by the open source community and many participants. But on the other hand, it is also an "expensive to run" network, whether it is the time cost of reaching consensus or the cost of providing tokens or "fuel coins GAS" to validators. The original design gene determines that the "use cost" of this strong rule network is high, and in turn the high cost further strengthens this trend: operations with scarce "asset" attributes must be operated on this network to achieve the expected rate of return in order to maintain the consumption of product users on the network. "Don't use a cannon to fight a mosquito", and don't use blockchain as a cheap chat tool or a general file transfer system. It is best to have valuable assets related, which is the first consideration for product developers.

(2) Applicable to databases with multiple weakly trusted, peer-to-peer write-permission nodes

In the blockchain network, whether it is the real-name participation mechanism in the alliance chain or the random anonymous participants in the public chain, the participants have one thing in common: before using the blockchain, there is generally no trust relationship or a weak trust relationship. The general way for nodes to interact with assets is to trust a third party. Then the "asset" attribute data or credentials are "transferred" and "exchanged" through a third-party entity. In this process, the complexity of the interaction will increase. The third-party agency provides guarantees and assists in reaching a consensus, and charges service fees. After the blockchain is generated, it plays the role of a database of public operation records, a trusted anchor, etc. This database requires a group of nodes that do not trust each other or lack trust to work together to perform "write" operations according to established rules. The "read" and "execute" permissions are open to participants with corresponding permissions. It is meaningless to rigidly transform a traditional C/S model into a blockchain.

(3) Solutions suitable for decentralization <br/>There is no need to say more. If a blockchain product needs to meet a demand that can be solved by existing centralized solutions in a mature and complete manner, then there is no need for this product to exist.

Cases

(1) Authenticity and Falsehood Scenario: “Cross-border Payment” vs. “Payment” (See Law 3)

First, let's consider the cross-border small remittance industry. The traditional way of remittance is to go from a bank in Malaysia to a small merchant in Bangalore, India, through multiple transit banks. The whole process is complicated and opaque. It takes about 2 to 4 days from payment to receipt, and the remittance fee is high. The essence is that there is distrust and separation between small financial institutions in various countries. Now, the introduction of open, transparent, verifiable, and traceable blockchain as a protocol link makes the entire transparency higher and reduces the cost of transit, compliance, and auditing. It can enhance trust and solve the transaction dilemma of lacking a "central coordinator" and serious counterparty risk in complex multilateral markets. In this way, the cost of cross-border remittances in the past was about US$26 per transaction, equivalent to more than 100 RMB. If it is a small remittance of thousands or tens of thousands of yuan for foreign workers, studying abroad, tourism, etc., it is very high. It is even unrealistic. However, cross-border remittance products on the blockchain, such as OKLink, have a fee rate of only 0.3% for small remittances. This can provide more choices and possibilities for small and medium-sized financial institutions and small remittances in various countries. For this reason, it also won the Inclusive Finance Innovation Award at the China Payment Annual Conference. But domestic payment products based on blockchain are not. Why? Because even if the Industrial and Commercial Bank of China and the Agricultural Bank of China are linked by blockchain, it will not create new value. Because there are already WeChat and Alipay. There is no point in reinventing the wheel.

(2) True and false scenarios: “Universal integral” vs. “integral” (see Law 2)

Points are a marketing tool for enterprises to increase user loyalty and activity. However, the current situation faced by consumers is that there are too many types of points in their hands, which are difficult to manage and have low value. They want to use them but cannot, and points have gradually become "useless". From the perspective of product concept design, introducing blockchain into the "points" field cannot solve any existing problems, because it is still a merchant responsible for the issuance, circulation and transaction of points. Simply introducing the blockchain system, since the point issuer is still a single entity. But consider this scenario to expand, if it is a merchant interest alliance of multiple companies, different subsidiaries within a large group, formulate certain game rules, use blockchain to build a general point platform between enterprises, and grant, accept and settle points, there will be room for exploration, such as using airline points to exchange general points for car rental consumption, because in this system, there are multiple operators who can "write" data, rather than a unilateral point granter, there is a possibility of technical fit.

(3) Authenticity scenario: “Evidence” vs. “Storage” (see Law 1)

Using the hash timestamp on the blockchain, almost any file and digital asset can be authenticated. This proves that a certain equity file and digital asset existed at a certain time, which has brought revolutionary changes to legal evidence, contracts, and wills. We call it evidence storage. For example, the hashed files of important interests are stored in the OP_Return field of the block of the Bitcoin public chain to maintain permanent evidence.

Music, movies, general documents and other asset-independent data can also be built with a dedicated blockchain system for distributed storage. Technically, this is feasible. However, according to Law 1, we can find obvious business logic loopholes in this product. Previously, there were a series of decentralized cloud storage projects that benchmarked Dropbox and online cloud disk services, and received early angel round financing of millions of dollars. Not surprisingly, most of these projects have died recently.

Conclusion:

Considering "how to apply blockchain technology" is harmless for developers. After all, it is still in the early stages of development. It is no exaggeration to say that more technical attempts to increase development capabilities are not too much. But for product managers and heads of technology companies, it is a common wrong idea and an irreversible nightmare. After all, blockchain is not a tool technology, but a new system and a new network. Perhaps, the question we should consider is not: what can we do with blockchain technology for our industry, how can we use such a hammer to nail our nails? Instead, it is: the future will inevitably come, and after the blockchain network appears, how should we integrate it into our products.