Always ask decentralized projects: What happens when your company is shut down?

crypto basset hound

I work as a technical consultant for VCs. We are dealing with a lot of blockchain/decentralised/… projects asking for funding or participating in ICOs.

One thing in particular is recurring over and over again. There is some idea which is not so bad, could improve certain industry or solve a problem in a new way and there is somewhat good technology in the project that deals with the problem well and then all this is connected to the blockchain and of course a new token is created for this. More often than not the token is used as a fuel in the new economy around this solution.

My favourite question is in the title. What happens if the company developing the solution, usually charging some kind of fee for some kind of intermediary service in this ecosystem, is shut down? And my favourite reply from one of the CTO's of the projects that we rejected was: "Obviously it will stop working because we have this and this running on our servers and users are coming to our website where they…" and then when I asked why do they need a blockchain and claim to be decentralised if there is such obvious single point of failure, the answer was "Everyone is doing it like that". And it is being done to be able to inflate valuation of the project 5x-50x because of the blockchain hype (pre-money, pre-product, pre-user valuations over $10M are not rare in this space). And of course to sell some tokens for extra free money, which is always handy.

So, I'm not saying that such projects with somewhat good technology behind that solves a real-world problem cannot make money. Some definitely can make money, but they are not honest to their users or their investors. If you're type of investor who only wants to make more money then it could be a good investment. But if you care about how the money is being made then please ask this question and reject dishonest projects.

More often than not you can apply what Andreas Antonopoulos repeated over and over again "you don't need a blockchain for that". You don't need a blockchain for that if you don't need to protect the project from being shutdown by a government or circumvent some kind of legislation barrier and basically survive no matter who dislikes it. You don't need a blockchain for that if you have a built in single point of [total] failure because you very much can just add a database to that point and you will have a cheaper and a faster solution that works better than what you propose.

submitted by /u/only_merit
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