Often a feasibility study (proof of concept) is essential for a project. Read how it looks in the field of blockchain technology. […]
IT projects usually cost money and time. The degree of innovation often plays an important role. Especially at the beginning of the project life cycle, the uncertainty of feasibility is greater than at the end. In addition, more recent technologies – such as blockchain – carry a higher risk. A feasibility study or a Proof of Concept (PoC) enables the shortest and most uncomplicated road to success in practice.
There are numerous possible uses for the blockchain. Here are just a few examples:
- It replaces a middleman and automates processes or transactions.
- It acts as a trusted repository of data or the foundation of digital identities that organizations process outside of the blockchain.
- It logs guarantees of origin in a logistics chain or notarizes access to data records, such as access to a cross-communal population register.
Without question, the greenfield approach is the easier way to implement a blockchain project, but this is not always the case. In the vast majority of projects – unless it is a test project – the blockchain will interact with existing systems in the IT landscape and is therefore dependent on interdependencies. One of the results of the proof of concept is therefore the development of the interface management.
The latter keyword is not only relevant for the interoperability with the company’s internal IT, but also for the interaction with outsiders. These are primarily the collaborative and / or consortial organizations that are in a blockchain network. The questions from this topic could possibly answer whether a private, open or consortial form of blockchain is used. The end users of the system, citizens, employees or government employees, are certainly also important. However, the feasibility of an app on the smartphone – the often chosen way to access a service – is manageable. The dominant operating systems Android OS and iOS offer little or no fragmentation, which is why the risk of failure is lower than the development and implementation of a blockchain network.
Established blockchain frameworks – such as the open source-operated Hyperledger Fabric and many others – help immensely in not having to reinvent the wheel, because they are tailor-made for business or community purposes and comply with compliance regulations. Nevertheless, deployment on a private cloud can become a challenge if the simple things, such as the necessary resources and capacities, have not been allocated in advance.
Because the feasibility study, the PoC, is mainly a conceptual and analytical work, at most perhaps basic software for checking the functionality, the project managers do not necessarily have to include all stakeholders (end customers, members of management, the sales executive or various organizations) .
Much more important is the involvement of people with specialist or technical domain expertise. The focus at the moment is on feasibility and evaluation with regard to the business case. Involving the right stakeholders and the result of the work differentiate the proof of concept from a prototype that, strictly speaking, follows. The latter is actually intended to give a first impression of user behavior and feedback. Clickable software, surface designs or 3D printing are ideal for this, provided that it is something physical.
There is no doubt that the participation of the sponsor as a stakeholder is of great importance. The proof of concept for a blockchain project ensures that funders are convinced of the project, the potential and the added value to invest in it. The earlier the involvement takes place, the more secure the support and commitment during the entire project life cycle.
At the end of the day, what counts is having picked up the right and important stakeholders. The aim is to create consensus and an amicable understanding of how the team conducts the feasibility study. The most important input for planning and coordinating the PoC is time, a lot helps a lot.
The literature and luminaries in this scene do not specify a fixed term for the implementation of a PoC. Depending on the industry, product, complexity and maturity of the technology, the proof of concept takes between five and 40 person days. From a business perspective, the entire PoC should be as short as possible and answer the most important questions. Especially with blockchain technology, the following questions could be:
- Which infrastructural components and interfaces are required to build the blockchain?
- Which technical target scenarios, depending on already existing technologies and processes, result from this for the IT infrastructure based on best practices?
- What transaction volume (tps) can be expected in a period? Possibly with a controlled activation rate of the users (the successive onboarding of new users).
- Is it possibly already possible to work out a cost-benefit analysis for the application and integration of the blockchain on the basis of the quantity structure?
- How are the target scenarios to be assessed with regard to scalability and performance in productive environments?
- Does the simplification of processes meet expectations?
There are also industry-specific issues: In the case of a payment service, this would be, for example, tax registration and collection. In healthcare, these can be guidelines for issuing the e-prescription.
Ideally, the proof of concept for the blockchain has a priority step and several, sometimes optional, individual steps. Similar to design thinking and many other creativity methods, an ideation workshop takes place in advance of the actual event. In this, the team works out the actual idea, which in turn emerged from an impulse (for example to increase or defend sales or other strategic goals). The subject of this preliminary phase is the definition of the vision.
It is also advisable to conduct a dedicated breakout session during ideation. For the first time, those involved should critically question whether blockchain technology is the right solution for the intended goal – free of hype phenomena. An ideation workshop should not exceed one to two person days.
The proof of concept is an isolated exercise, as the graphic shows. Fixed or defined procedures with precisely specified artifacts that the team must adhere to do not exist. Nevertheless, the market already offers well-established frameworks that can be used as a basis. The guide shown shows the author’s practice in everyday professional life.
- At the beginning of the PoC, project participants and stakeholders set the agenda and formulate the goals very clearly. It helps if those responsible quickly and quickly ensure that everyone has understood the problem that was previously identified and worked out in the ideation workshop – ultimately, this is the justification for this step.
- In order to keep the entire feasibility study short, the relevant and decisive functionalities should be coordinated in the second step. In addition, the functional requirements are defined.
- In the middle step, the participants define their (acceptance) metrics – for example, on the basis of a certain degree of utilization, an activation rate or simply for daily business. The execution happens between three and four.
- In the fourth step, the results of the evaluation are available. These are discussed with the stakeholders and a consensus has to be reached before we can continue. A dissent resulting from the meeting leads to a new definition of the acceptance criteria or the coordination of the unique selling points.
- If there is a “yes” about the feasibility and the consent of all stakeholders, the final step is to decide which blockchain solution or framework should be used.
The result of the proof of concept is a very clear “yes” or “no” about the technical feasibility of the project. The business-optimized or project management-technical aspects, whether CapEx or OpEx or how many sprints the project could possibly have, should take a back seat at this point. With newly added numbers, data and facts, the ongoing questioning of whether a blockchain is actually necessary also applies at the end of this phase. This time there is no need for a separate breakout session.
The following phases are optional and a chapter in itself. Depending on the intention and complexity, a prototype or a minimum viable product (MVP for short) can make sense. The difference between the prototype and the MVP is the public or closed access by outsiders, which is delimited by a release.
Even after almost a decade and with increasing evolution, the blockchain is complicated and complex. There are launchpad and low-code solutions such as IBM Blockchain Platform, Settlemint and Co. However, the blockchain is not a plug-and-play system. A proof of concept is particularly important because it shows the feasibility of an idea and confirms its potential. The implementation is a cost- and time-effective opportunity to validate features; it shows risks and possible errors at a very early stage.
Before moving from the PoC to the project for the productive system, it is important to continuously and self-reflectively – not in a pessimistic mood – to question whether alternatives such as a distributed database management system might be the right thing instead of a blockchain. There are decision diagrams for this purpose that answer questions about compliance and governance in such situations. This possibility of deciding against the blockchain in a cost-efficient manner is given at the latest in the MVP phase.
* Kamal Vaid is employed as a consultant for blockchain at SVA GmbH. He has been working on blockchain and other distributed ledger technologies for several years. The author has a Master of Science in IT Management from the NORDAKADEMIE Graduate School in Hamburg and a Bachelor of Science in Business Informatics from the University of Wismar. He has already worked on numerous blockchain projects in the automotive and energy sectors.