Tips on calculating blockchain development ROI

For entrepreneurs who want to calculate blockchain development ROI, a dollar figure is vital to do it. Some of the first questions our team gets from prospective clients are “how does blockchain make money?” and “how much will it cost?” With some key specifications, calculating development costs and ROI becomes a lot more clear-cut.

As business leaders find ways to put blockchain technology to good use, the cost of blockchain development takes priority. In this post, I’d like to share some insights into blockchain development ROI. First, we need to know several key things — a clear business model, what the blockchain product will do, and finally who will use it. Simple right? Well, you’d be surprised how many proposals we get where these points are not fully fleshed out. Many prospective clients want answers to how blockchain makes money. Not to worry though, we’re happy to help. Once you know these important factors, and we get a full picture, we can help you launch that great idea.

ROI uncertainty

In a 2018 survey on blockchain from Deloitte, 33% of 1000 companies surveyed said uncertain blockchain ROI was a major barrier to investment. Many business leaders are reluctant to invest time and money before seeing concrete results. Yet many still ask, “how does blockchain make money?” Despite this seemingly cautious mood, though, more than a third of the respondents have already begun production of a blockchain product according to the same report. Still more plan on starting a blockchain project in 2019. Early adopters will likely see the greatest returns as they’ll make it to market ahead of the competition.

Even though many companies indicate uncertain ROI as a barrier to investment, a significant number also cite a lack of in-house skills for blockchain development. A shortage of top skill is also hampering development plans. Linkedin meanwhile reported in their year-end emerging jobs report that demand for blockchain developers saw a 33-fold increase in 2018. Competition for blockchain developers is especially apparent in the United States as firms in San Francisco, New York, and Atlanta vie for top talent.

From conversations with our leads and clients, some of the uncertainty surrounding blockchain ROI stems from the fact that it’s so new. Few have really been through the blockchain development process before and many are looking for the expertise to get a great idea to market.

How does Blockchain make money?

You may be wondering how to leverage blockchain in your business — and how much a blockchain development project is going to cost. It’s a question regional director for the Middle East, Asia, and Africa Mickael Costache often gets in the first call from prospective clients. This is something Costache grapples with and says is hard to do off the cuff. “It’s not good when we don’t have a straight answer,” he admits. “Not throwing a number makes us look like we don’t know our stuff — or that we’re trying to price gouge. But giving something super ballpark also makes us look imprecise. If I send out a proposal with a huge range of prices, that person will not be happy — it just hurts the relationship.

Earlier in his career in tech, Costache gave flat-fee estimates for standard software development, so many clients expect this same model. Blockchain development, however, adds another level of complexity — something we calculate with a time and material model. Taking jurisdiction, tokenomics, and of course, the technical aspects into account makes pinning a number down a bit more challenging. Having what he calls a blur of specifications means prospective clients will get a blur of prices — something that can cause significant uncertainty in an ROI calculation.

Of all things that help you get a straightforward estimate, it’s having as many clear details as possible. Costache says investing some time to straighten out some key aspects goes a long way. “We need to understand step-by-step what clients would like to achieve. That’s really to avoid issues during the project because if it’s too vague, we will do what we think is best according to best practices we know, but this might not correspond to the client’s vision.”

Clear brief

Sending a clear brief will make calculating ROI much simpler. The ideal brief has well-defined ideas and specific instructions. Be sure to include:

  • A clear business model
  • The current stage of the project
  • Team members — especially if there is a technical person on board
  • Clear expectation of what you want the blockchain project to do
  • User stories

Sometimes getting outside advice is useful to focus your blockchain product’s specifications. A team of blockchain insiders can hammer all these things out. Even seasoned business people might need guidance in fully implementing a blockchain solution. This is where blockchain workshops come in.

All of our clients have exciting projects that sometimes need some guidance. At the end of a three-day course, participants receive a full report and mock-ups of a blockchain product. Whether you decide to hire our team or want to take the report back to investors, we’re happy to guide this early journey starting a development project.

Blockchain Workshops

Blockchain consulting director Dominik Zyskowski leads the Espeo consulting team and often gets the how does blockchain make money question as well. He recalls that Blockchain development ROI seemed better a few years ago as ICOs took off and cryptocurrency prices were rising. “You didn’t have to invest too much to create an ICO,” he said half joking. Few of those companies survived long-term, however as most of them rushed a shoddy product to market.  “Blockchain is not about collecting money through ICOs, Zyskowski said, “it’s about providing trusted and verifiable information.”

Answering the how does blockchain make money question takes a bit more detail now. To estimate a blockchain development project, we need more information. Now with so much pressure for blockchain projects to demonstrate a market need, getting all the fine details worked out is essential. Having some of the clear criteria I mentioned earlier helps.

Our blockchain workshops have helped several of our clients focus their thoughts and helped us understand what they want to achieve. In the course, we determine the business model that leverages blockchain but also analyze the project from a token economics and end-user point of view. “A blockchain platform doesn’t make sense without users,” said Zyskowski. “We need to come up with a market model that balances supply and demand.”

Trippmatch

One of our clients, Trippmatch came to us looking for a way to collect traveler experiences leveraging blockchain technology. Great idea — but how to do it, and why blockchain? “We built a token market model for them, “said Zyskowski, “and advised them on how to enhance the platform to incorporate a blockchain element.”

As with many blockchain development projects, the end product is user-focused. Part of the value proposition of blockchain is creating new models for social interaction online. For Trippmatch, the goal is to have as many engaged users as possible to create verifiable travel advice and reviews. The platform incentivizes travelers to share their experience and help other travelers.

Trippmatch plans on issuing cryptographic tokens to users as an in-platform incentive system. Tokens can be a great way to motivate users — especially if you’re creating a social platform. But getting tokenomics can be tricky.

At the end of the workshops, we produced a mock-up and graphic sketches for Trippmatch. With this full packet of items, this gives us the tools we need to make a precise estimate. It also gives clients a clear idea of their blockchain development ROI. With that information, they can either move ahead and develop with our team, or take it away and present it to investors. The return on investment in workshops is evident.

Conclusion

Calculating blockchain development ROI doesn’t have to be a difficult process. Answering the how does blockchain make money question and finding a way to do it needs a focused approach. A full set of specifications will make the process much more straightforward. Just as in any business plan, finding a market niche is an essential part. Having a sound business and technical roadmap will ensure a successful launch.

Working all these features out on your own, or in consultation with blockchain insiders, can help you a get a clearer idea of how much the project will cost. Knowing the user stories, the business model, and what the blockchain platform will do will give you the tools to calculate return on investment.  

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