Switching Costs: Why the Blockchain often doesn’t matter for ICOs

In many ICOs, Blockchain technologies just play a minor role – sometimes, they are not even necessary.

Many people are associating ICOs with Blockchain technologies – which is not generally false. Although, I personally understand the appliance of ICOs in a much broader scope than just for Blockchain projects.

Watch out for ICOs that put the user in first place
Many ICOs are trying to build an innovative project that facilitates the Blockchain. Oftentimes, projects seem to follow the opposite direction: They are not providing a solution for the user and facilitate the Blockchain for it, they rather try to find use-cases of the Blockchain and build a solution for the customer out of it.
In my opinion, this does not only lead to a project focused on the wrong perspectives, but also to the fact that in some projects only the technology behind it is a real USP against others. Let me explain it in detail.

Switching costs: „Your Blockchain doesn’t matter“

Many projects also try to enhance an existing solution on the market by implementing it with the use of a Blockchain. In some cases, it can really give you a competitive edge, in others it is just a marketing instrument.

Looking at the well-explored phenomena of switching costs, we can ask ourselves the very important question concerning ICOs:

„Is the advantage you gain through the Blockchain as big as users would be willing to switch from a well-known, existing and established solution to yours?“

Basically, a switching cost are all the (not necessarily monetary) costs a customer is facing when he wants to switch from a product he is currently using to a new product.

The essence of switching costs in the context of ICOs generally is that you should really ask yourself if a project that already exists on the market could not serve the customer in the same quality as a Blockchain-powered solution can. And if not, are the advantages huge enough (higher than the switching costs) that it is worth for the user to switch to the new product?

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