Standardization as the Secret Weapon for Blockchain Adoption

I remember talking with Packy McCormick a year ago about why I thought blockchains were destined to win. My thesis surprised him and he encouraged me to write about it, so I did..

The biggest power of blockchains is the most overlooked: interface and protocol standardization. Software interface standardization has always been the great accelerator of business innovation since the creation of computers, from CPUs to APIs.

There are a number of benefits blockchains provide businesses — greater trust, transparency, cost savings, and much more. But there is a critical superpower behind the technology that’s vastly overlooked: Interface and protocol standardization. To understand why this matters, you have to start with how most businesses operate.

The ways companies interact with each other —?and the set of APIs and protocols that come with those interactions — involve incredibly complex, multi-directional patterns. And that complexity comes with a cost. It creates business inefficiencies, expensive fragmentation, and greater security risks that impact an entire ecosystem.

But with standardization, those problems are greatly neutralized — which not only keeps businesses and users safe but also opens up new avenues for innovation. Below, we’re breaking down the four key stages of how multi-party systems work and what it means for businesses to adopt each approach. Starting from decentralized chaos and moving ultimately to decentralized order via blockchains, we’ll explore why this latter stage ultimately emerges as one of the fastest, most effective methods to drive business value and innovation.

Stage 1: Decentralized Chaos

The first state we’ll explore is one of decentralized chaos. This means businesses independently interact with scores of others, all using different clients and APIs.

The results are often painful: Businesses have to manage convoluted and redundant connections, fragmented client software, broken APIs, and more — all of which can create incredibly damaging security issues and inefficiencies that drain businesses’ time and resources. The sheer number of different interfaces and protocols drives up the complexity and vulnerability of all these connected businesses and systems, leading to higher costs and potential breaches for each company operating in this state.

Stage 2: Centralized Chaos

In stage 2, many companies attempt to streamline their operations by gravitating towards a centralized entity — whether that’s for communications, transactions, or some other functionality. That means the company’s interactions now use a more standardized client protocol, which is safer and more efficient, as it integrates with the centralized entity's API.

But unfortunately, this doesn’t neutralize all the problems. The centralized entity must interface with the fragmented and bespoke APIs of each company and maintain access to their individual states. Because of this, the entity must constantly deal with multiple inconsistent APIs. That’s an issue since overseeing these inconsistencies leads to a number of inefficiencies and security vulnerabilities — despite the partial standardization on the company side of things. As a result, despite making some progress from stage 1, the safety and efficiencies are not as effective as businesses need them to be.

Stage 3: Centralized Order

After running into the issues of stage 2, businesses often realize they need a new, more organized approach. At this point, the centralized entity may establish standardized protocols and processes to help reduce some of those recurring issues like fragmentation. But while it makes sense at first blush, these changes still aren’t a panacea: They don’t fully eliminate all the risks associated with centralization — including the fact that companies are still reliant on one single point of control.

Beyond that, the way centralized entities change their protocols doesn’t always benefit companies. Sometimes these changes actually break compatibility, for example, which can be hugely damaging for companies that rely on these interactions. Ultimately, even with this approach, the inherent risks of centralization remain — despite all the good faith efforts to manage and mitigate them.

Stage 4: Decentralized Order

The final and most advanced stage companies can embrace is the model of decentralized order, which is enabled by blockchain technology. The most important element at this stage is the standardization of state management, clients, and APIs — and this creates incredibly powerful ripple effects across the network.

With this standardization, interactions accelerate significantly — providing a seamless and truly efficient environment. That benefits every company that’s part of the network, and all the interactions that need to occur, and by extension, teams and users.

Unlike previous stages, if this model is adopted, a number of risks are mitigated. There’s a reduced risk of breaking changes, as just one example, which means companies no longer have the constant need to build safeguards and backup options.

The power of this reliability and consistency can’t be overstated: They empower businesses to move faster and focus on growth — knowing that the underlying infrastructure is robust and stable. It is a wheel that drives innovation forward and frees up internal teams to get back to what they do best, while driving trust as a whole in the ecosystem. And that leads to greater adoption.

A natural progress

Companies of all kinds need to constantly assess where their time and resources are spent, what risks they’re willing to take, and how their systems and interactions really work together. By embracing blockchain technology, businesses involved in multi-party systems, which is most of mid-to-large size businesses nowadays, reap a number of benefits and mitigate most common complexities. And standardization is one of the secret weapons behind the power of blockchains, fueling innovation and adoption for the market as a whole.

This ecosystem transformation is underway, with more and more businesses seeing the value of blockchain technology and the potency of standardization. The importance of adopting decentralized solutions to manage complex interactions has never been clearer — and ultimately, it’s driving a faster digital environment for businesses, more seamless experiences for end users, and broader global usage.