The emergence of cryptocurrency and blockchain has created a new type of decentralized business model, one with shared ownership of all participants rather than a single controlling interest. Organizations entering this space must understand the key role of the network and minimum viable ecosystem (MVE) if they are to succeed.

What is MVE?

Companies creating products or services must focus on minimum viable product (MVP); companies working to create blockchain or distributed ledger solutions must focus on both MVP and the minimum viable ecosystem (MVE). Under the former model, innovations are presented as a prototype, which demonstrates a limited value proposition at a limited scale. The typical development strategy completes the value proposition by moving from prototype to pilot, then ramping up deployment towards a full rollout. In contrast, MVE takes development along a different path, moving towards full deployment before the development of a complete feature set.¹

To start establishing MVE, it’s vital to consider “the user with their needs, based on a defined problem statement.”² Design of the ecosystem needs to take place on two distinct levels: users and value generation. As Diana Adachi of Pegasus Fintech has stated, “a blockchain or distributed ledger solution needs to focus on the community they are serving.”³

What is the minimum needed for MVE?

Diana Adachi has a clear answer: “at minimum, a company needs to have a few key stakeholders (these are typically market makers for the ecosystem) transacting with each other and a platform to conduct transactions. Until they have this, it is still in a prototype phase.”

In practice, as blockchain networks are, by their very nature, transactional, to be viable they must have the following: “stakeholders to participate [in] and execute transactions, a platform, a business model, [and] rules and governance at a minimum.” This is MVE for the blockchain.⁴

  • The business model should be focussed on a clearly articulated problem statement that spells out how transactions on the platform will benefit users.
  • Different groups of stakeholders will have distinct advantages and disadvantages, and awareness of how these groups will interact is a key element in designing MVE.
  • A working platform and a functioning network enable stakeholders to conduct the transactions that are at the core of the platform’s value proposition.
  • Rules and governance ensure that even in a decentralized ecosystem, there are controls in place to prevent the rise of bodies that exercise influence against the interests of the network overall.⁵

When do you know you’ve reached MVE?

Since successful establishment of MVE lets a company use the power of its ecosystem to encourage others to join the network⁶, it is reached when the ecosystem is proven to be operational. Once MVE is attained, “the next level is to begin to scale operationally with additional stakeholders, to increase volumes, and to enhance the platform.”⁷

What about tokens?

Tokens allow blockchain companies to encourage people to join the network, in exchange for partial ownership. There are downsides to joining a network early: with few other users, who will you interact, or transact with? Because early supporters receive a larger ownership share, and there is the possibility that the share — represented by the token — will gain value over time, this tends to offset the disadvantages of being an early network adopter.⁸ Tokens are offered by networks at their earliest stages of development to incentivize investment in the network.

No matter how compelling and innovative the application, it is useless unless it is adopted across a network. It is therefore vital for organizations to identify and build MVE to develop their network and drive widespread use.⁹