How to Make Your Business a Blockchain Startup

Blockchain is one of the most popular buzzwords in business right now, but unless you have a good understanding of “immutable, publicly distributed ledgers,” it can be difficult to understand what it could do for you.

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We’ll cut through the hype and mystery, explain what blockchain is, and help you understand if your business could benefit from becoming a blockchain startup.

Blockchain Business Technology, Briefly Explained

At its simplest, blockchain technology allows for the sharing of information and transactions between multiple people, businesses, software and others. Blockchain technology is exciting because it’s a digitized, decentralized, verifiable, immutable ledger. Let’s dig into what each of those terms means.

Digitized

All blockchain frameworks run digitally, typically across the internet and cloud-based services. All the technology involved with a specific blockchain will send, receive, process and verify information digitally.

Decentralized

Blockchain technology does not rely on the central control of one particular organization or technology setup. Instead, the blockchain can be accessed by any properly-authorized machines and users from anywhere. This means multiple computers contribute to the efficient running of the blockchain.

Verifiable

A specific blockchain “ledger” contains a record of all the transactions and information that’s ever been shared across the blockchain network. All of this data is independently verified for truthfulness and accuracy by multiple computers. This means it’s practically impossible for an individual user or machine to try and “fool” a blockchain network by introducing fraudulent or erroneous information.

Immutable

This means once a record has been written to the blockchain and verified, it can never be changed. Anything that’s recorded into a blockchain network is fixed at that moment in time. Although records can be amended subsequently, any changes would be captured as separate transactions. This makes it easy to audit blockchain information and transactions.

Ledger

The ledger is simply the place where all your blockchain information and transactions are recorded. It’s the functional equivalent of a database, except built around blockchain technology. As new transactions and information are added, they are appended onto the end of the blockchain ledger, so any connected machines can get the latest information.

Where does the name blockchain come from?

Well, every time a transaction is captured, recorded and completed it forms a new “block.” Each new block is connected to the previous one to create a “chain,” hence “blockchain.”

Blockchain Businesses and Cryptocurrency

It’s likely that you’ve heard blockchain mentioned in the same breath as cryptocurrencies like Bitcoin. While blockchain is the underlying technology that powers cryptocurrencies, blockchain has far wider utility and more use cases than virtual money. We recommend staying away from cryptocurrency-related blockchain businesses for several reasons:

The cryptocurrency market is extremely volatile. Bitcoin alone fell in value by over 80% in a year, and other cryptocurrencies also saw massive devaluation.

Many Initial Coin Offerings (ICOs) used to start cryptocurrency and some blockchain businesses were identified as scams or fraudulent, meaning that potential investors have lost trust in ICOs as a way to get funding

The Securities and Exchange Commission (SEC) in the U.S. and other regulatory agencies around the world are putting more controls in place around cryptocurrency assets

Many cryptocurrencies have no “inherent value,” meaning that any changes in price are purely speculative and based on demand, rather than the revenue or profits generated by a well-run, underlying business

This combination of a lack of trust and legitimacy, unpredictable valuation and finances, increasing regulatory controls and speculation means the cryptocurrency marketplace isn’t a reliable way to build a blockchain business. Instead, we recommend building and using business blockchain applications that have utility and value outside virtual currency.

Why You Should Consider Using Blockchain for Your Startup

Although it can be exciting to form a planning business, there will be significant demands on you as a small business owner. Here are some of the things you can expect.

Fortunately, blockchain technology and ledgers have plenty of value outside cryptocurrencies. Using blockchain technology in your business could be right for you if:

You’re primarily a business that manages or provides access to data and information

You need to verify, prove and audit the data you hold

You need to provide data to third parties

Blockchain technology makes a better solution for you than a customized database, software as a service or similar application

Software applications that you develop and use across the blockchain are known as “Distributed Applications” or DAPPS.

Advantages of Using Blockchain Technology for Your Startup Business

Blockchain technology does provide some advantages to a startup business, which can include:

The ability to freely share data across the blockchain ledger, giving authorized users easy, rapid access to the latest information

The fact that blockchain applications are secure, transparent and accessible to large numbers of users

A strong, verifiable audit trail so you can trust the information in the blockchain and see a history of how it’s been entered, tracked, managed and accessed

The fact that blockchain technology is “hot” right now, which might help attract investors, clients or suppliers

An expanding range of blockchain technologies, developers and frameworks so you can find the right type of blockchain solution for your business

There’s still plenty of room for innovation in the blockchain space, and your business could take advantage.

Disadvantages of Using Blockchain Technology for Your Startup Business

Though there are many ways blockchain can help your business, it’s important to consider the disadvantages of blockchain technology when deciding if it's right for your company. Here are some examples:

There may be a better solution for sharing information among multiple parties, such as a secure database or a software as a service application

Everything about your business will need to be engineered to support a blockchain application, as it’s a different approach to software development and usage

Distributed applications on the blockchain are still in an early, nascent stage, so it may be hard to get buy-in from all parties to use these applications

Due to the fact that every computer on a blockchain has to verify every transaction, blockchain applications can be slower than other software

Developing a blockchain application can be costly, as there are not a huge number of skilled blockchain developers at present

It’s best to choose a blockchain solution for your business startup if there are not already other better options.

Business Industries Ideally Suited to Blockchain Applications

If you’re in one of the following sectors, there’s a good chance you’ll get value out of a blockchain application. Here are some ideas of how blockchain can be used in these industries:

Healthcare startup businesses

Recording medical and patient details in the blockchain, including medical records, diagnostics and other information

Real estate startup businesses

Capturing and sharing details of property listings, transactions, contracts, funding and similar details

Supply chain startup businesses

Gathering information on raw materials, parts and products; capturing handoff of goods through the supply chain; providing details of contracts, documentation, shipping and payment processing to suppliers and third parties

Insurance startup businesses

Capturing policy details, managing claims or making payments

How to Move Your Business to the Blockchain

If you do decide to become a blockchain startup and develop software and applications on a blockchain framework, there are a few steps you’ll need to follow.

Decide on Exactly What Parts of Your Business, Information, and Technology You Want to Use the Blockchain For

If you do decide a blockchain solution would work best, it’s important to understand the scope of the solution. Carefully establish exactly what functionality you want to get from the blockchain and create scoping and project documents

Build Your Blockchain Solution Into Your Business Plan, Costs, Revenues and Profit Estimates

The choice to move to a blockchain application may affect your costs, revenue and profit margins. Ensure you understand the costs associated with developing a blockchain application and build them into your business model and forecasts.

Decide on the Best Framework for Your Blockchain Application

There are several ways to go about building a blockchain application. You may be able to adapt an existing application and use it for your needs. Alternatively, you can use an established blockchain “protocol” like Ethereum and build an application on top of it. Finally, you could develop your own blockchain protocol and application from scratch. Note that each of these will have significant differences in terms of cost, technical expertise, capabilities and customization options.

Develop the Blockchain Application in Partnership With All Stakeholders

As you start building a blockchain application and business, ensure you have regular feedback on requirements from all parties that will be using the application. Take their feedback into account when developing the software, so you can create a finished product that’s completely fit for purpose.

As you develop your blockchain business, you can refine your business plan and application so it perfectly meets everyone’s needs. That will help your business become a success by making use of this exciting new technology.

Confirm That a Blockchain Application Is the Best Solution for Your Business Needs

It’s worth spending some time exploring and confirming that a blockchain solution really is the best choice for your startup. Speak to your chief technology officer, consultants, development partners and others to independently verify if a blockchain solution is the right choice, or if something else could work better.

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