Blockchain and cryptocurrencies like bitcoin will fundamentally change how startups work now and in the future.
During recent months, blockchain has taken over the headlines. Industry experts, serial business people, and compelling technologists have not stopped buzzing over the long-term implications of cryptocurrencies and decentralized systems. Although many predict an imminent bubble, there are numerous substantial, actionable use cases for blockchain that will fundamentally affect the greater startup ecosystem.
For a company founder, or even an expert who works in and around the innovation space, there is maybe no better time to put resources into understanding the basics of the blockchain.
Here are three reasons that startups should care about blockchain and cryptocurrencies:
Startups Have an Opportunity to Become an Early Adopter
Like the early days of the internet, the blockchain world is to a great degree immature or underdeveloped. There are yet numerous basic segments of this maturing ecosphere that should be worked before it is open to the majority. Thus, there is a prized opportunity for startups that will take a risk on this fledgling technology and serve as early adopters of blockchain and bitcoin systems.
In doing so, these first movers gain an immense advantage over the slow-moving competition. Following the plant-the-flag strategy, these startups will have the capacity to develop a solid blockchain group well before space turns out to be excessively swarmed and immersed, making it impossible to separate. Investing time and resources early is a tremendous method to fabricate a focused channel around product and brand.
Startups Can Replace Antiquated Processes with Digital Systems
Several startups, even today, operate on top of legacy software and antiquated infrastructure. This drives up the cost of doing business, as pen-and-paper frameworks frequently perform inefficiently and inconsistently. Besides, some of these fundamental procedures are exceptionally manual, which means they are liable to the very regular danger of human blunder. Startups can implement highly automated blockchain networks to tackle for some of these issues.
“A key aspect is the programmable smart contract: code stored on the blockchain that automatically executes when certain conditions have been met,” says Paul Levy, a senior researcher in innovation management at the University of Brighton. “In uses that involve a financial transaction, it makes sense to use bitcoin or some other digital currency for the same reason — by doing so, transactions can be automated and guaranteed without recourse to third parties, such as a bank.”
As Levy describes, startups can leverage the power of blockchain to supplant the need for costly intermediary parties. Third-party brokerage services plague some of the world’s most important and value-generating industries, including healthcare, finance, and freight. Relying on algorithms over people, startups can expedite supply chains and dramatically streamline their end-to-end funnel.
Startups Can Secure Their Data
Cybersecurity is a growing point of concern for companies of all sizes. According to Gartner, the rising tide of cybercrime pushed information security (a subset of the larger cybersecurity space) spending to more than $86.4 billion in 2017 alone.
However, it doesn’t stop there. Global spending on cybersecurity products and services, for example, automotive and internet of things, is anticipated to surpass $1 trillion throughout the following five years. Unmistakably, this is a major point of interest for companies needing to secure and track their most essential data. Given their incredible security features, blockchain systems are likely to soon become the de facto method for storing and organizing enterprise data.
“The blockchain is an incorruptible digital ledger of transactions that can be programmed to record not just financial transactions but virtually everything of value,” says Don and Alex Tapscott, authors of Blockchain Revolution.
All the data stored in a ledger is automatically encrypted using the latest and greatest cryptographic methods. These data warehouses are also only accessible via a key-value mechanism that validates and authorizes identification before granting access. This greatly diminishes the power of hackers, who have no entrance point to steal information.
Further, the decentralized nature of blockchain systems greatly reduces security risk. Most obviously, distributed systems cannot be manipulated by a single entity. Rather, they can only be changed via a consensus majority among the network. This protects against corruption and restores control back to the end user. It also expedites interactions among nodes in the network, as no central authority is needed to approve transactions.
Emerging blockchain startups, like TrustToken, are extending these inherent features of blockchain to extend digital security to real-world assets. TrustToken has developed a platform, in collaboration with many of the world’s top trust law attorneys, that connects the beneficial ownership and control of a physical asset to a smart contract. This means that businesses, finance managers, and real estate owners can securely trade those assets on global exchanges the way that people currently trade bitcoin.
Blockchain may have picked up popularity because of the underpinning technology of Bitcoin, however, its potential uses stretch out a long way past the world of cryptocurrency. Its capacity to enhance privacy, increase security and help build decentralized networks has made it the talk of the town in recent times, although many businesses remain unaware of the great promise this technology holds.
So how can businesses today keep ahead of the curve and use blockchain to their advantage?
Accepting Cryptocurrency as Payment
It’s no longer possible to ignore the meteoric rise of cryptocurrency. With Bitcoin currently sitting pretty at close to $6,200 in value, it’s clear to see that this is likely to have a big impact on the way money is exchanged in the future.
Blockchain technology underpins cryptocurrency and is responsible for its truly decentralized nature by storing details of all transactions on digital ledgers that can’t be altered by any third party.
There are a ton of reasons for businesses to get on board the crypto train, not least of which because it signals awareness of digital trends and a forward-thinking outlook. In addition, it makes cross-border payments smoother, easier and cheaper by removing the need for currency exchange.
Microsoft first started accepting bitcoin as a payment method in 2014. “We’ve restored bitcoin as a payment option in our store after working with our provider to ensure lower bitcoin amounts would be redeemable by customers,” the spokesperson of Microsoft.
KFC’s Canadian wing has started selling chicken for Bitcoin. The company said it’s sold out of the buckets, and that’s not in the slightest surprising given that Bitcoin is currently rather less convenient than many other currencies: transaction-processing times are currently over 100 minutes, while transaction fees can exceed US$50. The latter sum is more than the cost of the chicken while waiting 100 minutes for a transaction to clear makes it faster and easier to either drive to KFC or to order just about any other food imaginable. Even as the uncertainties over the future of Bitcoin looms large, fast-food chain KFC has announced that it will accept the virtual currency for paying bills in its outlets in Canada with the launch of Bitcoin Bucket.
Using Distributed Apps to Enhance Operations
Distributed apps are another area where businesses can use blockchain to get ahead. In basic terms, these are software applications that are spread over lots of different computers in a network. There’s no centralized server, and blockchain’s decentralized nature makes it easier to achieve this.
These apps have many truly exciting functions, and identity management is one example. A person’s identity is a complex and multi-layered thing, made up of lots of sensitive information like their financial details, address and health records.
Blockchain’s immutable ledgers can store data in a way that avoids tampering, allows for easy verification of records and easily prevents unauthorized parties from gaining access. The data is distributed across a network of various bodies like banks and hospitals, with no central body holding all the cards.
Another way in which decentralized apps can benefit businesses is through file storage. This is an area where security is especially important, with 27.8% of users having uploaded sensitive information to file-sharing services.
Blockchain can help to create distributed storage services using blocks of encrypted data spread across the network. This removes the need for a central server, making it extremely hard to corrupt or steal the stored information.
Custom Blockchain Apps
Services like Bitcoin, Ethereum, Qtum, and Hyperledger can all help businesses to move some of their existing processes onto blockchain. They can create their own blockchain to allow smoother networks of buyers and sellers, create their own decentralized markets and make processes within the business more efficient. This can also ensure confidentiality between different links in the business chain and help keep sensitive data more secure.