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.
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.
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.
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.
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.
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.
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.
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.”
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:
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.
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.
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.
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.
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:
Recording medical and patient details in the blockchain, including medical records, diagnostics and other information
Capturing and sharing details of property listings, transactions, contracts, funding and similar details
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
Capturing policy details, managing claims or making payments
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.
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
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.
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.
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.
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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