Earlier this month, in his article “How Blockchain is Reshaping Business,” Pat Bakey, the President SAP Industries, does an excellent job of defining blockchain. He writes: “Blockchain is a globally distributed ledger of all the information pertaining to a digital transaction. It runs on millions of devices, is open to anyone and can be used to securely move and store anything of value, including money, art, intellectual property and even votes.” And, as the Harvard Business Review put it, “it’s the first native digital medium for value, just as the internet was the first native digital medium for information.”
The analogy that blockchain is to currency what the internet is to information is a good one. It also hints at the inherent value of blockchain to companies of all sizes, including start ups. Bakey points out that even though one might expect large banking-related companies to be some of the first to adopt blockchain technology, this has not been the case. “It is important to remember that the first implementations of blockchain which really impact customers may in fact have nothing to do with banks at all. Because blockchain technology has started with currency, most consumers and business leaders assume that banking and capital markets will be the first users. Somewhat ironically, the most obvious applications to the consumer may not be banking related.”
Bitcoin is perhaps the most famous digital currency to use blockchain. However, other “cryptocurrencies” are emerging, such as Ethereum by UBS. Companies are also joining together in collaborative ventures to explore the many practical uses that blockchain offers. Two such ventures are the Hyperledger Project and Digital Asset Holdings. DLT has also introduced “smart contracts,” which some call the biggest “killer app” to run on blockchain. Microsoft has gotten into the act via their Azure platform, as well as Facebook, Google and Amazon.
All of these developments that relate to online currency and financial transactions are considered part of the “fintech,” or financial technology” industry. As one of only a dozen or so Title III investment portal approved by FINRA, Jumpstart Micro is a player within the rapidly-growing online investment sector.
Blockchain’s Effect on Start Up Businesses
1. Perhaps the most notable way that blockchain is affecting the start up world is in the sheer number of blockchain-related investments by VCs.
According to CoinDesk, as of Q1 2016, the total venture capital investment in bitcoin and blockchain startups now exceeds $1.1 billion. The first quarter of 2016 was also the first time blockchain and hybrid startups raised more money than bitcoin startups.
The other ways that blockchain affects start ups are as different as blockchain is itself. On SAP.com, Pat Bakey writes: “While considerable debate has emerged over the merits and prospects of public (or open) and private (or permissioned) blockchains, the ability and flexibility of blockchain technology to serve many different purposes is one of its most powerful qualities. Blockchain’s innate versatility means that it truly has the ability to reshape nearly any industry if put to use correctly.”
2. The ability to generate more revenue is one of the biggest reasons companies of all sizes are taking a look at blockchain.
Bakey believes that the industries that have the most to gain by implementing blockchain technology today are “those that may believe they’re years away from even considering how it can be rolled into their strategic business ecosystems.” Bakey encourages start ups to be purposeful in implementing blockchain and to do so “as an extension to their current business.”
Likewise, in his insightful and thoroughly honest article, “The 9 Mistakes I Made When Bringing Blockchain to My Startup,” John Rampton, the founder of the online payments company Due, suggests that start up CEOs proceed, but with with caution, in adopting blockchain.
Here are the 9 top blockchain mistakes Rampton warns against:
– Failing to understand how blockchain actually works
– Not selecting the blockchain software that aligns with your business purpose
– Being impatient and trying to rush the timeline for blockchain adoption
– Thinking every business function can be improved with blockchain
– Believing the system is already protected from user mistakes
– Not limiting access to private keys
– Making the blockchain too heavy
– Not realizing there are limitations to blockchain as a database
– Not seeing the potential flaws within blockchain
Rampton also talks about the importance of staying abreast of changes in blockchain, and engaging with forums and thought leaders in cryptocurrency. Equally applicable to CEOs and CIOs, Rampton’s article is a great read and gets very specific.
3. Because Millennials like and demand easier payment methods, using blockchain applications is also a way to win and keep Millennial customers.
Bakey explains: “Gaining the trust and loyalty of Millennials is becoming more and more difficult, as increased competition has made it difficult for many legacy industries to differentiate themselves based on pricing or offerings alone. Low-cost micro-transactions can be processed through a blockchain without the fees that existing payment platforms demand.
4. Through creative, thoughtful use of blockchain, start ups can make doing business easier for their customers. They can operate more efficiently and can even protect their intellectual property.
Some practical examples of how blockchain can be used by start ups include:
Legal – Because legal transactions usually involve a lot of data and paperwork, start ups can benefit from using smart contracts. These are agreements that can “automatically activate actions based on specific conditions. Smart contracts can drastically reduce transaction costs and provide superior security than traditional means.”
Healthcare – Blockchain can be used to safeguard digital assets, including medical records. It can make processing claims easier for customers and sharing records easier for patients, while still maintaining privacy.
Media, Entertainment and Content – As with many industries, blockchain can eliminate or drastically lower the cost of transactions. For example, blockchain could allow subscription-based sites to charge readers by the article or video, as opposed to a monthly fee. A blockchain ledger could also be used to secure intellectual property for companies that work with film and music, protecting artistic rights and reducing digital piracy.
In fact, blockchain, has the power when adopted in an innovative way, to save entire industries from extinction. Time will tell. Buckle your seatbelts and enjoy the ride.
Coindesk – http://www.coindesk.com/state-of-blockchain-q1-2016/
Coindesk – http://www.coindesk.com/the-9-mistakes-i-made-when-bringing-blockchain-to-my-startup/