Back in 2009, the world was introduced to an entirely new technology to help people think differently about transactions and digital recordkeeping. The technology, called blockchain, was used in the creation of the cryptocurrency Bitcoin. But over the years, it has found a use beyond crypto. Companies have now adopted it as part of their overall digital footprint.
What is Blockchain?
Although blockchain is a well known term with respect to cryptocurrency or bitcoin, people remain a little puzzled over what it actually means. They continue to use blockchain interchangeably with cryptocurrency. Whenever they come across a blockchain development company, they think of crypto.
Blockchain, however, goes way beyond cryptocurrencies. It is a chain of blocks where transaction data (who has transacted, to whom, and how much money was exchanged) are stored in a digital ledger. This ledger is distributed throughout the entire network, which means that it is virtually impossible to alter, hack, or cheat the system. Each node on the blockchain network verifies every transaction before it is processed.
How Has Blockchain Technology Impacted Startups?
The nature of blockchain, such as its immutability and decentralisation features, makes it useful in a number of ways for many industries. Here are some of the advantages of blockchain for startups:
A New Industry
Since blockchain is a new industry, many startups have realised its potential and found innovative ways to apply it to real-world problems. According to Statista, blockchain technology will increase in value to nearly 1,000 trillion U.S. dollars by 2032.
The adoption of blockchain technology has stimulated the creation of entirely new job roles and industries. Key roles such as smart contract engineers and decentralised application (dApp) developers are in high demand. Blockchain has also birthed new companies such as Binance and Coinbase that are now worth billions of dollars.
For example, cryptocurrency exchanges like Binance and Coinbase have transformed how people buy, sell, and store digital assets. There are other startups apart from exchanges, such as Chainalysis, that are also making waves in the industry.
Additionally, blockchain technology offers anonymity and privacy for users, as transactions do not require the sharing of sensitive personal information. Furthermore, cryptocurrencies enable faster cross-border transactions, bypassing the delays and high costs typically associated with international payments handled by banks or intermediaries.
A number of startups such as Strike and BitPay are driving innovation in this space.
To Store Records Transparently
One of the key benefits of blockchain technology is its ability to store records securely and transparently without the need for a third-party authority. Transactions and data stored on the blockchain are immutable, meaning they cannot be altered or tampered with once recorded. Additionally, these records are fully transparent, as anyone with access to the network can view them.
Startups like Everledger are using blockchain to create transparent records for industries like diamond certification and wine authentication. Meanwhile Provenance is helping businesses ensure supply chain transparency.
Improved Security of Company Data
Blockchain technology offers a high level of security, primarily due to its decentralised nature. Transactions and data are recorded across multiple nodes in the network and this ensures that no single point of failure exists. This decentralisation makes it nearly impossible to tamper with or alter the data without consensus from the entire network.
Startups like Guardtime are using blockchain to secure healthcare records, while Storj provides decentralised storage solutions that ensure data integrity and protection against unauthorised access.
Decentralised Funding
Entrepreneurs usually find it difficult to raise capital from venture capitalists or even banks. Blockchain technology has created a market for decentralised funding (i.e., ICOs or token sales). ICOs allow startups to raise funds by selling tokens or coins to investors. These tokens very often represent a stake in the project or a product/service.
For instance, ICOs allowed Ethereum and EOS to fund themselves in record amounts by building apps and platforms that destabilise future fund structures. This also brought about the development of DeFi which uses smart contracts. Smart contracts are autonomous contracts with pre-defined rules. They have lots of applications but are most commonly used in DeFi programs, which are typically more concerned with the exchange of money and money lending. Popular examples of blockchain-based lending platforms include Compound and Aave.
Use Cases of Blockchain in Startups
Although the most popular use case of blockchain is in finance, it can also be used in various industries such as gaming, property, supply chains, and healthcare.
Healthcare Industry
Medical practitioners can use blockchain to securely store their patients’ health records. Once a medical record is created and signed, the record can be written into the blockchain to provide the patient with proof and assurance that the record cannot be accessed. Such private health data could be encrypted and stored on the blockchain with a private key, thus enabling them to be seen only by specific people, maintaining privacy.
Supply Chain Management
Suppliers can record the origins of materials that they bought through blockchain. This would help businesses certify not only the quality of their product but also common labels like Organic, Local and Fair Trade. According to Forbes, the food industry is implementing blockchain to track the flow and safety of food throughout the farm-to-use process. Examples of such companies include Te-Food and Yojee.
Real Estate/ Property Records
Recording property rights is cumbersome and inefficient. A deed today needs to be presented to a government official at the local record office, where it is entered manually into the county’s central database and public index.
Whenever there is a property dispute, claims on the property must be matched against the public index. This is expensive and time-consuming, as well as subject to human error. Each mistake makes property tracking inefficient.
Many startups are looking to take advantage of the inefficiencies of traditional property records. Blockchain could remove the hassle of scanning documents and finding paper copies in a local record office. When the right of property is recorded and authenticated on the blockchain, property owners know that they have an accurate record indefinitely.
Voting
Blockchain would support an emerging voting system because it has the potential to reduce election fraud and increase voter turnout. While not a common practice, in West Virginia, it was put to the test in the November 2018 midterm elections. This approach using blockchain would make votes virtually impossible to manipulate.
Igaming Industry
The use of crypto as payment methods is now so widespread that it is common to see casinos that accept cryptocurrency for deposits and withdrawals. Some even offer sports betting bonuses that are specific to this type of method.
Players may use websites such as Askgamblers.com to learn more about this. The inherent characteristic of crypto also makes it popular among those who want to remain anonymous and enjoy lower fees on online casinos.
Challenges of Adopting Blockchain
Though blockchain technology has many advantages for start-ups, there are some barriers to its implementation.
- Complexity: New technologies like blockchain and AI need technical expertise for implementation. Startups may struggle to attract experienced blockchain developers. Also, implementing blockchain into existing systems and infrastructure can be expensive and time-consuming
- Regulatory and Legal Risk: The regulatory environment surrounding blockchain technology is currently changing, making the landscape confusing for start-ups. Laws already exist for compliance, data privacy and security, so compliance isn’t easy if blockchain brings new things. Startups need to understand all of these laws and make sure they operate within their limits
- Interoperability and Standards: The absence of general standards and interoperability among different blockchain platforms can hinder startups. Compatibility may limit integration with existing systems and collaboration with other organisations. Startups might have to overcome these barriers by using interoperability protocols, or through partnerships tailored to the blockchain plan
- Performance and Speed: Blockchain technology, especially public and decentralised blockchains can limit transaction speed and scalability. Startups who need to conduct large amounts of transactions fast may struggle to do this on the blockchain. They should think hard about the balance between decentralisation, security and performance
It’s clear that blockchain has developed into something extraordinary and has impacted start ups in many ways. It has created a new industry with many branches they can explore. The good thing is that there are still many things to come from blockchain.
As it continues to evolve, startups will have even greater opportunities to create previously unimaginable solutions. Blockchain is not just a technology, it is a foundation for a new era of possibilities.