From fundraising to securing your digital assets, blockchain tech is proving to be helpful for small and large businesses alike
The world became aware of Blockchain technology when Bitcoin hit the headlines in the recent months. However, Blockchain technology has been making inroads into the global economy quietly for years. It has picked up pace only recently though. The global Blockchain technology market size is expected to reach USD 13.98 billion by 2022, with a compound annual growth rate of 42.80%.
Blockchain has started to expand into areas other than the financial market, and the startup ecosystem is no exception to this trend. In fact, the core characteristics of Blockchain technology allow us to provide tangible solutions to startups.
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Here are four ways Blockchain technology can help transform your newfound business.
1. Access to Funds
One of the major obstacles for any startup is to raise funds. Access to capital through conventional funding methods such as venture capital, bank loans, and angel investors is often restricted and comes with hidden costs. But, Blockchain is helping startups raise funds without these drawbacks. According to CB Insights, Blockchain-focused startups raised more than $5 billion in 2017 through Blockchain token sales or Initial Coin Offerings (ICOs). They circumvented the conventional venture capital fundraising process.
ICO is fast becoming the most popular way of raising funds. Most startups and tech companies are using it to raise funds to run their business. It is somewhat similar to Initial Public Offering (IPO). When it comes to ICO, however, you need to create digital coins or currency tokens and offer those for sale instead of company shares. Blockchain ventures such as DCorp are following a similar strategy to raise capital for startups. However, the technology offers a safer and transparent environment where startups can get easy access to funds, while investors are shielded from financial frauds.
2. Secure and Automated Smart Contracts
Blockchain has the potential to automate the legal agreement process. It can be used to create and execute smart contracts. Smart contracts are essentially software or computer codes. Using these codes, you can store, verify, and act upon various terms and conditions of a legal contract. When executed, each event leads to a particular action, which in turn, triggers subsequent actions. This chain reaction continues until the agreement is fulfilled completely.
Smart contracts don’t rely on middlemen such as an escrow agent or a notary. They don’t require documentation or signatures by any of the parties. Thus, startups can use smart contracts to save money, time, and make the process more secure, faster, trustworthy, and transparent. Though this technology is still in its infancy, many Blockchain companies are exploring the potential applications of smart contracts. For example, Ethereum is using the Blockchain technology to develop smart contracts for third parties.
3. Improved Supply Chain Management
The lack of supply chain management is one of the reasons why many startups fail. Two factors, lower cost of acquiring raw materials and getting the finished product to the market in time, are crucial to the survival of your startup.
Unfortunately, conventional supply chain management is costly, error-prone, cumbersome, and time-consuming. Too many go-betweens often result in delays and extra costs that no startup can afford. But with Blockchain, the entire process can become faster, transparent, and accurate.
The Blockchain technology can work as a distributed digital ledger. You can use it to record and execute transactions in a series of data blocks just like a smart contract. Being decentralized, it isn’t prone to a single-point of failure. As it exists in multiple copies over the network, tampering is also unlikely.
To falsify the data, you will need to update all copies of the ledger at the same time, which is impossible. Everything including records of inventory, warehousing conditions, delivery times and dates, payment transfers, and vehicle information remains safe. Thus, it can help promote ethical sourcing. Furthermore, with a Blockchain-based supply chain, you can automate the supplier payments and track a shipment in real time.
4. Protection from Data Breaches
Cybersecurity is a growing concern for commercial organizations as the number of cyber-attacks is increasing rapidly. In 2017, the number of data records compromised in publicly disclosed data breaches surpassed 2.5 billion, up 88% from 2016. According to the 12th annual Cost of Data Breach Study by IBM and the Ponemon Institute, the average cost of a data breach is $3.62 million, up 17% from 2013. It translates into around $141 per record breached. No startup can survive such colossal loss.
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Usually, poor password practices pave the way for data breaches. With Blockchain technology, however, startups will be able to authenticate devices and users without the need for a password. You can use the distributed public key infrastructure where each device has an SSL certificate instead of a password. You need an encryption key to open a particular device. Only users and businesses have access to this key. As a result, it becomes nearly impossible to hack a Blockchain-based database.
Users can maintain their personal information on their computer in their network. However, every transaction is time-stamped and signed digitally. As each transaction is associated cryptographically to a user, it is virtually impossible to add or remove data in a Blockchain without proper credentials. That’s why traditional banking institutions such as Royal Bank of England are testing Blockchain applications for monetary transactions.
Parting Words
The Blockchain technology is still in its infancy. However, that shouldn’t stop startups from exploring its potential applications. From funding to cybersecurity, Blockchain technology can help startups deal with many problems effectively and efficiently. Your startup can become the early adapter of this technology to leave slow-moving competitors behind. Have you ever thought of using Blockchain as an entrepreneur? Tell us how you are planning to do it in your comments below.
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