Bitcoin and other cryptocurrencies have been in the news a lot in the recent months. This is mostly because of the record heights that crypto currencies and so-called crypto assets have reached, in terms of valuation and volume. Bitcoin recently breached the $12,000 price mark. While naysayers are predicting a crypto bubble, it seems there is no stopping startups from launching their tech-driven businesses via blockchain.
For businesses, these are exciting times, especially with the enhanced capabilities that fintech startups and service providers can offer, whether you are an enterprise seeking to optimize operations or a small business looking to expand.
Looking beyond the cryptocurrencies, however, what’s more important are the fundamental technologies that underpin these new asset classes, which are their respective blockchains. These are the secure, immutable and distributed cryptographic ledgers that serve as record-keeping mechanism for decentralized tech.
While many blockchain-based startups are focusing on consumer-facing applications, a good number will be useful in a business environment, catering to B2B, B2C and other such transactions.
How Blockchain Leads to Innovation
Here are a few notable ways blockchain-based technologies can help any business become more innovative.
Establish a Self-sovereign Identity
To date, establishing your business as a legal entity would require registering the business either as a proprietorship or as its own corporate entity. This will require “citizenship” in a certain country or sovereignty, which is managed by a government. Some communities would like the ability to establish an entity without having to rely on an external or centralized authority, however.
Here is where a startup called SelfKey will come in. The basic precept is that identity can be established through cryptographic means via blockchain. Users essentially tokenize their identities, paying KEY tokens to trusted notaries to authenticate and verify their identities. Such identification has privacy and granularity — meaning users can share only certain aspects of their information, and not the whole package.
The good thing with SelfKey is that it is valid both for individual users and for businesses seeking to establish their own identity without relying on a centralized authority.
“SelfKey has basic cap table management, and can provide basic corporate governance which allows the startup to do things that are currently burdensome such as opening a bank account,” wrote the founders on the SelfKey whitepaper. “When relying parties onboard a new company, KYC needs to be done not only on the specific company level but also for all significant shareholders at each ownership level above the entity until you reach the ultimate beneficial owners.”
Leverage Distributed Computing Across a Global Network
Cloud computing and virtualization are now mainstays for both small businesses and enterprises, due to their low cost of ownership, scalability and low barrier to entry. However, cloud computing platforms are still owned by centralized entities, such as AWS or Microsoft Azure. An emerging technology from Golem leverages just about any computer across the world in a truly decentralized computing platform.
“Golem connects computers in a peer-to-peer network, enabling both application owners and individual users (“requestors”) to rent resources of other users’ (“providers”) machines. These resources can be used to complete tasks requiring any amount of computation time and capacity,” states the Golem whitepaper.
One key aspect of Golem is monetization, which enables nodes to earn from participating in the network and contributing their processing cycles. While a cloud computing platform can potentially offer businesses some level of savings, a truly decentralized approach might offer more optimal performance-vs-cost, especially since business users are now directly paying the individual node owners. These transactions are done through smart contracts powered by Ethereum.
Manage Private Capitalization Tables and Profit from Secondary Markets
We mentioned capitalization tables under the self-sovereign identity aspect of Streamr. Another startup that focuses on this aspect of building a business is CapchainX, which is a blockchain startup that tokenizes capitalization tables.
“The Crypto token market is valuable because it accelerates liquidity in private markets,” writes Beryl Chavez-Li, founder and CEO of CapchainX. She adds that “[t]he solution for a responsible liquid secondary market is issuing tokens backed by real shares — Crypto Equity,” which is the main concept behind CapchainX.
The company will basically replace paper-based legal, regulatory and operational aspects of maintaining a capitalization table, which makes it easier for startups to manage their company’s shares. This can be particularly useful when accepting institutional funding, since share dilution can be complex to compute. According to Chavez-Li, this also opens up the potential for a secondary market, wherein shareholders can use the tokenized system to buy and sell shares, which can help both improve liquidity and bolster market value.
The Takeaway? Blockchain Technology is Flexible and Businesses Stand to Gain
While it is true that the recent run of coin sales and token sales might be akin to bubble-like growth, one cannot deny the importance that such blockchain-based startups are offering individual and business users alike: value from truly decentralized applications.
Blockchains also now cover a wide variety of industries from fintech to insurtech, edtech and more. This means there is only room for growth, and whether your business is directly dealing with blockchains or crypto assets or not, you will feel the impact one way or another.
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This article, “How to Use Cryptocurrencies and Blockchains to Innovate in Your Small Business” was first published on Small Business Trends