3 Things Entrepreneurs Need to Understand About Blockchain Technology No single entity has veto power over the rest of the network in a blockchain, eliminating top-down corruption and manipulation while empowering the community.
By Serenity Gibbons Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
The rapid evolution of the internet has reinvented what it means to be a business owner. In the same way that the digital economy has empowered tens of thousands of hopeful entrepreneurs over the last decade, blockchain technology promises to ignite a new generation of innovators.
Though much of the fintech coverage is focused on the ephemeral benefits of cryptocurrency exchanges and returns, there is far more opportunity, especially for engineers, designers, and makers generally, when we think about the long lasting impact that blockchains can have on how we organize and store systems within our society.
As an entrepreneur, it can be difficult to navigate this space and separate the signal from the noise when it comes to determining the key information to understand. There are many self-proclaimed experts who simply want to steal your attention and sell you a product. The best entrepreneurs are able to separate these distractions from what is truly important and find ways to use the best of this technology to make a difference.
Here are three essential implications of the technology, relevant to entrepreneurs, that will help to define the fundamental tenets of how starting a business will be different in a blockchain economy.
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1. A new fundraising mechanism.
Access to capital is one of the biggest points of friction for founders. This obstacle becomes twice as hard when you are living outside of an economic hub, as there are fewer investors willing to take a chance on you. From a global market's perspective, this is largely inefficient and a waste of potential, given that there is a surplus of talent needing capital to help kickstart their ideas into action.
In a blockchain economy, initial coin offerings will become the standard vehicles for startup (and large enterprise) fundraising. An ICO, as they are shorthanded, is effectively the modern day IPO, a tool to "crowdfund" capital to companies in an extremely secure and efficient manner.
Companies like ConnectJob, an on-demand economy built on top of a blockchain, are already beginning to announce their token issuing, achieving rapid global growth via the crowd. Unlike the traditional markets, these coin offerings are accessible to anyone interested, regardless of geography, so there can be a much larger base of potential investors. This opens up an entire new economy of innovation, powered by ICOs, that can scale quickly and escape the sluggish and elitist venture capital community.
At the same time, it is really important to be cautious whenever investing in a coin offering, as there are many scammers and hackers who are out to take your money. Given the lack of regulations, as it is still very much so a developing space, you should proceed with extreme caution, for when a deal seems too good to be true, it generally is. In sum, you should really only invest in deals you have thoroughly researched and have conviction about.
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2. Seamless systems.
Many of today's most dynamic and massive industries are built on top of intermediary parties. The government. Healthcare. Freight. Education. Voting. The list goes on and on. In each of these industries, middlemen, operating as brokerage services, dictate the ebb and flow of the sector. But, at the same time, ask anyone ingrained in some of these friction-ful industries and they will tell you, these intermediary services can drive prices up and slow down progress velocity. Working internationally, brokers can be a nightmare to deal with and charge exorbitant prices for seemingly menial work.
Luckily, we can supplant the need for conventional intermediary parties by using Ethereum smart contracts to automatically verify and validate issues of trust and verification. At a high level, smart contracts operate independent of any one individual and are essentially an algorithm that authenticates information. With smart contracts implemented across a wide variety of industries, we can stop relying on humans to handle our most important data.
Entrepreneurs can abstract this technological breakthrough and apply it to a number of pressing problems -- many of which stem from the foundational issue of human error. For instance, TraDove has applied the power of the blockchain to unlock corporate demand for a token-based business-to-business (B2B) marketing, sales, and trade platform. This is the first of many implementations that are likely to reach a wide scale.
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3. A community-driven priority.
In a distributed ecosystem, built with blockchains, the power lies with the people. In other words, there cannot be one singular entity with controlling powers over the rest of the network. This, among other things, protects against top-down corruption and manipulation. It also restores power to the community as a whole.
ODEM, an on-demand education marketplace, has been able to leverage existing relationships to cultivate an active and inspired audience around their upcoming token offering. Started by the founders of Excelorators, an education company with a network over 200 professors, ODEM's community attracts educators, students, and investors. All three share a common goal of eliminating intermediaries and costs involved in traditional education.
As a result, building a strong and active user base that is passionate about your mission and project will become essentially important for the next wave of companies and entrepreneurs. Whether you are planning an ICO or working to develop your product roadmap, it will be critical, perhaps now more than ever before, to future plan with your community in mind. Entrepreneurs will need to become master communicators who can persuade their vision to the masses, such that they achieve buy-in and are able to work quickly and effectively.
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