Launching a Business? These Blockchain Startups Will Make It Easier for You

Business.com / Starting a Business / Last Modified: November 9, 2017
Photo credit: Tzido Sun/Shutterstock

Blockchain technology is proving to be exciting for small and medium businesses by making decentralized technologies more accessible and innovative.

Blockchain technology is proving to be exciting for small and medium businesses by making decentralized technologies more accessible and innovative. Of course, there are bitcoin and other cryptocurrencies, which businesses can leverage as a method of payment and consumer transactions. But it's not just cryptocurrencies. Blockchains now offer other business-focused technologies that empower SMEs to do things faster, better and with more flexibility.

Blockchains are essentially secure, immutable and distributed cryptographic ledgers that serve as a record-keeping mechanism for the 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.

Faster business registration through self-sovereign identity

Establishing your business as a legal entity requires registering the business either as a proprietorship or as its own corporate entity. This requires "citizenship" in a certain country or sovereignty, which is managed by a government. Some communities would like to establish an entity without having to rely on an external or centralized authority, however.

Blockchain-based startup SelfKey has a solution for entrepreneurs and businesses that want to launch, whether in a new country or their home nation. The basic concept behind SelfKey is that identity can be established, managed and authenticated 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.

SelfKey works both for individual users and for businesses that want to establish their own identity without relying on a centralized authority. For individuals, establishing one’s identity in a new country or jurisdiction is usually the first step to launching a new business. The inspiration for this identity-management blockchain actually came about from frustrations about business registration. In gist, the founders based their observations on how the know-your-customer process was frustrating for many businesses wishing to start up, thus the need for a technology-driven solution.

Citizenship by stake

Individual entrepreneurs can also take advantage of the "citizenship by stake" potential of SelfKey. This is perhaps comparable to depositing a certain amount at a local bank prior to acquiring an entrepreneur pass in Singapore – to have one "staked" before establishing one's identity and business in the city-state.

With SelfKey, the concept is somewhat the same, since its users will essentially pay tokens to have themselves establish a stake, and thus become part of the ecosystem of self-sovereign identified individuals. The blockchain makes it simpler and easier, thus reducing the transactional friction involved in having to manually go to the bank to make payments and having one's identity validated.

In addition, blockchain-based identity management is more secure, although it can be easier to manage. Moving to a self-sovereign identity system, you could store that information on your smartphone. You would be able to send your personal or business data to a company; no one else would know its content, not the blockchain nodes, because the data is encrypted.

Manage private capitalization tables and profit from secondary markets

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. As a corollary, a solution for a responsible liquid secondary market is issuing tokens backed by real shares. Such crypto-based equity 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.

The bigger potential here, however, is that CapchainX can be used to manage trading in company assets in the secondary markets, giving potential to establish better liquidity for a privately owned business by tokenizing its shares and offering it for sale in the secondary market. This means that shareholders themselves can use the tokenized system to buy and sell shares – much like the public stock market. This can help both improve liquidity and bolster market value.

The founders' background is actually in startup crowdfunding. Before ICOs even came to fashion, they were already involved in raising funds for companies through equity crowdfunding. The focus is on equity, however, and not raising funds through token sales. This is where platforms like CapchainX will better enable liquidity for startups and small businesses in need of funding.

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, you will feel the impact one way or another.

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