Making the impossible possible, Blockchain is a revolutionary new technology that will change the business’s future. Blockchain is an incorruptible digital ledger that can be organized to record transactions and virtually everything of value.
A blockchain startup uses blockchain technology to disrupt/solve problems in various industries. The digital ledger holds data securely and transparently, and the digital ledger is distributed across a network of computers.
You’ll need to learn how blockchain technology works to build an amazing blockchain startup. You’ll also need funding for your startup, which could be difficult given that banks are often reluctant to provide business loans. Still, you’ll need money to build your product and get customers.
To start a blockchain startup, you must research the technology before starting. When it comes to Blockchain, more than online resources is needed.
Blockchain books will provide deep and elaborate knowledge about this technology, but no books teach how to build a blockchain company from scratch.
Choose a blockchain business model:
Before starting a blockchain startup, you must choose a business model. A blockchain business model is a way your startup generates revenue and earns profits.
P2P Blockchain Business Model – In a peer-to-peer business, end-users communicate with each other directly. P2P networks are decentralized and distributed across the network.
These startups can generate revenue by selling tokens, charging transaction fees, or offering BaaS.
The Blockchain as a Service (BaaS) business model provides other companies with an environment in which they can manage their blockchain systems. Microsoft’s Azure, IBM’s BlueMix, and Amazon Web Services (AWS) are just a few examples of companies that have adopted the BaaS model.
There is also the possibility of selling popular blockchain platforms as a service, such as Ethereum and Bitcoin. One excellent example is EBaaS, which stands for Ethereum Blockchain as a Service.
Token Economy – Utility Token Business Model – Utility tokens, also known as crypto tokens, are digital assets whose owners are granted access to the decentralized platform’s underlying services. Take the cryptocurrency Ethereum as an example.
A cryptocurrency and a utility token are used to gain access to the decentralized computing service provided by the network that bears the same name. A company that operates according to this model will keep some utility tokens for themselves and release the rest so the network can carry out its functions. Once there is a change in the value of the utility token, profits can be made.
Products Based on the Blockchain Software This refers to marketing ready-made blockchain software solutions to other businesses so that those businesses can incorporate and utilize them according to their requirements.
Development Platforms are an additional decentralized business model, primarily focusing on creating applications capable of spawning blockchain-based infrastructure. For instance, Hyperledger is a platform that provides a collection of tools, frameworks, and knowledge that can be used to build similar platforms.
Blockchain Professional Services is a business model well suited for leading software development companies and can be used to provide bespoke blockchain solutions to organizations of a smaller scale.
In a nutshell, a blockchain startup can make money through network fees, a token economy, or software solutions based on the Blockchain. All three of these options are viable.
But before it can begin operations, a blockchain startup must first ensure that it complies with the laws and regulations that are in place in the jurisdiction that it has chosen to operate within.
Set the stage for a new kind of business entity:
The next step is choosing an appropriate business entity that ensures your startup complies with all relevant laws and regulations. At this point, you may be wondering what type of entity your business should be. You’ll be most interested in two types of entities: corporations and limited liability companies (LLCs).
Corporations are standardized legal entities that allow businesses to operate more easily within the existing legal framework while ensuring their owners are protected against personal liability. They were first used in the Netherlands in the seventeenth century. Most corporations are commercial entities referred to as “business corporations.”
Abide by regulations:
Blockchain technology is still in its infancy, and it needs to be completely clear how it will be regulated. However, what is certain is that blockchain businesses will be subject to several regulations, such as financial regulations and anti-money laundering laws. You’ll need to be careful regarding the code of conduct and the corporate structure of your blockchain business.
To ensure that your blockchain startup complies with all applicable laws, you must have the right regulatory framework for your business. It’s also important to ensure that you have a legal team with relevant experience so that they can advise you as required.
Select a framework for your blockchain application:
Once you have registered your business entity, it is time to select the right blockchain framework for your startup. A good framework will help you to build a blockchain solution quickly. It will also make it easy for you to create and update new applications.
Blockchain experts advise businesses to start with a well-recognized framework with a large community of developers behind it so they can easily get help if required.
Create your proprietary blockchain solution:
Once you have developed your application, it is time to build the proprietary blockchain network on which its transactions will take place. You can build several proprietary blockchains, and this is where the uniqueness and strength of each one come into play.
There are several blockchain platforms available for businesses to build their proprietary blockchains and create applications on top of them. The most popular platforms include Ethereum, Hyperledger, Ripple, and Bitcoin’s main Blockchain, here known as BTC.
Explore funding options:
Equipped with a blockchain network, it’s time to explore funding options so that you can begin operations. In most cases, businesses will look at venture capitalists and angel investors. Businesses can also opt to issue their crypto tokens (utility tokens) during a token sale instead of selling shares or going public.
There is also the option of crowd-sale, wherein your blockchain startup can use smart contracts to offer a percentage of ownership to its token buyers.
Sales will be regulated if you sell crypto tokens as your equity form. This can change as the market matures and blockchain technology becomes more mainstream. A few years back, the US Securities Exchange Commission (SEC) issued guidance on initial coin offerings that defines how token sales for registered businesses should be handled.
The SEC’s view on initial coin offerings is that they are subject to federal securities laws and therefore have to register with them before offering their crypto tokens to the public. However, the agency’s view is that tokens can serve as a medium of exchange and can therefore be classified as securities if they are offered to the public in the form of securities.
Although blockchain technology is still in its early stages, it’s undeniable that it has enormous potential. As blockchain use cases crop up every day, it’s no surprise that several business models and forms of governance have emerged to facilitate this technology’s adoption by many industries.
The main concern regarding the regulatory reality is that certain jurisdictions may see this emerging industry as a threat and become stricter on how they govern such organizations. Although this is an area where a lot needs to be done, blockchain startups still need to come up with innovative business models.