How to launch a blockchain startup

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how to launch a blockchain startup

As blockchain technology evolves and gains more popularity, it becomes evident that its power and potential are not limited to digital currency. The mechanisms behind blockchain could turn out to be game-changers for businesses in many industries. Although this is a rather new and untapped frontier, a lot of businesses are already eyeing all that immutable, distributed ledgers can bring to the table. Meanwhile, the advent of blockchain-powered decentralized autonomous organizations (DAOs) has introduced the world to the first Internet-native business entities. 

If you think bringing a startup to life is a challenge, launching a blockchain startup is undoubtedly raising the bar. However, geared with the right plan, such an organization could tap into a sea of opportunities.

Why start a blockchain business anyway?

Although blockchain technology is still relatively young, it’s an avenue many choose to explore.

Blockchain is revolutionizing the way we store and share information, how we make transactions, and how we establish trust among players in a system. It’s an exciting opportunity as it’s fully digitized, doesn’t rely on a central authority, it’s easily verifiable, and most importantly – immutable. The protocols and mechanisms that blockchain employs ensure enhanced security and reliability. These properties of blockchain technology can be utilized to a great effect in a number of industries and could have a profound impact on the way business is conducted. 

Blockchain technology is feasible and applicable to many industries, including healthcare, supply chain, real estate, retail, and others. But to create your own blockchain, the following steps should be considered.  

Choose a blockchain business model 

At the core of any blockchain business is the model that it’s built on. Let’s explore some of the most popular blockchain business models suitable for enterprise organizations:

  • P2P Blockchain Business Model – in a peer-to-peer organization, end-users communicate with each other directly. Such startups can monetize via tokens, transaction fees, or BaaS. 
  • Blockchain As A Service Business Model (BaaS) – BaaS offers other businesses an environment where they can manage their blockchain system. Some examples of companies using the BaaS model include Microsoft’s Azure, IBM’s BlueMix, and Amazon’s AWS. Popular blockchain platforms like Ethereum and Bitcoin can also be provided as a service. EBaas or Ethereum Blockchain as a Service is a great example. 
  • Token Economy – Utility Token Business Model – utility tokens or crypto tokens allow owners to use the services provided by a decentralized platform. Take Ethereum, for example. It’s a cryptocurrency and a utility token that grants access to the decentralized computing service of the eponymous network. A business relying on this model will hold a portion of the utility tokens and discharge the rest for the sake of the network’s functionality. Profits are made once the utility token’s value changes. 
  • Blockchain-Based Software Products – selling ready-made blockchain software solutions to other companies, who can integrate and exploit them based on their needs.
  • Development Platforms – another decentralized business model, where the focus is on designing apps that can give rise to blockchain infrastructure. For example, Hyperledger offers a set of tools, frameworks, and know-how for creating such platforms. 
  • Blockchain Professional Services – a model suitable for leading development companies, that can provide bespoke blockchain solutions to smaller organizations.

In a nutshell, a blockchain startup can rely on either network fees, a token economy, or blockchain-based software solutions to make money. But in order to operate, a blockchain startup first has to make sure that it’s compliant with the rules and regulations existing in its chosen jurisdiction.

Blockchain setting the stage for a new type of business entity

Blockchain technology has enabled the creation of an entirely new type of business entity – decentralized autonomous organizations. These Internet-based organizations are fully managed by their members and governed by transparent, program-encoded rules. Blockchain technology allows DAOs to function without the need for centralized governance, significantly improving data security, trust, and transparency. 

Abide by regulations 

As blockchain technology evolves, so do the regulations that are put in place to control how these solutions mature and grow. As more startups are born, unique legal challenges confront the community of blockchain enthusiasts and businesses. Some of the key legal issues that blockchain startups should be fully aware of include state and federal regulations, intellectual property and t privacy laws,   cybersecurity and insurance.

Regardless of its chosen jurisdiction, a blockchain startup will most likely have to comply with some form of anti-money-laundering and know-your-customers (ALM/KYC) rules, especially if its operations involve cryptocurrency transactions or other crypto-related activities. In fact, AML and KYC compliance is a must for any money-service business that seeks to operate in a given jurisdiction.

Every blockchain startup should cautiously steer the regulatory landscape and stay up to date with recent changes in regulation. It’s vital to back up your startup with due diligence to guarantee that the business abides by the applicable regulations. 

Choose a framework for your blockchain application

Not all blockchain applications are created equal and there are a myriad ways to approach their creation process. Although on some occasions you may have the opportunity to upgrade an existing application to fit the requirements of your new startup, other scenarios will require deeper dedication and level of effort. You can rely on established protocols like Etherium and design your application over it, customizing it to fit your needs. As an alternative, you could also choose to work with a team of experts like LimeChain, who can create a new blockchain protocol and application specifically based on your criteria. 

Explore funding options 

Token sales

While standard companies often source funding via Initial Public Offering, the crypto industry has an equivalent in the face of an Initial Coin Offering or ICO. Any business or startup that wants to launch a new app, create a new coin, or offer a new service can rely on an ICO to raise money. When investors take part and buy into the ICO, they can receive tokens issued by the c company. The tokens could include product or service utilities. 

On the other hand, if a startup seeks to sell tokenized securities, for example, digital representations of company shares, it can do so via a different form of token sale known as security token offering (STO).

Angel investing

Blockchain startups can also rely on angel investors, who use private funds to invest in rather risky but exceptionally rewarding business opportunities. Angel investors normally invest at the first official funding round or the seed stage. The perks, in this case, include flexibility in terms of negotiating opportunities, no need to make repayments, and the opportunity to exchange know-how and useful information with experienced angel investors. 

Pitfalls to avoid 

Launching a blockchain startup can not only be extremely profitable, but it could also provide an answer to a problem faced by many. The nature of blockchain allows it to be adaptable, flexible, and secure, filling gaps that standard models have been challenged with. However, there are some common pitfalls that newcomers to the sector often face. A popular challenge is releasing a solution that is not yet ready for the market. Make sure that your startup provides a service or blockchain solution that doesn’t only work in Proofs-of-Concept, but is ready for real-life use. 

A lack of deployment strategy and limited understanding of the blockchain sector overall could also lead a startup to a dead end.

Blockchain startups that have turned into success stories 

There are numerous startups that have already adopted blockchain technology and are witnessing the potential of the technology. Take OpenSea, for example – the leading marketplace for NFTs on Polygon. Founded in 2017, the company is now worth $13.3bn.

Another example is Mintable. Founded four years ago in Singapore with a funding of $13M, the company is now looking to grow its network beyond Etherium onto other blockchains. Mintable is a marketplace with a collection of smart contracts that work together to offer users the ability to design, buy, and sell digital items. 

Pastel Network is yet another thriving blockchain startup. The peer-to-peer decentralized platform allows users to trade and collect digital assets or NFTs. Founded in 2018, the business relied on seed funding to make the first steps. Today, the startup records annual revenue of $1.3M.

On the other hand, startups like Solrise Finance help fund managers create new DeFi funds. The solution is a decentralized fund management and investment protocol that runs on Solana. 

Conclusion

Considering the fast pace of development that blockchain is currently going through, we can expect to see more creative startups rising in the space. The technology is without a doubt here to change the world in fascinating ways. And we’re yet to embrace its full potential. 

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