Blockchain technology has garnered much attention because of cryptocurrencies and Non-Fungible Tokens (NFTs). While both of these digital assets have proven very lucrative for savvy investors, there are several other ways forward-thinking entrepreneurs can use blockchain technology.
You don’t have to be a big business with a large budget to enjoy the benefits of blockchain technology. While Bitcoin and Ethereum get most of the public attention regarding blockchain technology, there are several other blockchain platforms that creative entrepreneurs can use to improve their business processes.
However, before we explore a few creative uses of blockchain technology, let’s briefly explain what blockchain technology is.
What Is Blockchain and How Does it Work?
Unless you are an app developer or tech company, you might not know what blockchain technology is besides what you know about cryptocurrencies and NFTs. The easiest way to imagine blockchain technology is to think of a shared database. In the case of Bitcoin, the blockchain is a distributed ledger that all network members have a copy of and are responsible for ensuring its accuracy.
Other blockchain networks like Ethereum are more akin to shared snippets of code or a distributed ledger where every entry is a piece of code. Unlike Bitcoin, blockchain networks like Ethereum are capable of more than just recording transactions. However, like Bitcoin, these blockchains are distributed across the entire network. Therefore, every participating member has a complete copy of the blockchain, ensuring it remains accurate.
Creative Ways to Use Blockchain Technology
Now that you have a basic understanding of blockchain technology and how it works, let’s explore some of the ways entrepreneurs can put it to good use. Entrepreneurs and small businesses can use blockchain technology for:
- Raising capital
- Cap table management
- Smart contracts
- Data storage
Raising capital can be a challenge for some entrepreneurs. Traditionally, businesses would have to turn to equity firms, banks, and other lending institutions to raise capital. However, blockchain technology gives entrepreneurs a chance to circumvent the complexities associated with traditional lending and raise capital through an ITO (Initial Token Offering).
Businesses can set up an ITO and sell blockchain tokens to interested investors. These tokens work like other cryptocurrencies. They can be used to make purchases with your business, but they can also be used to prove a stake in the company or project. Tokens sold in an ITO are like revenue share and equity that investors receive through a typical fundraising process.
Cap Table Management
Cap table management for startups is critical. A capitalization table shows a detailed breakdown of your startup’s ownership by stakeholder. Cap tables are used because they make it easy for the business to know who owns what percentage of the company or project and how the capital structure will work.
Naturally, blockchain technology is perfect for managing this type of ledger. Not only does blockchain technology provide unparalleled security, but it also scales to any size company. Managing shareholder data and stock plan information has never been easier with blockchain-powered cap table management software.
Contract enforcement can be difficult and costly for startups. Keeping a lawyer on retainer or paying for legal services to draft and help enforce contracts is not cheap. However, savvy entrepreneurs and small businesses can avoid the legal fees and choose smart contracts instead. Smart contracts are automatically executed once their terms have been met. Plus, once they have been recorded, they are immutable.
Entrepreneurs can use blockchain technology to create and record smart contracts with vendors, employees, suppliers, leaseholders, etc. However, legal protection can be costly. Smart contracts offer small businesses an affordable way to protect their contractual interests. Ethereum was the first blockchain to use smart contracts, but many other blockchain networks offer smart contract capabilities today.
Businesses spend a lot of money on data storage on-premises and in the cloud. Using blockchain technology, entrepreneurs can cut the costs of cloud data storage without sacrificing security or access. Since several different blockchain networks are available, small businesses can choose the platform that offers the most competitive storage price. Larger networks like Ethereum and Bitcoin have higher associated transaction fees because of the underlying mechanics of their system and the value of their associated tokens.
Blockchain technology is quickly becoming a can’t miss technology for entrepreneurs and small businesses. You don’t need to invest a lot of money to get started using the blockchain, and your business can benefit from it in several ways. If you’re interested in utilizing blockchain technology, take the time to review the different blockchain networks to find one that best meets your business’s needs.