What is a blockchain startup?

Interesting startups, their development

A startup is a newly created company that implements some promising technology or project. The key feature of such a project is intensive growth and the beginning of brand formation. With the proliferation of cryptocurrencies, many blockchain startups have sprung up. 90% of these companies have failed, but the remaining 10% have made a name for themselves in the blockchain world, and some of them are among the top 20 digital assets.

Most often, a startup is viewed as a vehicle for investment. If you find a project in demand, then the investment will not only pay off, but also bring a profit of 200-300% in a few months. At the same time, thanks to the ICO, any user who has free money on hand can become a depositor.

But its not just investors who make money on startups. Those who organize a new project get the biggest profit. However, in order to create your own company from scratch, you need to have knowledge and understand how blockchain works. Lets figure out how startups are created on the blockchain and what promising projects can be invested in today.

What is blockchain

If you are planning to invest in a digital startup or create a blockchain startup , you need to understand how it works. Blockchain is a distributed decentralized database that forms a continuous chain of blocks of information. These blocks contain important data: for cryptocurrencies, these are usually coin transactions between users. The data is interconnected, and each block is sequentially connected to the previous and the next, and therefore the information in the blockchain cannot be faked or unlawfully changed.

The reliability of information within the blockchain is not its only advantage. The main principle of using a distributed database in the cryptocurrency market is the creation of a decentralized structure. The blockchain does not have a single administrator or person who can modify it, all information recorded in the block is automatically checked by other users, and each participant has an up-to-date copy of the current blockchain on their computers.

Thus, if scammers want to create their own block, it must have a link to the previous one. And in addition to the link, third-party users will check the fake block and the information in it for legitimacy, moreover, independently of each other. Simply put, in blockchain systems nothing appears just like that and all elements are interconnected with each other. It turns out that scammers need to take into account and calculate a huge amount of data before the current block is created by someone else.

To implement all these functions, the blockchain uses elements from cryptography, hash sums, confirmation algorithms, etc. The system of public and private keys helps to confirm the fact of changes in information in the block, without resorting to the direct participation of third parties.

Also, some blockchain startups use smart contract protocols and make changing information completely private by not disclosing information about users. At the same time, the system can be completely transparent, if the environment of use requires it: the history of each individual unit of information can be fully tracked using a sequential chain and its legal appearance can be confirmed. 

The idea of creating a distributed decentralized database appeared back in the 1990s , but it was not until 2008 that the first blockchain-based project saw the light - it became the Bitcoin cryptocurrency, created by the mysterious scientist Satoshi Nakamoto. Bitcoin has shown the world that currency transfers can be not only fast and inexpensive, but decentralized and almost completely confidential.  

Today experts predict a huge scope of blockchain applications, the most obvious are the financial sector, use in land and other state registries, and the labor market. Also, large companies began to introduce blockchain into the medical field, energy, education, cybersecurity and media. Now is the time to get to know the technology better and try to make money on the blockchain.

How a startup is created

Blockchain is the vanguard of modern cryptography and IT technologies. Therefore, to create a startup with a distributed database, it is necessary to understand the specifics of the industry. Do not rush to take on all the work yourself if you do not have sufficient IT skills. It is much more important to deal with organizational issues by delegating highly specialized tasks to professionals.

When creating a conceptual blockchain startup, you need to adhere to a clear plan, otherwise the project risks failing due to misplaced priorities and the lack of a "Roadmap".

The most successful blockchain developments have evolved according to the following principles:

1. Identifying the problem and finding a convenient solution . Every successful business project or technology is a solution to a specific problem, task, or simplification of routine processes. Projects on the blockchain are organized according to this principle. Find a problem in B2B, marketing, law and cloud services that can be easily solved with blockchain and bring the technology to business and business.
2. Search and recruitment of the command . The composition and size of your company staff depends on the goals and the service offered. If a large-scale project is planned, then it is necessary to hire several developers with knowledge of smart contracts and blockchain , as well as sales managers, marketers, testers. Small blockchain-based solutions can be created by one programmer with knowledge of the specifics of the cryptocurrency code and cryptography in general. To save money on a large staff, it is recommended to hire both experienced employees and novice developers who have their own ideas.
3. Concept creation . To understand the project, create a business plan, whitepapper and reflect on paper the future project plan. This way you can identify weaknesses, growth vectors and possible risks in advance. You can form a concept both on your own and in consultation with an already assembled team.
4. Search for investors and financing . The most important stage in the implementation of a startup. In offline business, this stage can take several months or even years. Here, the creators will come in handy with the previously drawn up business plan, whitepaper - so investors can more quickly assess the risks and benefits of the project. Thanks to ICO and crowdfunding on the Internet, you can quickly find money for the implementation of a startup from third-party users. However, after that, you will have to launch your own tokens and enter the cryptocurrency market, entering into fierce competition.
5. Technical implementation of the project . When the company has received money to pay the developers, you can start to actually create software. It is important to tell investors about the plans in advance and gradually bring the project to self-sufficiency, even if it takes several years to create. The most important thing here is not to lose the attracted clients and investors, to keep the initial development team. New people will find it more difficult to pursue an unfamiliar project.
6. Marketing and legal settlement . This stage is partially touched upon when creating a business plan. Early marketing promotion of a blockchain startup will help to quickly implement the service after the official launch of the software. At the same time, the company must be registered legally and must not contradict the laws of the country in which it is created.
7. Optimization, scaling and strategic management of a startup . The final phase starts after release and is the most difficult. It is required to keep the project afloat, sell the technology and gradually enter larger markets. If the company has turned out to be large, at this stage you cannot do without an assistant or an external management audit.

Such a plan can be easily implemented only on paper. In reality, the entrepreneur will face difficulties at every stage of project development. But the most important thing for true success is not competent project management and an honest approach to implementation, but the value of the proposed technology. If the service is in demand, then the project will be doomed to success.

Types of blockchain startups

The distributed decentralized database system is not as narrowly focused as it might seem at first glance. We noticed earlier that blockchain can be applied in a wide variety of areas of business and life. Therefore, the variety of blockchain startups is difficult to bring under certain varieties and other frameworks.

Moreover, each such project has specific features and tries to stand out from other startups. Blockchain startups are distinguished by the following characteristics:

1. Investment search method . Investments can be attracted through special venture funds, crowdfunding or ICO. The last two methods are the most popular in the world of cryptocurrencies and are similar to each other. If on crowdfunding platforms users invest in technologies free of charge, then during ICO the investor receives tokens in return for the money spent. Depending on the ambitions of a startup, tokens can increase in value and bring profits to investors.
2. Scope of activity . Finance, real estate, IT technology, marketing and digital services for business are considered traditional. When choosing another area, you will most likely have to write a software base from scratch - due to low competition, it will be impossible to find open source code for projects of a similar orientation. The most promising spheres are considered to be media, entertainment, construction and the Internet of Things.
3. Payment system or practical solution . Most often, blockchain startups choose either the creation of a new payment system (cryptocurrency), a B2B solution for introducing technology into a business, or a combined option. The easiest way is to create a more practically usable project, since it does not need to be thoroughly promoted on the network and constantly updated.
4. Technical focus of the project . The software of different projects may also differ. Some blockchain startups are analogous to Bitcoin protocols, others use smart contracts, and still others take as a basis only the very principle of a decentralized database. The technical side of the project strongly depends on the goals of the creators, but, as a rule, developers create software without unnecessary functions.

Needless to say, every startup has a different approach to company brand building, design, marketing, etc. Practice shows that users most often trust those projects that have a high-quality design, a clearly structured plan and detailed principles of work.

Do not think that young startups are not paying attention to ICOs. Large investors are looking for promising small projects that will repeat the success of TRON and Waves. So, at the beginning of 2019, completely acquired a little-known startup of four developers to create its system on the blockchain .

The history of the first blockchain startup

The very first blockchain startup with reservations can be considered Bitcoin . This project has been developing for longer than most modern solutions, but has had a huge impact on the entire cryptocurrency industry. Also, bitcoin did not have investors - the project was created by Satoshi Nakamoto with the help of his own forces.

Subsequent cryptocurrencies are either built on the open source bitcoin or copy other cryptocurrencies. The paradigm shift happened in 2015 when Ethereum was first launched. 2 years earlier, the creator of the cryptocurrency, a young developer Vitalik Buterin, shared with the crypto community the concept of smart contracts and a more advanced blockchain-based system.

In 2014, crowdfunding was carried out to raise funds for the creation of the project. Funding for Ethereum through investors was realized within 42 days as part of the IPO. As a result, the developer gained about 31.5 thousand BTC, which at that time was equivalent to an amount of 18.5 million USD. Many large banks and financial organizations immediately became interested in the project. At that time, it was one of the most successful crowdfunding projects in the world of cryptocurrencies.

After looking for investments, the creator started hiring employees and developing software. It took about a year to implement - at the end of July 2015, the Ethereum platform was brought online. After the launch, the price of ETH was in the region of 1-2 USD per coin for a long time . Today, one ETH will have to pay 140-150 USD according to CoinMarketCap. At the same time, the market capitalization is about 15.5 billion USD, which puts the cryptocurrency in second place in this indicator. The investment benefit from the start of the project is estimated at about 6,000 percent. 

But Ethereum is not only a profitable project from an investment point of view, it has had a huge impact on the cryptocurrency world. Thanks to ETH, today investors can conduct ICOs - the main investment search tool for blockchain startups. This became possible thanks to the introduction of smart contracts and ERC20 tokens. By finding a convenient and profitable technical solution, Ethereum has realized itself as a successful startup on the blockchain . Investors are still looking for projects similar to him in order to invest in a promising company on time. Having worked out the technical component of the project, you may well come close to such results.

Features of creating a startup in the world of cryptocurrencies

Due to the specifics of the cryptocurrency market, the blockchain business has its own nuances. They should be taken into account when planning projects related to modern encryption technologies.

Cryptocurrencies and blockchain are the sphere of interests of only a part of users around the world. Your potential buyers and investors will be extremely specific: they are people versed in information technology, IT financiers, crypto evangelists, and ordinary people seeking to make money on ICO. On the one hand, this significantly reduces competition, and on the other hand, it requires the release to comply with certain criteria.

One of the criteria may be the technical soundness of the project. The community of crypto enthusiasts is not only specific in terms of purchasing power, but also extremely cohesive. If the creator plans to simply copy someone elses Whitepaper or implement another project under a false name, users will immediately understand this and tell them on the forum. At the same time, the cryptocurrency industry is traditionally considered rich in scammers and failed projects, but in reality the situation is better than in real life. If you are planning to launch a blockchain startup, give up the ideas of fraud and plagiarism - you risk spending more money on project design than on making money with ICO.

It is worth talking in more detail about the ICO itself. The abbreviation stands for “Initial Coin Offering” (here we mean cryptocurrency coins) and appears to be analogous to an IPO for the digital money industry. This means that anyone can invest in a project, and the amount of "entry" into a startup on the blockchain is no more than 3-5 thousand rubles.

ICO works like this: you offer investors to exchange a certain amount for tokens of your project. Tokens are the same as bonds for the financial sector. They are taken into account in the cryptocurrency market, grow or fall in price depending on the ambitions of the launched blockchain startup. In the future, the investor can exchange them at the market rate, earning up to 50-100% of the invested amount. Typically, the tokens and ICO model are completely built on Ethereum protocols.

In this case, the creator is not responsible for the actions of the contributor. He simply receives real money (or cryptocurrency) for the development of the project. Blockchain startups do not disclose the technical side of the project or open source software in advance. Most often, two documents are provided for investors - Whitepaper and Roadmap. The first is a general description of the project, its financial component and technical side. To create this document, both text and various graphics, video content and other visualization are used. The second document presents the companys development plan after the release. The Roadmap details each update and promotion of a startup on the market.

Based on these two documents, investors will have to determine whether your company is worth the investment. There are many tricks to making your Whitepaper and Roadmap more "selling" and attractive to your customers. Therefore, if you are planning to invest in one of these projects, carefully read the technical information about the startup.

Another important feature is legal regulation. Cryptocurrencies are regarded as cash. In many countries, this means that any blockchain project must be regulated by the countrys central bank or be taxed. It is important to arrange a startup so that it does not contradict the laws and can be legitimized in the mainstream market. If your solution is in the B2B field, then this is practically a necessary criterion for launching a startup.

Before holding an ICO, think in advance about registering your own company from a legal point of view. Potential buyers will only trust the official, not the secretive creator of the "brilliant" startup. To invest in a firm, become a fully public figure and provide information about your team. 

It is important that in many countries settlement in cryptocurrencies and ICOs is not regulated in any way by law. The government and financial leaders are urging simply not to invest in dubious projects. The US SEC only in the summer of 2017, after 2 years of ETH existence , equated ICO tokens to securities.

Think about it: if you have a truly unique business solution that will find demand in the market, it may be possible to implement it outside the ICO. Thus, you will not come under the scrutiny of the tax authorities and avoid the reputation of a fraudulent project. When looking for investments, you can always do with more traditional means - personal communication with large investors, crowdfunding.

How to launch your blockchain startup

Above, we went through a step-by-step plan for creating our own blockchain- based project . Now lets go deeper into building our own IT business and talk about the nuances of each stage.

The implementation of an average blockchain startup will require approximately 1-3 million rubles. This includes developer salaries, paperwork, marketing campaigns, and brand building. At the same time, the amount does not include remuneration for the founder or group of founders of the company. The problem is that you need to start the initial development of the project even before the stage of searching for investments, which means that you will have to find part of the amount yourself. For small projects, as a rule, this is 100-500 thousand rubles, which will go to programmers, marketer and Whitepaper designer .

You also need to choose the platform on which you will promote your startup. There are special services for collecting money for cryptocurrency projects: Waves, KICKICO. The best blockchain startups and professional cryptocurrency investors gather there. On such platforms, you will find your target audience faster and can raise up to $ 30 million in ETH.

Many businessmen strive by all means to grab hold of the straw of the ICO and earn money before cryptocurrencies lose demand. This is where the problem of finding a startup idea may arise. If there is no specific solution, but you really want personal IT development, use the universal ideas:

1. Trading operations and playing on stock exchanges. The blockchain can store information about a traders successful transactions. Subsequently, each new transaction will be analyzed and compared with previously completed successful contracts. If the match is large enough (for example, 70%), then the trader is given the green light to execute the transaction.
2. Blockchain for paying for goods or services in private companies. Transfers and purchases will be stored forever in a distributed database. The customer and store owner will always know what was purchased and when. This allows you to analyze the stored data and sell the most profitable and popular goods using the blockchain.
3. Integration of digital currency into the service sector. With the advent of bank cards, people leave tips in cafes and restaurants less and less, while tips make up 50% of the income of waiters and service personnel. The integration of a token or cryptocurrency system would help to tip the waiters quickly without having any paper money with you.

Another important point is hiring a technical director. Many startups believe that they can do without the help of a person who is well versed in IT and blockchain: they will have to pay such a candidate a salary, and even listen to advice on business development. In fact, the CTO can not only bring your startup to a new level of development, but also become a co-founder of the project, investing personal funds in it.

Keep a close eye on the legal agenda of the cryptocurrency market in your country. If you are planning to create a B2B startup, it is important that the business is fully legalized and can be implemented for large players. It is better to once again report on profits and taxes than to lose the project at the peak of its popularity due to frivolity.

After the release of your IT solution, you will need to continue working on the startup. Advertising, internet marketing, and work with social networks come to the fore. It is not recommended to ignore various blockchain conferences and large-scale seminars, form your companys brand and people will want to work with you.

The most promising blockchain startups

Experts admit that the cryptocurrency market is in recession today. If the boom at the end of 2017 was accompanied by a huge number of ICOs and the emergence of new blockchain startups, today the competition in the market is minimal, and the distributed database technology is evaluated more seriously. This is the perfect moment to enter the cryptocurrency market and offer your technical solution to the whole world.

Today it is more and more difficult for high-quality young projects to get to the top. Many crypto investors have left specialized crowdfunding and ICO platforms, and it is difficult to find a suitable audience on services like kickstarter. At the same time, every year the industry is looking for the top five startups that enter the global digital money market. Lets take a look at the 5 best blockchain startups of 2019 :

1. Get Protocol . A startup in the field of buying tickets based on ETH tokens. The field of ticket aggregators has shown good growth in 2017-2019. Unsurprisingly, savvy people have decided to create a blockchain startup that will quickly buy transport tickets. With the help of a special Guts service and a cryptocurrency wallet, customers can buy a multi-ticket with a QR code, which is suitable for all transport on the selected route. The buyer will save money and get a comfortable ride, especially if a group of people are involved in the trip. The market cap of the GET token is USD 3.3 million and the average price is USD 0.29 per token.
2. Storj Labs . One of the first projects in the field of distributed decentralized cloud storage. On the Internet, news constantly flashes about how hackers hacked into a new cloud storage and stole customer data. Storj offers customers cheap disk space that will not be under the control of any one structure. The company is already cooperating with a large Chinese video hosting service and is gradually gaining new clients. In addition, you can earn money on Storj - rent out your own disk space and get income up to 1000 USD per month for 2 TB. The market capitalization of the company is slightly more than 15 million USD, and the price for the token is about 0.11 USD.
3. SingularityNET . Another startup based on the ERC-20 token. This time, the field of artificial intelligence is touched upon. The project proposes to create a platform where programmers can easily create, promote and monetize various functions related to AI. Thus, a full-fledged market for blockchain-based AI solutions will be created. SingularityNET can be called a kind of TRON for the field of robotics, neural networks and machine learning. Experts believe that with the increasing popularity of machine learning and AI, the project may overtake TRON and enter the ranking of the 15 largest tokens in terms of capitalization. Now it is 13.6 million USD. The token is famous for its high trading volume - up to 1 million AGI units are sold annually.
4. CUBE . So far, the cryptocurrency world has not seen a worthy project on the blockchain in the field of transportation and transport logistics. Cube can be the first startup that managed to be in demand in the transport sector - industry, which turns a huge amount of money each year. The project offers an automated system that analyzes traffic management and makes it safer. Algorithms are created that lead to the least number of accidents and accidents with freight transport. The startup may be in demand not only for the citys transport infrastructure, but also for the cargo transportation system - the clients of the forwarding companies will incur less costs due to the reduced risk of accidents.
5. Propy . Control, accounting and creation of a real estate registry is an area in which blockchain technologies immediately predicted large-scale use. Unfortunately, not many startups have created a truly interesting B2B distributed database solution for real estate. One such project is Propy , a startup that combines blockchain, machine learning, and smart contracts. Propy allows you to legally buy real estate anywhere in the world thanks to fair deals with multi-signatures. In the future, the project may become an analogue of Airbnb in the field of buying apartments, houses and apartments in Russia and abroad. The creators were not only experienced blockchain developers, but also the best realtors in the USA, UK and Europe. Propys market cap is estimated at USD 4 million.

The blockchain start-up market has just begun to exist, but it already offers hundreds of interesting and promising projects in various fields. Many large investors left the bond markets of international companies and completely switched to the development of projects such as Storj, Propy, etc. The tokens of these projects can be considered as a kind of bonds or stocks, which, at the same time, do not affect the development of the company in any way. Its safe to say that the blockchain startup industry is replacing traditional investment methods.

Pros and cons of starting a startup

If you are seriously thinking about investing or creating your own project on the blockchain, you first need to consider all the advantages and disadvantages of a startup. A personal IT project can really make you a dollar millionaire in a few months. Lets take a look at all the pros:

1. Quick start . After analyzing most of the large blockchain startups, you can see that they all became profitable in less than 2 years. Such figures do not correspond to the state of affairs in IT startups of the past, which for decades have been going to dominate the high-tech market. This significantly increases the attractiveness of young companies working with blockchain systems.
2. The demand for the sphere. The cryptocurrency sphere is interesting to a wide variety of people. Starting from ordinary citizens and ending with large businessmen and top managers , most of them somehow had savings in cryptocurrencies or tokens and tried the game on the stock exchange. In the future, "trendiness" can be converted into "necessity" and high demand for cryptocurrencies. This will push the entire blockchain industry to growth.
3. Low competition . Today, at the time of the cryptocurrency market recession, supply and demand have dropped, creating huge opportunities for young companies. The competition in blockchain startups is incomparable with similar indicators in the modern IT sphere, where it is extremely difficult for small companies to get noticed.
4. Promising investments . Investing 10,000 rubles in ICO tokens, and selling them for 30,000 rubles in 3 months is a very real situation for investing in blockchain startups. Here it is important to competently approach the selection of a suitable project and carefully analyze the documentation before purchasing digital bonds.

But dont be too fascinated by the blockchain startup space. It has a number of drawbacks that still discourage really large investors from investing in promising projects. Here are some of them:

1. Soap bubble effect . Many experts and financiers say - prospects blokcheyn startups can be compared with the dot-com boom in the 90s. Then, due to the spread of IT-technologies, ordinary people overestimated the sphere and created a "soap bubble". It burst, and hundreds of thousands of people lost their money. Many fear the same fate will befall the blockchain start-up industry.
2. Fraud . Illegal enrichment through ICO and crowdfunding is not uncommon in the world of cryptocurrencies, project developers quickly forget about their responsibilities, having received the required amount of money.
3. Instability of cryptocurrency. Most cryptocurrencies are extremely volatile, their rate can rise or fall by 5-20% daily. This poses a certain danger to investment, but opens up a huge opportunity for electronic trading.
4. Lack of legal regulation . Most countries (except Japan and partly the United States) have not yet recognized cryptocurrencies, because of this, the reputation of blockchain startups in the legal field remains unknown. At the same time, blockchain technology exists quite stably without cryptocurrencies.
5. The need for knowledge. To create a successful project, you need to have knowledge in programming, cryptography, mathematics. If you are weak in computer science and IT, it is better not to take up investment and create your own projects.

Perspectives

Despite the shortcomings of cryptocurrencies, blockchain technology itself is extremely valuable. All critics of digital money unanimously agree that a distributed decentralized database will revolutionize many areas of human life, but apart from cryptocurrencies.

If we look at the TOP 10 cryptocurrencies by market capitalization, we will find several very young blockchain startups in the list. This is EOS, Stellar and even the second digital currency Ethereum. So far, the market value of these companies is difficult to compare with the modern giants of the IT industry or the financial sector, such as Apple, Google, Citibank, but in the near future, the situation in the global market may seriously change.