Using blockchain to scale your startup

Linked: blockchain gives customers peace of mind when it comes to digital transactions

Trust and verification are becoming increasingly important. Blockchain guarantees this trust, becoming a crucial tool if you are going to grow your startup

In the first quarter of 2022, a record £9 billion was raised in venture capital by UK technology start-ups and scale-ups. The UK is second only to America in tech start-up investment, ahead of India and China.

However, according to start-up financier FundSquire, around 20 per cent of start-ups are dissolved in the first year.

Having worked with startups as well as industry leaders, we’ve seen how blockchain technology can play an important role in helping businesses grow from Davids to Goliaths.

Transparency and trust are becoming much more of a hot topic for consumers and businesses. This means that there are increasing opportunities for a start-up to utilize emerging technology such as blockchain in its business model. With this, they can fill gaps in the market where explicit trust can deliver all important competitive advantages and consumer advantage. And in doing so, differentiate itself from other brands for turbocharged growth.

3 signs your startup could benefit from blockchain

• You operate in a market characterized by a lack of trust
• Your technological users need access to secure real-time information
• Your users are looking for secure authentication and protection of their digital identities

All three points are linked to explicit trust.

In his keynote speech at a Hyperledger Global Forum on security, trust and blockchain, renowned American cyber privacy expert Bruce Schneier cited the book Blockchain and the New Architecture of Trust by Kevin Werbach.

The book, Schneier said, “outlines the following four different trust architectures,” ranging from “peer-to-peer trust” and “intermediate trust,” like PayPal, to “distributed trust,” which is what blockchain enables, creating a trust in the system .

Of course, as Schneier said in his speech, this trust is a human trust in the system and its operators. But blockchain provides layers of assurances and indisputable facts to help cement explicit trust. It goes beyond anything in operation today, and is the next evolution of the trust architecture makeup.

By embedding themselves in these trusted networks, start-ups place themselves in a winning position to survive and thrive. But how does blockchain ensure this trust? And how can start-ups use it to accelerate their growth?

What is blockchain?

Blockchain provides a secure digital distributed ledger that connects multiple participants to one source of data – the golden record of truth. This can be leveraged to implement seamless business processes involving various participants and eliminates the need to issue paper-based certificate credentials.

The authenticity of these digital certificates can be verified by anyone using the blockchain immediately, without relying on the manual intervention of the issuing authority. It is crucial that the digital medium is protected with cryptography.

Blockchain use case – an event company

The key to this protection and explicit trust is cryptographically hashed data. The classic example is an event company that uses blockchain to issue tickets and, crucially, to facilitate any secondary sales or resales. Ticket fraud is a known problem. However, with blockchain, ticket buyers receive a key upon purchase that is able to unlock the unique public “ticket address” and therefore they can prove they are the true owner.

It is a cocktail of an open network combined with hash data and cryptography to produce a fast, secure and efficient way to ensure certification and verification.

Blockchain provides immutable and transparent transactions. The decentralized and distributed ledger also eliminates any process of reconciliation and settlement.

In today’s climate, transactions are verified by a central authority. Blockchain replaces these centralized processes with decentralized ones, meaning that a number of cooperating users can verify items.

What happens is a transparent log of records. When data is sent out by users, it is time-stamped and added to the chain in chronological order. The hash mentioned above links the blocks together and secures the chain, making it virtually immovable. Hence the name blockchain.

For example, in terms of record keeping, the non-disputability of an event means that companies cannot object to claims for damages by other users. Blockchain can ensure that there is no rejection.

Transactions and trust

Public blockchain is highly secure and virtually impossible to counterfeit due to the underlying cryptography used. While companies can attempt to manipulate private blockchain records, an independent auditor can monitor mischief in the network. Blockchain provides the trust and security needed for multiple organizations to connect to the shared ledger.

This is because all users have access to a copy of the entire blockchain, meaning they can see if any tampering is going on. If there is a hash match in the entire chain, the records are trusted.

Furthermore, smart contracts represent the future of transactions and are intertwined with blockchain. Smart contracts are a piece of code that can outline each step of a transaction, with the ability to connect multiple blockchains and assets. When the terms of the contract are met, they are automatically implemented. For startups, these coded contracts could revolutionize the way they do business.

For example, smart contracts are perfectly suited for supply chain management. They can improve the traceability of transactions, track products as they move and initiate charges when necessary. Crucially, there is no need for an intermediary.

Time to turbocharge

There is always a risk and cost with new technology – and blockchain will seem to many like a leap into the unknown. But for a startup in a position of innovation and new territory, the jump into blockchain is particularly relevant.

We all need trust to negotiate business effectively. Vendors and consumers are following the trend of expanding awareness of trust and security issues. This in turn increases the number of uses for blockchain to support and prove its value. Blockchain creates an explicit, collaborative and irrefutable trust in records that enables faster and more secure transactions.

Technology is ready to take over. As a start-up looking to turbocharge the market, why not take advantage of the explicit trust and security offered by blockchain? Ultimately, with a secure foundation built, the sky is the limit.

Anastasios Papadopoulos is co-founder and CEO of IMS Digital Ventures

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