What is blockchain?
A blockchain is a decentralized network of digital information, blocks, with each block storing information about transactions that have occurred within the chain. Each block has its own unique code, a “hash.”
As new blocks are added, each new block is available for viewing by all other users of the blockchain. Bitcoin’s blockchain provides a good example: every transaction is recorded and then verified by the entire network.
Trust intermediaries companies
Today, many firms work as trust intermediaries: they make their money by connecting things with people who want to buy them. But what if there was a way for all buyers and sellers to be connected at any time they wanted, without an intermediary?
Instead of paying to send and receive money by PayPal, for example, one could simply send the money and have the full sum be received by the other person.
Or take Fiverr, for example: why pay 50 cents per $5.00 to buy and sell services, when the same transaction could be handled through the blockchain for free?
The power of this logic of the blockchain
Once you understand the power of this logic of the blockchain, it’s hard to stop thinking about it. Why buy eBooks off Amazon, when a blockchain could grant access to the book and give the author the full purchase price? Why pay for a streaming subscription service through Netflix, when streaming films could be accessed through the blockchain?
Clearly, the power of blockchain lies in its distributed, decentralized character, creating a powerful force for connecting people without middlemen.
New fundraising process
The ramifications do not stop there: they extend to fundraising, an area in which blockchain is already making waves. The traditional fundraising process is inefficient and cumbersome, requiring entrepreneurs to make presentations to many potential investors – and in practice, the pool of angel investors or venture capitalists has been relatively small.
Initial coin offering (ICO)
Now, however, blockchains are allowing entrepreneurs to obtain funding from smaller-scale investors across the globe. The key is the initial coin offering (ICO), which works because the tokens that make up the units of value and exchange on a blockchain are either subject to a fixed supply or else on a transparent supply schedule.
Bring democracy to the funding and running of the firm
Thanks to the way in which blockchains function as decentralized, distributed ledgers, they hold great potential to bring democracy to the funding and running of the firm. By removing intermediaries and gatekeepers, blockchains are already beginning to reshape the investment and entrepreneurial landscape.