The benefits of the blockchain for companies are clear. However, the benefits of the blockchain for users are less obvious at this point, and there are certainly risks that early adopters may encounter.
Wired highlighted Prodeum as an example of the scams that are happening in the new and expanding cryptocurrency market. Many of these scams follow the Prodeum playbook: An ICO is launched, money is raised, and then the company and the product vanish… along with investors’ money. As a result, investing your time or money in blockchain-based technologies can be a risky bet, since it’s easy to overestimate the potential of a product and its team.
However, as with any risky bet, the rewards can be substantial, so in this post, we’re looking at how companies are using the blockchain to run their business like Uber, and the opportunity that presents to early-adopting users.
Uber’s New Business Model
For a long time, anyone that wanted to start a new company would raise funds through bank loans or wealthy investors, and use those funds to buy and manage all of the necessary means to produce their product or provide their service. As markets matured, companies needed to be more efficient to compete, and this favored big corporations that could dedicate big budgets to owning as much of a market as possible.
For smaller companies looking to compete against these big corporations, a new solution was born: Crowdsourcing products and services, and then overseeing the distribution of those products and services to the end user.
Under that model, Uber was born.
Why build a taxi company, with all the investment that requires (owning and maintaining a fleet of cars is tremendously expensive) when there are already an abundance of cars on the road that could do the same job at a lower expense?
This crowdsourcing model was good for more than just taxis. Soon, the same model was applied to housing with Airbnb, food delivery with Grubhub, and digital marketing with DOZ, just to name a few. Companies could provide a good or service to users in exchange for a commission they set, and even when adding the cost of that commission to the cost of the good or service, the total cost to the end user was still cheaper than the old school alternative.
Blockchain’s New Fundraising Opportunity
The next evolution for businesses is to rethink the way they get funded. While crowdsourcing changed how businesses acquire their means of production, Uber still needed to raise money through traditional investors to fund their growth. With cryptocurrencies, companies looking for investments do not need to turn to banks and Shark Tanks; they can crowdfund: Set a funding goal, launch an ICO, and let future users and believers invest in their product.
Following the industrial age where customers were seeking goods, came the consumption age where customers were seeking services. Recently, we are entering a new age of consumption that economists are calling the ‘experience economy’. With the rise of social media and the importance of influencers, businesses need to be closer to their customers than ever before, including how they finance their company.
Customers are no longer spectators looking to be served. They want to make an impact and become part of the process. They want to associate with their favorite brands, and believe in their products. This new generation of customers is also more entrepreneurial, which means the demand for opportunities to invest in the companies they believe in is also rising.
Here’s the trick with blockchain-based companies: They can reward users for being users! A company creates a product, and if the customer likes it, he or she can buy the company’s currency, help fund that company, and get a share of the company’s success. And if they really like a product, users can help that product become even more successful, which increases the financial benefits they get from that investment.
To help show how this relationship can work, imagine your favorite musician. Are they famous because they make music, or are they famous because you are a fan? (You’re right, it’s both.) They make music, you like it and talk about it, and soon hundreds, thousands, and sometimes millions of people do the same, and the musician becomes famous. Since they are famous, they are able to make a living by creating more music, and you are able to hear more of the music they create. Everyone benefits, right? Except in this example, you just get more music for your investment of time and attention, while an investment in a blockchain-based company can actually provide a financial reward as well.
Conclusion
Since the blockchain is such a new technology, the environment is open to creative and innovative ideas. Businesses and even governments are beginning to convert to blockchain technology, and though it might not be obvious yet, the world is changing from a very centralized economy, where a few are empowered at the expense of others, to a decentralized system where the individual takes back their share of the power.
Crowdsourcing and crowdfunding are enabling new types of businesses, and new types of products and services, where users can get involved from the very beginning, and share in the financial rewards of that business’s success. There are going to be risks, and not every business is going to be a success, but passionate users have a new way to support the ideas they believe in, and we think that’s a good thing for everyone involved.
About The Author: Lina
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