2017 was a real year of burst for cryptocurrencies. Even with the Bitcoin rate going a bit down, the digital currencies trend went all the way up. Using the hype created, hundreds of new currencies appeared on the market, providing ICOs (Initial Coin Offerings) for their projects. Investments were flowing like crazy, putting their trust and millions of dollars in. Many of the startups who launched their currencies got their ICOs closed successfully. And it all seems like a pitch-perfect picture until you look into what happened next.
And what started going on after is not an unusual thing for a market operating at its peak. Many of the startups appeared to be not strong enough to keep up. And some were simply created as a way of scam. So, about half of the businesses kicked the bucket at the beginning of 2018. The investors lost their money, and the companies their ideas. Nevertheless, the trend is not going anywhere. On the contrary, it’s maturing, gaining more experience.
Reasons To Use Cryptocurrency
All those experiences seem to be very appealing from the first sight. But if you want to make it worth something, you need to understand why and when is the time to use cryptocurrencies for your startup. Here, we will be talking about launching your own coins and not just implementing digital money into your system. Let’s start with a few examples of when you might need this option.
- You are dealing with security. The blockchain technology behind all of the existing cryptocurrencies proved itself as one of the most secure systems in the world. If you are dealing with digital security and want to provide your customers some more reassurance, that’s the way to go.
- You are sure you will have a market for it. Well, of course, this is not something you can be 100% positive about at any time. But if you are not even sure, you will have the public to use your currency, why bother at all? You might want to go around specialized forums to see if people are interested in your idea before you start.
- You have time and money to develop it. Generally, most of the tokens produced are created on the basis of an already existing code. This can be any open-source code available. The development process itself doesn’t take too much time to be completed. Sometimes, it’s almost a simple copy-paste from the GitHub code. But this is not the main part of a currency creation. You need detailed planning and evaluation before you begin the coding. And while the market for web developers working with Blockchain grows exponentially, you have to be careful when choosing who to work with.
- It might be a good idea if you are working in the digital business. Many things we used to do physically are being digitized. This includes contracting, payments, and so on. But when you are an owner of a digital company, it’s different. You are dealing with non-physical matters, like online services, domain names, SSL certificates, etc. It’s even more of a reason why you should use cryptocurrency.
- You are in the online-gaming. Tons of online games around the world have their internal currencies. You can earn them by playing or purchase them for some real-world money. Some other games, like Swagbucks or Exodus3000, allow you earning money. But, Minecraft changed the game in 2015, when they announced they will be launching their own currency inside the game for educational purposes. And the difference to many others was that this game is available for kids. And it gave them the opportunity to learn how digital currencies work and withdraw them into real money through an online exchange.
There are many more cryptocurrency startup ideas. Some would use it as a token for their new business, exclusively to cover the initial expenses. Others would indulge into developing their coins or tokens into something that will be used in the market. Anyway, there are plenty of successful companies using the digital money for their benefit. And if you are completely sure, you can be one of them, go for it. But, before you do, we want to show you the backside of the story.
Do Startups Really Need Cryptocurrency?
Until now, we have mainly been talking about the upside of creating your own digital money. But it’s not all just ponies and rainbows along the way. There are a few things you should consider before going into this business.
- As so many ICOs failed since the beginning of the year, the investors are now being more cautious. They look more into what the project is about and how it works. So, you need a very clear vision of your idea and, perhaps, some advisers to work with you. A whitepaper is no longer enough to satisfy the interest of those who want to invest into your project.
- If you are on a tight deadline for launching, it might be hard to create a proper cryptocurrency. We already mentioned it doesn’t take that much time to create the code itself, but there is a long and precise planning before that. When your project is not evaluated properly and doesn’t have a clear plan behind it, there is a much lesser possibility of investors going for it.
- You should be ready your business might fail. And this can happen at any stage of the development. You might not get enough interest in your project and, thus, not gather enough money. Or even if you do, there is still a possibility of it declining. That’s why you need a backup plan. Something to cover your back if things don’t go as planned. You should also consider the warranty for your investors. If something goes wrong, you will have to return all the collected money, so don’t hurry to spend it.
- Considering the point above, a lot of experts in the cryptocurrency field suggest starting off with a general investment first and when the things get a bit more stable, going for a cryptocurrency. This will ensure you have everything covered.
- Take care of the legal aspect. Even though the Blockchain and cryptocurrencies are decentralized, the official authorities start taking more interest in the market. This leads to imposing some laws and restrictions. That’s why you should consider the impact of the legal points on your business. For example, China has prohibited ICOs in the country at the end of 2017. You might consider investigating the legal part of the question before starting.
- If you are launching a token, it will be based on the rate of the currency you tighten it up to. And digital coins tend to have volatile pricing. The price for it can change any minute and since it’s decentralized, it’s not supported by any governmental institutions.
- Even with the Blockchain being considered an extremely secure technology due to the way it’s built, it is possible to have it hacked. In fact, the story of the Japanese exchange stock CoinCheck proves the theory. It’s not the only case, but it’s the loudest one, since, the exchange claims the loss of more than $500m. Nobody knows where the money went, and considering how the exchange treats the loss, they are not even trying to recover it.
- There is a lot of competition on the market, and it doesn’t make cryptocurrency for small business so appealing. It may take a lot of effort and funds to make things happen in the world of digital money. And small businesses often don’t have that kind of luxury.
As you can see, there are lots of pros and cons for the question. And you definitely need to consider every point of it before making a decision. The growth and development of the industry make it extremely appealing to startups. But, the possible risks included in the process may destroy the idea. So, once again: evaluate your project thoroughly, create a flawless plan, investigate the market for your potential product or service. Use the experience of best practices to help you. Once you have done that and the results appeared to be satisfying, you can start your journey down the rabbit hole of cryptocurrencies. Have an awesome project idea? Contact us and let’s get it started!