Blockchain-Powered Marketplace Can Help Startups Gain Scale

Blockchain, Opinion | July 24, 2018 By:

By tapping into the power of blockchain, startups can enable each other to scale up in a world dominated by a few tech giants.

The vast majority of tech startups fail, with the odds of success being infinitely small even if a company is executed well. Striking data tells us that on average, 90% of apps lose 90% of their users in 90 days. Poor user retention is the norm, but it doesn’t have to be.

Decentralization can help to nurture a peer-to-peer marketplace that helps apps help each other. It’s thanks to decentralization that companies with no prior relationship are able to work effortlessly together. Here’s why.

Two key factors are working against market entrants achieving scale.  Firstly, the number of digital start-ups out there is rapidly expanding, fragmenting user attention, capital, and technical forces.  Secondly, bigger platforms have a huge lead in user data, attention, capital and resource, which enables them to either predict what’s coming or copy very fast.

With blockchain, smaller companies can achieve scale and attain users together and share the cost of acquisition. It also enables companies to surmount complexities involved in working together, such as integrating systems, drafting up contracts and synchronizing invoicing – all of which come at a high cost.

Decentralization not only helps companies with no prior relationship to work effortlessly together, it also provides a richer experience for users. Users can tap into multiple apps from one interface, without having to set up individual accounts for each app. This is a game-changing value-add for users during a time where more apps are being pumped in the market while users want fewer apps.

The second reason for why the current centralized marketplace is broken is because there is disproportionate value capture to creation. The global economy is coalescing around a few digital superpowers. These huge companies centrally store user data and provide users access via a username and password, which they essentially own. We see unmistakable evidence that a winner-take-all world is emerging in which a small number of “hub firms”— including Alibaba, Alphabet/Google, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent— occupy central positions.

While creating real value for users, these companies are also capturing a disproportionate and expanding share of the value, and that’s shaping our collective economic future. When dominant businesses capture an asynchronous benefit relative to the value they create, other participants and consumers lose out. The very same technologies that promised to democratize business are now threatening to make it more monopolistic.  If centralization wins, most of us lose.

On average, good plans, people, and businesses succeed only 1 in 10 times. This is because there are many components that are critical to an enterprise’s success. The best companies might have an 80% probability of succeeding at each of them.

But even with these odds, the probability of eventual success will be less than 20% because failing to execute on any one component can torpedo the entire company.

The reality is that in this existing model, a very small percentage of people own and/or control all of the assets and the system, in which the other 99% are effectively modern-day serfs to their feudal kings and queens. Regardless of how great and innovative a company’s team, ideas, or strategy are, chances of success are low, when tech behemoths Amazon, Facebook, Google and Alibaba rule the industry. Therefore, blockchain technology will provide a decentralized community of digital startups, opening the door to success in a world where the odds are otherwise stacked against them.  

A huge imbalance in power already exists among large tech companies, whose scale of data reach is a mountain few will be successful in overcoming.  The application of blockchain has the potential to increase the scale of inequality and reduce our basic human rights to a democratic and free society.

Instead of shareholders getting all of the upside in a decentralized ecosystem, the participants, users included, can share in the value which is created.