Top 6 challenges of Crypto startups and their solutions
Key success factors for business entrepreneurs in the crypto space.
Cryptocurrency and blockchain startups are a new type of business emerging in the technology and startup spheres. These startups can be defined as those that are related to cryptocurrency, investment, or services relating to crypto. Due to the high risks involved in this space, there are some challenges these companies need to overcome before they become viable businesses.
Cryptocurrency and blockchain startups are highly speculative and risky. If a startup company fails, investors lose a lot of money. However, if the company is successful, its value will rise to millions of dollars.
Crypto Timeline
To understand why startups related to cryptocurrency and blockchain are high-risk investments, we need to go back in time. This time is the start of cryptocurrencies (in particular Bitcoin) and the blockchain technology that served as their underlying working systems. The main idea behind them was to create a decentralized system that will allow the users to control their economies without needing third parties.
However, in the first months of Bitcoin’s existence, it was only used for illegal activities. The creation of cryptocurrencies and blockchain technology became a global phenomenon within a few years. A large number of people and companies invested in this field and were eager to implement blockchain in every aspect of their businesses.
The cryptocurrency market is still volatile but it has been going through rapid developments as well. There are currently more than 1,500 different types of cryptocurrencies worldwide. The value of the total cryptocurrency market is $600 billion and it shows no signs of slowing down soon. This trend has led more than 5 million people to invest in this area and the numbers keep increasing steadily even though there are definite risks involved in this industry.
Cryptocurrency and blockchain startups are the new industries in this field. They offer innovative services, products, and games that were not present before the creation of cryptocurrencies. However, there are some challenges involved with running this type of business. Those challenges include legal issues, marketing concerns, high risks regarding their operations in general, etc. In this article, we will focus on the most important ones that startups need to overcome before they can become viable companies:
1) Legal Concerns
The main concern of cryptocurrency and blockchain startups is related to the legal status of these technologies in a specific area or country. As a decentralized ledger, the blockchain’s nodes can be found in numerous places all over the world. This implies that every transaction recorded on the blockchain may potentially be subject to the laws of every single state where a node of the network is located, thereby subjecting the blockchain network to an unmanageable number of laws and regulations.
It would be necessary for the system to adhere to all applicable legal and regulatory frameworks. This also makes it challenging to identify the location of a transaction if it turns out to be fraudulent or inaccurate in some other way.
The solution
Because virtual currencies lack the same regulatory oversight as traditional currencies, their safety and security are perpetually in doubt. If the government enacts appropriate legislation to address the related difficulties, cryptocurrency use can be done bravely once. It’s usually wise to learn everything there is to know about digital currencies before joining the league.
If utilized legally, cryptocurrencies have the potential to be highly beneficial to the average person. To strengthen the legitimacy of the use of digital currencies, the government can create a permanent law that closes all the gaps and security flaws already present.
2)Crypto Marketing
Launching a cryptocurrency in the marketplace is a difficult task for startups. Given that there are other cryptocurrency developers with larger budgets and more market experience, the competition in the space is fierce and intense. You can’t reach your target demographic and take the top spot in the cryptocurrency market without the appropriate crypto marketing approach.
The solution
Consult with crypto specialists and professionals who have greater knowledge and are currently engaged in the successful creation and marketing of cryptocurrencies. Your efforts should be split roughly 40 percent into cryptocurrency development and 60 percent towards cryptocurrency marketing if you want your cryptocurrency to enter the market. You might also use platforms for cryptocurrency exchanges to list your cryptocurrency, which would help you attract investors, traders, and end users.
3)Market Volatility
The cryptocurrency market has always been unstable, but for millions of investors worldwide, the previous several years have been an especially wild ride. Many people have won millions of dollars during major upswings, but many others have also lost a lot of money during bubble bursts and sharp market declines.
Nevertheless, marketing professionals should understand how to advertise bitcoin firms during times of extreme volatility and investor ambiguity. We should identify the variables that affect the price of digital currency and ways to leverage them in order to understand how to achieve it.
The solution
You should be aware of your investment plan as a crypto business and the level of risk you are ready to take. Additionally, switching to a low-risk coin is the greatest choice if you own an online business that accepts cryptocurrencies as payment, especially Bitcoin or Ethereum. It will not only prevent your company from suffering a financial loss in the cryptocurrency market, but it will also drastically reduce your risk.
Everyone, from investors to regular customers, must deal with the market’s enormous ups and downs, but since the future of cryptocurrency is uncertain, you must remain vigilant and understand how to control these changes.
4)Funding issues
This is another major obstacle that companies must overcome. Remember that creating a new coin and introducing it to the market might cost you anywhere from $3,000 to $300,000. The majority of developers get stuck at this step because they have a fantastic idea for a cryptocurrency but lack funding, which puts their ambition on hold.
The solution
Make a plan for how you will create your coin. You can approach the appropriate investors and educate them on the workings of your coin development project as well as the advantages of working with you. You have the option to obtain funds through many online channels. For instance, after developing your cryptocurrency, you may launch an initial coin offering (ICO) to raise money for your cryptocurrency development project, which is one of the best business models for raising funds in the crypto space.
5)Cyber security
Although blockchain technology is thought to be extremely safe and “tamper-proof,” this benefit is lost if the data that is stored on the blockchain is compromised in the first place! Cybercriminals attack the data entry points rather than the ledger itself, which results in the storage of inaccurate or misleading information.
As the popularity of cryptocurrency continues to grow, so does the need for robust cybersecurity solutions for startups in this space. With the potential for large financial rewards, cryptocurrency startups are a prime target for hackers and cybercriminals.
The solution
A solid cybersecurity solution can help protect a startup’s assets and data, as well as the personal information of its customers and employees. There are a number of steps that a startup can take to beef up its cybersecurity, including investing in a strong firewall and intrusion detection system, encrypting all data, and implementing strict access controls.
In addition, it’s important to educate employees on cybersecurity best practices and create a culture of security within the organization. By taking these steps, a cryptocurrency startup can help protect itself from the growing threat of cybercrime.
6)Scalability
For the blockchain industry, managing a high number of users at once continues to be a concern. For blockchain technology to complete a single transaction, many intricate algorithms must be used.
As more and more individuals become accustomed to it, the average transactions have also drastically increased. Because there were more users, there were more machines writing to and accessing the network, slowing down the transaction processing pace overall.
The solution
Enhancing consensus protocols is one of the most frequently suggested solutions for the scalability issue. The Proof of Work consensus protocol is currently used by well-known blockchain networks like Bitcoin. The Proof of Work consensus process provides trustworthy security, but it is incredibly slow.
As a result, the Proof-of-Stake consensus method is seen by many blockchain networks as a viable way to address scalability difficulties. Miners are not required to use a lot of computer power to solve cryptographic algorithms in order to use the PoS consensus mechanism.
Conclusion
The explanation above makes it clear that any organization planning to embrace blockchain technology faces a number of significant risk management challenges. But similar difficulties have been encountered before, during the introduction of e-commerce, electronic records, and the internet.
Accurately identifying the dangers and legal concerns is crucial, as is properly mitigating them where practical. Companies using blockchain may also choose insurance to mitigate these legal concerns. Some of these risks may be covered by conventional insurances since cryptocurrencies are viewed as being equal to conventional assets like “securities” and “money.”
To serve the cryptocurrency and blockchain business, some top insurers have also introduced specialist insurance products. The benefits of blockchain technology are much more than its potential concerns, and using this technology can definitely secure you a better future!
Since we are aware and for that matter prepared for such challenges, we, at CryptoGenesis, are here to support every entrepreneur dreaming to build their niche in the crypto space. Our marketing and blockchain solutions will not only prepare you to face these challenges but will also help you stay strong in the crypto market. Remember, it’s not the high flying that is important, it is how you keep flying that will take you to heights! Let’s start your journey with CryptoGenesis- bringing your ideas to life!
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