Why does your Crypto Startup need Consulting?

Why does your Crypto Startup need Consulting?

The growth of crypto and blockchain technology

In October 2009, Satoshi Nakamoto, the father of bitcoin, released a white paper that brought forth bitcoin as a new digitised currency, inadvertently initiating a technological revolution. Nakamoto’s proposal included blockchain technology as a foundation for bitcoin. The arrival of crypto and the very concept of accepting digital currencies as assets of value divided the world into two camps – crypto enthusiasts and crypto sceptics. However, the truth is that whether you love them or hate them, crypto trading and the use of blockchain technology have only seen unprecedented growth. The credit goes to the belief of initial adopters of the cryptocurrencies and the subsequent rising value and use-case of the digital assets. In mere fifteen years, cryptocurrency’s market cap has risen to $2 trillion, which is no easy feat.

Blockchain technology is still in the nascent stage of development and has seen broader adoption by companies worldwide. Almost all top conglomerates such as Amazon, Microsoft, Paypal, Samsung, and Alibaba have incorporated blockchain technology in various business operations with its numerable use cases. As a result, the crypto world is seeing an augmentation in crypto and blockchain startups. Simultaneously, the demand for start-up crypto consulting firms offering crypto and blockchain solutions is also witnessing an upward trend. 

Why is there a rise in crypto startups?

When bitcoin launched in 2008, its initial trading price was as low as $0.08 in 2010. In 2021, BTC was valued at $68000. Although the exponential growth of Bitcoin raised a few eyebrows in the mind of the sceptics, it still managed to capture the interest and imagination of investors and traders alike. Soon trading cryptocurrency caught momentum. Moreover, the introduction of Ethereum blockchain bought in other digital currencies such as Ether, Ripple, Dogecoin, Litecoin, and many more at the fore, giving a further boost to crypto trading. Riding on the booming trend, many crypto startups have emerged on the scene while more are in various launch stages. Crypto startups are decentralised platforms engaged in crypto trading, lending, borrowing, and exchange of crypto assets. According to a source, almost 4000 crypto startups seek venture capital funding annually. On the other hand, more than $25 billion were invested by venture capitalists in blockchain enterprises in the same year. 

Types of Crypto Start-Ups

There is an array of options that founders and cofounders of startups can choose from. The founders can develop the following platforms for their venture:

  • Lending, borrowing, and trading platforms
  • Application development platform
  • Tokenisation development platforms
  • Tokenisation exchange platforms
  • Audit platforms
  • Derivatives exchange platforms
  • NFT marketplaces 

Types of blockchain startups 

Since the bitcoin days, distributed ledger technology was deemed as a functional, decentralised alternative to the traditional financial institutions where users could develop, exchange, buy, sell, trade, and invest in digital coins. However, blockchain users have seen immense possibilities in their use cases over the years, thanks to their recognition of its key features by industrial players. There is an increasing demand for blockchain technology as more and more industries are now incorporating its use. Jumping on the bandwagon are the blockchain startups that are getting implemented on the daily basis. According to the experts, blockchain startups alone got $4 billion investments in the 2021 quarter. So if one is planning to float a blockchain startup, there are three distinct types of blockchain they could model their startup.

  • Completely privatised blockchains: In this category, blockchains have classified access to data available to a limited number of users. All activities from viewing, access to information, sharing and auditing of data, etc., are restricted to a chosen few private blockchains that are highly efficient and significantly secured. As a result, they are money savers with lower costs and are better regulated. Hyperledger and Corda are a few of the crypto startups based on the notion of fully privatised blockchains.
  • Consortium blockchains: Also known as Federated Blockchains, they lie in between fully private and public blockchains. Several companies and organisations have access to viewing and audit data. Consortiums are favoured due to scalability, moderate power consumption, moderate security, and superior transactional speed than public blockchains. Examples of consortium blockchains startups are IBM food trust, r3, and Energy Web Foundation.
  • Public blockchains: These are permissionless and publicly accessible blockchains where anyone owning an internet connection can join the blockchain network. No single authority controls these blockchains, and transactions are handled through Proof-of-Work and Proof-of-Stake concepts. Ethereum and Bitcoin are prominent examples of a public blockchain.

Prerequisites of launching crypto/blockchain startups

Whether you are planning to launch a crypto startup or a blockchain platform, the founders need to understand and fulfil the prerequisites required, which are as follows.

Be technical: As a founder, one needs a deep technical understanding of the logistics and the workings of the platform they wish to develop. Furthermore, the crypto world is highly volatile, while blockchain technology is still under development. Therefore, one needs to keep themselves abreast with the latest developments and innovations, especially in the blockchain realm. Additionally, a firm grip on the basics and technicalities of financial markets, cognizance of smart contracts and blockchain protocols are of utmost importance. Furthermore, learning software programs like Javascript and Solidity is a must.

It doesn’t matter if you have a technical background; it is a prerequisite one cannot do without. Whichever platform you wish to develop will require angel investors or venture capitalists’ investment. However, one either needs to learn the business’s technical aspects, which would be advisable to gain investor trust or bring in cofounders with profound technical prowess.

Learn the art of conviction: Although cryptocurrencies are highly volatile, they still have a high return on investment. To sell this idea to the investors, entrepreneurs have to be convincing enough to inspire investor confidence. Whether you offer equity for investments or plan to develop tokens through ICO (initial coin offering), it is recommended to brush up on public speaking skills and develop the art of conviction.

Release a white paper: White papers are the best way to attract investors, especially if you plan to develop tokens. The white papers present the vision and the road map of the startup and its objectives while establishing founders’ authority and expertise in the product. 

Quick adaptation to changing technological landscape: Innovations are part and parcel of web 3.0, and blockchains are constantly developing. New cryptocurrencies are enriched with new technology and enhanced features. It becomes imperative for the startups to keep up with the instant technological changes and quickie adapt themselves. The key is to keep developing and innovating or losing out to competitors.

Develop risk tolerance: The Great Crypto Crash in 2018 sensitised the crypto world to the high volatility of cryptocurrencies. The distributed ledger technology is still developing and prone to conjectures while relying heavily on investors’ sentiments. Crypto markets are similar, or perhaps more fraught than traditional share markets. Therefore, it is in the founder’s interest to develop a thick skin and learn and ride the wave of severe and overnight crypto market crashes. Prepare for unforeseen circumstances and also keep diversified revenue-generating options open.

Hiring crypto and blockchain consulting firms: Even with the technical background, Crypto startups founders would require the mentorship of qualified crypto consultants with a deep understanding and technical knowledge of digital currencies, smart contracts, and blockchains. These blockchain and crypto consultants help analyse and determine the correct blockchain protocol and present a feasible framework for the recommended solutions.

Why do crypto and blockchain startups need consulting?

According to a survey, almost 50% of crypto and blockchain startups fail within months of their ICO (initial coin offering). The reason behind the failure varied and often demographically challenged. The few reasons that lead to a shut down of these startups are:

  • insufficient product or market research
  • Substandard or poor business model
  • Harsh government laws 
  • Inability to adapt to constant innovations
  • Improper or lack of expert guidance
  • Insufficient funds or investors backout

Crypto markets are already subjected to harsh scrutiny and still haven’t been mainstreamed and are mostly being viewed as a threat by the traditional financial setups. But lack of proper guidance is essentially the real reason why crypto and blockchain startups fail. 

On 8th December 2021, Visa, the global leader in digitised payments, announced the launching of Visa’s Global Crypto Advisory Practice, an offshoot of VCA (Visa Consulting and Analytics). The idea behind launching this crypto consulting program was to help people who required hand-holding or beneficial advice to help boat their crypto journey. According to a survey conducted by Visa, 94% of financial top-dogs are familiar with the term ‘crypto’, so understanding its ecosystem and, most importantly, the technology cryptocurrencies rely on, is crucial for growth and survival in the risky, volatile crypto world. 

Need for crypto consulting firms and services they provide

Crypto consultancy firms’ job profiles are not just limited to guidance but providing authentic solutions to their clients. However, Startups should take a few considerations into account before employing a crypto consultancy firm.

  • How well versed are they with the functioning of blockchain technology. Cryptocurrencies run on blockchains; therefore, it becomes crucial for the firm you plan to hire to have an ingrained technological knowledge of the workings of the ledger technology. They should also have a strong grasp of the interoperability feature of blockchains. The consultant firm needs to be acquainted with various blockchains possessing distinctive features. 
  • Fundamental knowledge of smart contracts and their development is a must feature to consider for crypto startups. Preset contracts are an integral part of web 3.0, and crypto consultants should have the ability to code error-free smart contracts. 

 Their services include:

  •  Token and platform development
  •  NFT development
  •  Developing crypto strategy centred around the startup’s framework
  •  Amount of investment and subsequent investors selection
  •  Planning and executing ICO and IEO fundraising 
  •  Analysing crypto markets
  •  Developing crypto marketing blueprint
  •  Analysing risks and strategizing with compliance to laws of the land
  • Holding training workshops to teach or elevate technical knowledge of the client

Need for ICO consultancy and services ICO consulting firms provide

The ICO consultants are highly trained professionals who have in-depth knowledge of the crypto’s financial and development aspects. Their diversified proficiency in marketing, strategising, and developing a product will aid attract potential investors through Initial Coin Offerings or Initial Exchange Offerings. They also help build a solid brand for your company and create awareness among potential investors and end-users. 

Apart from the services mentioned above, they offer advice on a myriad of legal issues such as:

  • Provide consultation regarding demographic legal compliance and consolidating various key legal documents for smooth flotation of ICO
  • They draw up legal agreements, write white papers, and prepare legal and commercial proposals per the rules and regulations of a particular country where a start-up will operate.
  • They help with the licensing process before the issuance of ICO, keeping in mind various variables such as crypto trading utility, security of the platform, and compliance with the corresponding protocols.
  • They scrutinise and review the KYC (know-your-customer) and AML(anti-money laundering) procedures of the start-up while ensuring their compliance with government-issued rules and regulations. 
  • They provide tax advice on ICOs. 

Blockchain consultancy and the services provided  

Blockchain consultancy is a new and emerging form of consultancy which advises startups in the blockchain industry. It is a specialised form of consulting that deals with blockchain technology and its many use cases. Distributed ledger development startups especially need blockchain consulting as the technology is constantly evolving and need guidance in keeping up with the changing dynamics. Blockchain consultancy is essentially a process that helps identify client requirements and the type of blockchain which is best suited for their businesses. They need an expert to create a functional proof of concept, and even train them to intercept and deal with unforeseeable volatile situations. Their various services include:

Identifying and understanding blockchain startups’ core structure

The blockchain consultants help recognise the pain points of the business model and help strengthen the core structure of the startups. They identify the company’s goals and strategize around the priorities set by their client. In some cases, they even help and guide founders and top management of the company to realign their business model to match their set objective. The consultants answer some crucial questions pertaining to choosing an appropriate blockchain platform, zeroing on the type of blockchain platform (private, consortium, or public), transactional process, and ownership rights.

Arriving at a consensus

Blockchain consultants interact with founders and core team members and build a roadmap leading to blockchain implementation by analysing its potential and pinpointing defects in the current plan. They explore the proposed blockchain prototype’s pros and cons and present viable alternative solutions to match the company’s business model. 

Developing blockchain solutions

The next step is crucial, and it involves creating a framework for blockchain solutions. Blockchain consultancy firms develop and design a blockchain that matches the requirements of the start-up and operates within the structural framework of the company. The design should be flexible enough to keep up with the ever-evolving blockchain technology and also provide short and long-term benefits.

Implementing proof of concept

The next step is to deploy a mutually agreed upon prototype and test its capabilities in the real case scenarios. The idea is to gauge how well the prototype could withstand the market’s highly volatile environment and uncertainties. Any tweaks and tests required are executed at this stage while enhancing the design and security features of the blockchain to make it ready for deployment.

Integration and final reviewing of blockchain 

Once tested, the blockchain platform is ready to go live. At this stage, the blockchain consultancy firms play a key role by integrating the final product and ensuring that the blockchain utilities comply with clients’ expectations through constant reviews. Many things could go wrong here, and the blockchains might require more customization and upgradation. 

How to choose a crypto/ICO/blockchain consulting service provider?

Lately, numerous crypto, ICO, and blockchain consultancy firms are mushrooming due to the high demand for their services. However, it would be advisable for the startup management to thoroughly research and access the consultancy firm before hiring.

Here’s a list of the variables you need to consider for choosing a consultancy firm that tick all the required boxes.

  • Access consultancy’s profile: Startup founders must appraise and evaluate the company’s profile and check their previous projects to get a better handle of the services they provide. Reaching out to the companies they have worked with or getting verified reviews and references will help them choose and pick a viable consultancy firm that matches their requirements.
  • Availability of the consultants: Your choice should definitely consider how easy availability of the consultants and their capability to dispense prompt services.
  • Check their online content: Many well-reputed crypto and blockchain consultancy firms regularly publish white papers,  scholarly articles, and blogs that establish their mastery in the services they provide
  • Cost-effectiveness: Founders must consider the costs of the services, which highly depend on the consultancy firms’ reputation, specialised knowledge of consultants, and the number of services they provide. The startups’ management team should consider negotiating a fixed rate before getting into an agreement. However, they also need to be flexible on prices as this is still an evolving industry with many unknown variables and uncertainties at all junctions. 

Why choose Sofocle for blockchain development

With four years of experience under our belt, Sofocle has catered to clients from different industry sectors. When it comes to blockchain consulting, our expert team includes highly proficient blockchain consultants who provide apt blockchain solutions to our clients. Our consultancy process comprises four stages, from analysing and appraising blockchain adeptness to arriving at a consensus as to which blockchain solution is to be implemented that fulfils the company’s requirement. The third stage involves the development of an operational blockchain infrastructure based on the proposed solution. The final step is reviewing and improving the prototype and preparing it for full-scale production.

 Our blockchain consultants work hard to ensure products’ timely delivery while deploying a blockchain solution that helps transform your businesses and keeps up with the changing technological landscape. 

Book a session with our blockchain consultant and product experts today to get a better and more in-depth understanding of our blockchain consultancy services.