Carve Your Own Niche Without Competing Against Corporates
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The trustless business environment is a pioneering space and therefore an ideal environment in which entrepreneurs can launch new products and services without having to compete against corporates — or even other established businesses.
As Bitcoin was the first to show, trustlessness is actually a form of distributed trust. Individuals agree on a way to transact and a system is devised that enforces the agreement.
In the process, the need for large, corporatised or government intermediaries, like central or commercial banks or institutions such as Visa and Mastercard, is eliminated. This strips cost out of transacting, simply because it eliminates layers of middlemen.
It opens up markets small or medium-sized businesses simply couldn’t afford to go after otherwise. Perhaps more importantly, it slashes the cost of starting and running a business.
This lowers the barriers to entry, enabling entrepreneurs to more easily break into existing markets or create entirely new ones. There’s been a lot said in the past 50 years (since the personal computer gave ordinary people access to information that they’d never had before) about the way IT is revolutionising business.
But trustlessness introduces a whole new paradigm of business, one that suits entrepreneurs down to the ground.
HOW TO PROFIT FROM THE TRUSTLESS UNIVERSE
1. Three years ago, First Choice Global, a Kenyan start-up, broke the stranglehold ‘trusted’ global financial services conglomerates had on international money transfers. It enabled Kenyans working in the rest of the world to send money in a matter of seconds to their families, who were often unbanked and living in remote rural areas.
It bypassed banks, using feature phones and the Mpesa system. It has since been expanded to the citizens of other African countries. The company makes its money on the exchange rates entailed in the transfers. Customers pay no fees.
2. The Ushahidi system, which also originated in Kenya but has been used all over the world, including the United States, works on the basis of voters and other members of the public using the app to report electoral fraud or disruptive incidents.
Authorities are involved only when they are notified in time to intervene and keep elections legitimate. The system is in the hands of the electorate but monetised by licensing it to governments or electoral authorities.
3. When it listed on the NYSE in April this year, Spotify ditched the traditional model of listing. With no lockup period and no intermediary bankers, Spotify went public without all the typical shenanigans.
There was no underwriting syndicate, no IPO allocations, no preferential treatment. Spotify offered shares directly, simultaneously, and equally to its 70 million paying users.
4. Bitcoin flourished because it has mechanisms in place by which all parties in the system can reach a consensus on how information and trust are shared by the network’s various stakeholders.
Information about individual transactions is shared in detailed ‘blocks’ on which agreement must be reached by independent third parties known as miners, before the transaction is validated. The agreement is public.
Bitcoin is a ‘trustless’ system in the sense that there is no surrender of authority to a usually ‘trusted’ centralised organisation. It is also trustless in the sense that each party to each transaction and, therefore, all the parties to all transactions in the block chain are equal components of a distributed chain of trust and power.
You don’t have to know other parties to the chain in order to be able to trust the overall chain. Monetisation of the Bitcoin idea occurs as miners earn a transaction fee for using their resources to validate a transaction and also earn new Bitcoins for successfully solving the algorithm puzzle related to settling a transaction between the two people transacting.
And, of course, Bitcoin is vying hard for the status of a currency. It has an external value in which people want to trade. The Bitcoin example is more complicated and obscure than the others.
But, the principle remains: The decentralisation of decision-making that technology enables means that, as long as the community of users you target agrees on the process needed to transact with you, you can start a business anywhere, any time.
Superficially, that sounds like the basis of any conventional business. But, there are two crucial differences. In the trustless world, you need to be:
- Transparent. The trustless universe functions only if people can see, understand, and agree to what you’re doing and what is required of them to benefit from your idea.
- Democratic. Acknowledge not only that other people have good ideas and could improve your product or service but also that they actually want to do so. It’s a source of innovation you couldn’t afford to buy. But you can harness it.
The decentralisation of decision-making that technology enables means that, as long as the community of users you target agrees on the process needed to transact with you, you can start a business anywhere, any time.
YOU DON'T HAVE TO START FROM SCRATCH
To profit from the trustless universe, you don’t have to be as radical as Bitcoin. As the three earlier examples show, a simple idea will do. And, you can choose to operate in an established industry.
Our own business is a case in point. We’re a stock exchange. Shares have been issued by businesses and bought and sold by investors for close to 600 years. So, our industry is well entrenched.
But... we’re changing it. Not for the sake of being different but in order to create financial access and inclusion with the specific purpose of improving the national economy so that every South African’s life improves.
Our core idea is simple. We use technology to cut transaction, settlement, and clearing time from the usual three days to ten seconds. This removes the need for issuers, brokers, and investors to hold large sums of capital pending settlement.
Ordinary people can, therefore, afford to buy shares because they need no more than R1 000 to transact. As a result, a retail market opens up, exactly like the Spotify example. Issuers have a vast new source of capital to tap into.
(Think of the power of issuing shares to your most loyal customers. It’s the best loyalty scheme ever devised. Do you think they would ever buy anywhere else?)
And, because our model cuts the cost of listing by up to 80%, a vast new range of businesses can afford to list, creating entirely fresh investment opportunities for institutional and individual investors. It’s one of those synergistic, seamless ideas that inherently translates into a reinvention of an industry.
It is transparent, in that investors can use an app to get realtime information and make decisions about the companies listed with us. Also, our system is so granular that it can tell issuers exactly who is trading their shares. They can, therefore, control exactly how many and what type of shareholders they have.
The model is also democratic. It is principles-based rather than rules-based, acknowledging that entrepreneurs know best how to run their businesses and investors know best how to spend their money. Specifically, it is democratic in that it enables shared value. Everyone wins.
It is trustless in terms of relying on the generally agreed principles of the Companies Act to keep issuers both sustainable and answerable to their shareholders. We don’t impose additional rules on our issuers. Our market, which is everyone in Africa, is able to rely on consensus-driven definitions of business sustainability.
The trustless universe is still being defined by commentators and participants alike. However, it is already a practical reality and is happening all around us.
Rather than waiting for it to be fully defined and ‘trusted’, focus on the fact that it’s a frontier. You get to make your own destiny. Go make it.