How Blockchain Impacts Crowdfunding?

Blockchain technology has been transforming into multiple industries. The same is the case with the Crowdfunding business, too. The entire process of crowdfunding has changed beyond our imagination.

We will be discussing the matter in detail in this article here. But before we are detailing the basic concepts like Blockchain, crowdfunding, and much more.

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Blockchain

Blockchain technology has been doing its round for quite some time now, or to be precise, from the year 2009. It is still a complicated concept for many.

We will try to explain the concept in simple terms. A blockchain is a place where you can store data or a distributed ledger.

For example, consider the case of traditional spreadsheets and Google Sheets. In traditional spreadsheets, the file or data is available in only one location. They are stored in a particular computer drive or on the web in a drive like Dropbox.

In short, it cannot be present in more than one place at a time. So an edition in the file makes the process more time-bounded. If an update is made to the data, then the entire file should be sent again to all the respective parties.

Google Sheets, on the other hand, are available to all users at a single time. It is stored in a cloud server. Hence, all the respective users who have permission to access the file can use the same if there is a steady and fast internet connection.

Blockchain is more like Google Spreadsheets; only the persons with access can use the ledger. The entered data cannot be changed once it is stored on a particular block.

Thus, the data entered into a Blockchain are highly safe and secure when compared to other means. This specific feature is one of the significant attractions behind the Blockchain-based Crowdfunding business.

The process of Crowdfunding was still there in the past, too, but with a lot of differences. The evolution of crowdfunding procedures can be classified as traditional Crowdfunding, present Crowdfunding, and future Crowdfunding (or Blockchain-based Crowdfunding).

We will see about all those below.

Traditional Crowdfunding Involves a lot of Procedures

Some of the conventional business funding depended on the following procedures. They are self-financing, bank loans, or venture capital funding.

The self-financing facility will be limited to the majority. Getting bank loans is also a little risky because it also involves a lot of complicated formalities, and venture capital funding it requires a product or service that has broad public acceptance.

These factors are what encouraged more people to think about something advanced or updated.

Crowdfunding is an improvement but is still inefficient

Crowdfunding has seen a total change once the modern internet age began. The process of crowdfunding became better and more advanced compared to the traditional crowdfunding procedures. Some of the major firms in this area are Kickstarter, Indiegogo, Crowdfunder, etc.

The crowdfunding process helps the firms who have lovely business ideas to make it a reality with the support of the common public through their small investments.

But one of the problems of this crowdfunding model is that most of the campaigns are not meeting their target goals. Also, it has been found out that only 1.9 percent of the funds acquired through crowdfunding campaigns are going to developing countries.

That’s when the concept of Blockchain was introduced to the crowdfunding landscape.

How Is Blockchain changing the Crowdfunding?

Blockchain is altogether changing the entire process of crowdfunding in a lot of ways. But how?

We all know that Blockchain technology is highly safe, secure, transparent, and accessible from any part of the world within much less time. These all factors affect the Crowdfunding procedure on a positive note.

Also, the success of a Crowdfunding project is much higher in terms of the ones making use of Blockchain technology.

Another important thing that makes this strategy different from other techniques is that the Initial Coin Offerings (ICO).

What is Initial Coin Offering (ICO)?

ICO is somewhat similar to that of the concept of initial public offering in the stock market. But in the case of ICO, the companies will be selling their own made Cryptocurrency, which acts as company stock.

ICO-based Crowdfunding also works in the same format as the other crowdfunding processes work. The Cryptocurrency developers will market their ICO through various mediums. The common public who finds the proposal interesting will apply for the new Cryptocurrency that is above to enter the financial market.

Moreover, the money made thus, from the selling of their Cryptocurrencies will be invested in more attractive projects they have in their array.

But, what about the case with the ones who have these new cryptocurrencies in their kitty? They can hold these Cryptocurrencies until their market value rises to a higher level. Once it reaches a better price value, the owner can sell it! Thus, make a higher profit.

These Cryptocurrencies are also called Crypto-equities. Regularly, all these new technology startups will be owning a separate platform for the selling of their Crypto-equities.

A real-time example where the new companies can list out their ICO offering is

The OpenLedger. The companies who are looking for funds for their projects will release their Crypto-equities through OpenLedger. Later, these crypto-equities can be exchanged through the same platform.

Well, do you know? Some companies even make a fund for their newer projects through Bitcoin-based Crowdfunding! It also requires a separate platform. An example of Bitcoin-based Crowdfunding is mentioned below.

A real-time example where the new companies can list out their ICO offering is:

A Real-Time Example of Bitcoin-based Crowdfunding

The famous Blockchain Development Platform Stratis follows an entirely different approach for Crowdfunding. They followed the pattern of Bitcoin-based Crowdfunding.

Stratis released a new Cryptocurrency to fund their future projects. Their ICO was only obtained through Bitcoins! The company states that they received over one lakh US Dollars as payment for their technological startup. Quite interesting, right?

The Future of Blockchain-based Crowdfunding Looks Promising!

Blockchain for crowdfunding - Use Cases — Blockchain for crowdfunding – Use Cases

The real potential Blockchain-based Crowdfunding is still unexploited. It’s still in the beginning stages of life. But the astonishing fact is that more and more new companies are coming up with creative ideas and innovations. It’s expected to get better in the near future.

Let us wait and watch the future of Blockchain-based Crowdfunding!

Blockchain technology has been transforming into multiple industries. The same is the case with the Crowdfunding business, too. The entire process of crowdfunding has changed beyond our imagination.

We will be discussing the matter in detail in this article here. But before we are detailing the basic concepts like Blockchain, crowdfunding, and much more.