How Crypto And Blockchain Are Changing Crowdfunding

2022-04-14, 06:48

The impact of Blockchain technology on all sectors, especially the financial sector, can not be overemphasized.

Blockchain technology allows you to keep track of all transactions via a decentralized platform.

The integration of crypto and Blockchain in Crowdfunding has helped take the projects higher.

Crowdfunding is defined as sourcing for investors to pull their funds into a project or launch of a startup.

You can now invest in a startup with your cryptocurrency.

Using the blockchain platform for Crowdfunding enables you and your investor to monitor the project and receive donations from all walks of life.

Blockchain has become an invaluable aspect of today’s economy generally. There is no exception to the sector where blockchain-developed apps are not taking over.

Blockchain technology gives you the power to keep track of your transactions, secure them and publicly verify those transactions on a decentralized platform.

Today, blockchain technology alongside crypto-assets disrupts the old ways, primarily the financial sector, since the platform allows you to leverage its fast and transparent features.

One of those disruptions is online Crowdfunding. The use of blockchain technology for Crowdfunding has numerous advantages and will help maximize the project's success.

Since blockchain developers have started using Blockchain in crowdfunding app developments, the sector has witnessed unprecedented success.

While some of our readers may be curious about what Crowdfunding entails and how crypto and Blockchain are changing the narrative in this sector, it is expedient to provide detailed explanations to satisfy their curiosity.

Let's dig in

What Is Crowdfunding

Crowdfunding is the practice of sourcing funds for a venture or project. Crowdfunding involves all activities and means whereby you get several people to contribute money to a project.

In Crowdfunding, you source the funds from as many people as possible, rather than one or two investors. When several people contribute capital for a startup, that is simply crowdfunding.

Crowdfunding is not new to the tech space. Several startups and developers have sourced funds from several people online to finance their products and services.

Whichever means you take, once you are soliciting funds from people online to finance a project, you are engaging in Crowdfunding.
There are several ways to engage in Crowdfunding. Some of the popular types of Crowdfunding are;

Peer-to-peer
The peer-to-peer type of Crowdfunding is not a free donation, and there is always an agreement that all individuals who contribute to the startup fund will get a certain profit or benefit.

If you invest your funds in a startup, you will receive a profit at a particular date, also called debt crowdfunding.

Equity
The equity type of Crowdfunding is self-explanatory, and all investments are based on assets.

Once you invest in a startup, you are entitled to an asset and become a co-owner. You will continue to be a partner in such a startup until you decide otherwise.

Experts believe that Equity crowdfunding is the most suitable way to source funds in building blockchain apps.

Donation
This type of Crowdfunding is strictly on a donation basis, and you are neither entitled to a reward nor a stake in the startup.

Once you donate to the launch of the startup, you do not have any relationship or partnership with the project, and you are merely supporting the project with no reward or financial return.

Whichever type of Crowdfunding that a startup or project adopts, the main goal is to get enough funds to meet and surpass their estimated target.

Moving forward, let's take a look at how crypto and Blockchain are changing the narrative in Crowdfunding.

Impact Of Crypto And Blockchain In Crowdfunding

Statistics have shown that blockchain technologies will prosper in the future. Blockchain apps have continued to break ground and dominate across all sectors with positive impacts.

For instance, Finances online reported that “The total amount of blockchain transactions as of February 2021 was estimated at $620 million.”

The practice of Crowdfunding is not an exception to the positive impact of Blockchain and cryptocurrencies.
Some of the impacts include;

Decentralization
Blockchain developers leverage the decentralized feature of the platform. All apps built and powered by blockchain technology are decentralized.

Decentralization enables peer-to-peer transactions at ease. Startup developers can raise funds directly from investors without needing a third-party platform.

Decentralization makes it easy to source funds directly, and it increases your visibility to investors and eliminates unnecessary bottlenecks.

Initial Coin Offerings
One of the significant impacts of crypto on Crowdfunding is Initial coin offerings.

This form of Crowdfunding entails developing a blockchain app with its coin and urging investors to purchase the currency. By buying the token, they are simply buying shares in the startup.

Instead of receiving funds in the form of fiat, investors will donate in cryptocurrencies, or you can create a crypto asset for the project, and all donations will be in that token.

Universal Acceptability
One of the advantages that Blockchain and crypto bring to Crowdfunding is the universal acceptability of the platform.
Blockchain technology is here to stay. It is the future of IT, and its visibility and transparency have made it stand out among other software development platforms.
Once your project goes live via blockchain technology, it becomes visible to every internet user. Any investor with internet connectivity can easily check the fundraising campaign and make donations.

Conclusion

It is no news that blockchain technology is taking over all sectors, and it is considered the future of information technology.

This article shows that Crowdfunding is not an exception. Most financial services and operations have embraced digital ledger, a tool in blockchain technology.

Companies like Kickstarter, Crowdfunder, and Indiegogo have used Crowdfunding to raise capital and recorded success. However, the capital raised fell short of their expectation.

Experts believe that incorporating crypto and Blockchain into Crowdfunding will make it easier to make donations, find investors, and ensure transparency.

With blockchain-powered crowdfunding projects, you do not have to doubt the Genuity of the project; you can continuously monitor how the funding is faring and be rest assured of a successful startup.

Author: Valentine. A, Gate.io Researcher
This article represents only the researcher's views and does not constitute any investment suggestions.
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