Crypto crowdfunding has become the most used term in recent years and more people are into it as it is easy to carry out and people can access funds in no time.
The fund can be used for different purposes be it business or individual goals. This has become an aid to blooming startups and other entrepreneurs.
With the popularity of cryptocurrencies, people are relying more on crypto crowdfunding because it enables people to reach out to a pool of potential investors and it does not delay the flow of money as is prevalent in banks or other financial institutions. It is a decentralized system and offers investment in various cryptocurrencies and other assets.
We will look into more information about crowdfunding with cryptocurrencies in the coming section of this article.
What Is Crypto Crowdfunding?
Crypto crowdfunding is a form of securing capital or raising a large amount for personal or business needs and cryptocurrency is the medium of transaction. Unlike other forms of crowdfunding, where there is a need for a third-party intermediary, crypto crowdfunding offers direct access to investors or financiers.
This form of crowdfunding also speeds up every process and allows direct access to the investors. All transactions in crypto crowdfunding are recorded on public ledgers, it becomes more transparent and investors can track their investments at any time.
Some of the features of crypto crowdfunding are:
- It offers flexibility in how funds can be utilized.
- The crypto trading platforms offer a wide range of investment categories.
- Transactions are more secure when compared to other forms of payment.
- Enables the creation of portfolios tailored to one’s goals.
There are mainly four models of crowdfunding:
- Peer-to-peer – also known as debt crowdfunding and this type of crowdfunding model assures investors profit from businesses in a stipulated time.
- Rewards – Investors can receive some form of reward for investing. The value of the reward can differ depending on the size of the donation.
- Donation – This is where investors invest in projects without expecting anything in return.
- Equity – It involves assets. Investors can own a part of the company or become a co-owner of that project and also invest in its growth.
How Does Crypto Crowdfunding Work?
In crypto crowdfunding, investors can donate digital coins to any new business project or startup. For purchasing digital coins, investors can buy coins from the Initial Coin Offering (ICO). Companies looking for investments can create their cryptocurrency tokens and publish them on the ICO website.
The tokens also serve as evidence of ownership and can be used for future transactions. After the tokens are completely sold, users can use the funds to start their respective projects.
Other crypto crowdfunding methods are:
- Initial Exchange Offering (IEO) – Through IEO, exchanges take place through centralized platforms. The transactions are more transparent and safe.
- Initial DeX Offering (IDO) – IDO is a decentralized exchange platform. It is more flexible in terms of using the tokens but does not give out equity.
- Security Token Offering (STO) – STO is considered as a legit fundraising platform. They use blockchain technology and offer more credibility.
Why Are Blockchain Crowdfunding Platforms Popular?
One of the highlights of blockchain technology is that it is a decentralized platform that offers optimum transparency of all transactions. It can also lower the processing fees and make crowdfunding more affordable for creators.
Blockchain-based crowdfunding can help creators start fundraising not just on one platform but on different platforms as well. It also creates an opportunity for investors to claim their ownership in the stakes they have funded. Blockchain crowdfunding can also protect intellectual property and does not create any opportunities for idea theft.
Platforms For Cryptocurrency Crowdfunding
Let’s go through some of the popular blockchain crowdfunding platforms that enable decentralized as well as transparent exchanges.
- Gitcoin – Gitcoin is a popular platform for offering multiple forms of funding projects. It was developed by Kevin Owocki in the year 2017.
- QuantmRE – This platform allows investors to build a portfolio of their assets. The process of crowdfunding is pretty straightforward on this platform.
- RealBlocks – RealBlocks is a platform founded in 2015. It is a decentralized platform and enables the tokenization of physical assets. Multiple investors can be involved at the same time.
- Tallycoin – Tallycoin is known for its zero-free donations and there is no need to register for an account. Funds can be transferred anonymously and are unfreezable.
Since cryptocurrency crowdfunding is a popular way of fundraising anyone can try it out. Although the risks are low, it is important to identify any potential risks before making any investments.
