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A New Era of Crowdfunding with Blockchain
It is now a well-known fact that Blockchain is disrupting many industries in the world. Crowdfunding is also not left behind. The primary reason for accessing Blockchain for every field is its higher level of security.
What is the problem with traditional fundraising?
When we talk of business funding, we mainly mean either self-funding or bank funding. Now what actually the problem with traditional financing is self-funding is limited, and bank funding needs a business with good revenues.
Let's understand it in simple words. If you are funding your business, you cannot generate much of the funds, and the reason is pretty apparent. When you approach a bank for funding, it needs many legal documents. You just cannot get the desired amount of funds if your business is not in good condition. So, if you are in a new business, it becomes a little difficult to gather funds by traditional methods.
So, these are the reasons why crowdfunding comes into the picture.
Let’s understand crowdfunding briefly.
Crowdfunding means that you raise the required funds for your business in small amounts from regular people. Here, different investors and entrepreneurs can come together to expand their pool of investors.
Indeed the system seems to be quite promising, but the data suggests that it is still inefficient. The average success rate of crowdfunding is less than 50%. Also, with the current companies for crowdfunding, there are many problems, including high charges, no track of records and non-transparency.
Blockchain can change crowdfunding entirely.
The inefficient crowdfunding campaigns bring us to the thought of why Blockchain should be included in crowdfunding. We know that Blockchain makes the process quite transparent and safe to use across the globe.
What happens on the crowdfunding platforms is that the creators post their projects and then ask for the funds from people who can back them with money. Now, with Blockchain, companies can create their digital coin, which can be used for ICOs. It means that people investing their funds in the project can now buy the crypto tokens that potentially represent their share in the project. It is more or less like the share market because their token's value will also increase with the company's growth.
Blockchain technology supports crowdfunding in different areas. To start with, we know that it is absolutely decentralized, which means that it is not essential to depend on any platform for arranging the funds, unlike traditional crowdfunding. It is indeed helpful because you will not require following the rules and regulations of the platform.
Additionally, Blockchain solves the issue of high fees, which makes crowdfunding a bit less expensive. It is interesting to note that a blockchain-based crowdfunding model can help in funding any new project. It means that you just need good internet to connect to participate in crowdfunding and nothing else. Isn’t it interesting?
Crowdfunding is beneficial, especially for entrepreneurs. Crowdfunding using Blockchain is comparatively a newer concept for the entire community. The world is still adjusting to the Blockchain, and it might take a couple of years to complete the adoption of Blockchain in crowdfunding. Still, it indeed holds considerable potential in revolutionizing crowdfunding campaigns.