In the last several years, websites such as Indiegogo and Kickstarter and a new breed of equity crowdfunding sites have transformed the ability of startups to raise capital. Business ideas that did not have traditional appeal in the mainstream business community have been able to flourish through these platforms. Now the startup revolution may be moving into something referred to as Blockchain crowdfunding.
Crowdfunding as a Powerful Investment Method
Crowdfunding is a highly effective method to create projects that raise funds. The method is perfect for projects that are generally not visible to the traditional investment community. Due to this position, these projects are difficult to get off the ground through traditional investment means. However, crowdfunding platforms have revolutionized the scene, helping startups find willing consumers or investors in order to generate funding. These platforms also operate as a reliable third-party, keeping money safe in escrow and protecting investors from being scammed. If the funding is successful, the customers get what they were promised. If the funding effort is not successful, the money is sent back to them from the escrow account.
One issue with these crowdfunding companies is that they act as a centralized body to influence projects and charge high fees. Blockchain crowdfunding, however, is on the verge of changing the landscape due to its decentralized funding model.
The Process of Blockchain Crowdfunding
The process of crowdfunding through blockchain consists of startups developing their own digital currencies and selling them. This enables companies to raise funds and the investors potentially making money if the value of their cryptographic token shares goes up.
Proponents of this fundraising method believe it is a purer type of crowdfunding in that it does not require intermediaries to stand between the startup and investors. This type of crowdfunding also has the potential to advance new blockchain platforms by giving the blockchain community a method to raise money for its own projects. As well, fervent blockchain enthusiasts like this method because it enables them to steer clear of traditional fundraising approaches.
This blockchain crowdfunding method is similar to the Kickstarter model with an investment twist, with creators presenting their projects and asking for funds from an audience of interested investors. The difference is that startups can now make their own crypto-currencies to sell to potential buyers. The tokens connected with this cryptocurrency are monitored by blockchain, making forgery an impossibility. Just as you would buy shares of stock, you would purchase tokens as shares in a particular project – and these tokens have the potential to rise in value – producing something that may be referred to as cryptoequity investments.