Developing an Advanced Crowdfunding Platform with Blockchain

Posted by MuBlockchain on March 18th, 2021

Experts claim that crowdfunding platforms have five major advantages: performance, scope, simpler presentation, built-in PR and marketing, and near-immediate idea validation. Thus, crowdfunding has risen in popularity as a viable alternative to venture capital (VC). Additionally, it has provided a new audience for non-traditional projects, such as those launched by in-need families or optimistic creatives. Indeed, to date, billion has been raised by crowdfunding campaigns, contributing nearly billion to the global economy, according to estimates. All crowdfunding outlets could be valued at billion, surpassing venture capital funding in the process. However, there are challenges as well that are hindering their adoption. Let’s find out what are those and how blockchain app development can help.


Traditional Crowdfunding Platform | Limitations

High Fees Crowdfunding platforms charge a fee for each project that is mentioned. This is often a flat fee, at other times it is a proportion of the total funds collected by donors.

Stringent Laws and Regulations Not all platforms regard facilities as a feasible project. Instead, they seek tangible goods.

DIY Marketing and Advertisement Sites, with a few exceptions, would not assist in spreading the word about new companies, suggesting that startups must pay for marketing and advertising.

Scam Startups In some situations, startups turn out to be scams that deliver nothing, leaving investors with empty hands and no way to recover their funds

Intellectual property risk In some situations, startups lack IP security, leaving them vulnerable to seasoned investors who can take the concept and launch it with all of their money.

The Effect of Blockchain on Crowdfunding

With all of the aforementioned drawbacks of current crowdfunding platforms, blockchain technology can be better put to use by offering provable milestones as contingencies forgiving, with smart contracts solutions releasing funds only until milestones prove that the money is being used as intended.

Crowdfunding will become a more acceptable means of funding a wide range of initiatives and causes by offering greater oversight into individual campaigns and lowering the amount of confidence needed to donate with a good conscience.

The inherent benefits of blockchain technology will aid and boost crowdfunding in a variety of ways.

Enhanced Equity Accessibility

Instead of using crowdfunding to allow pre-orders of upcoming tangible goods, blockchain may use asset tokenization to offer investors equity or some other form of ownership. For example, an entrepreneur who intends to use the funds to develop several new products might give each new investor a small ownership stake in the business in proportion to their contribution. Investors can see their success relative to the company’s eventual success in this manner. This has the potential to open up entirely new investment opportunities.

Worldwide Availability

Any project that uses a blockchain-based crowdfunding model has a chance to succeed. Such ventures can also be contributed to by anyone with an internet connection. Platforms for exploration and visibility could be in demand. However, unlike crowdfunding ventures today, there is no inherent restriction.

Real-Time Provisions

The “empty promises” that have troubled modern-day crowdfunding ventures will not be an issue for blockchain-based crowdfunders. Rather than donating money and waiting weeks or months for the expected product, donors would receive fractional business or product ownership right away.

Exchanges between Peers

Today, crowdfunded company or product stakes can be exchanged on a peer-to-peer basis, much like cryptocurrencies. Contributors would have more liquidity for their portfolios as a result of this. It could be a good way to pique people’s interest in the project as a whole. This shift could potentially lead to the emergence of a completely new form of marketplace.

Unchangeable Campaign Laws

All campaign data — step descriptions, targets, objectives, marketing materials, and legal documents — should be on a forgery-proof, securely accessible distributed ledger. Investors can use it to verify campaign process and requirement compliance.

Fundraising in Decentralized Way

Make fundraising processes clear and KYC-compliant; smart contracts can only release funds to project owners after such benchmarks have been met. Stakeholders, subsequently, may vote in total democracy on the legality of each project (through consensus algorithms).

Reduced Operational Costs

With smart contracts, you can simplify operations and remove third parties, saving fundraisers money and allowing them to spend only the amount they planned to invest.

Private Communication Channels

Send private messages encrypted with public keys to communicate with groups and make announcements (visible to senders and recipients only).

Adaptable and Flexible Fund management

Manage sales securely and transparently through blockchain-enabled escrow, messaging, deposit, withdrawal of digital assets, and other resources to access a number of new funding techniques, such as scheduled transfers or monthly payouts.

Additional Funding Options

The tokenization of real-world assets and quick, low-cost cross-border transactions are just two examples of how digital assets based on the blockchain allow previously impossible funding and investment methods.

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Joined: October 27th, 2020
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