Crowdfunding Today

Today, crowdfunding represents a multi-billion market that is growing at 26% compound annual growth rate (source). There are many benefits to crowdfunding — including its ability to broaden access to capital and making entrepreneurship more prevalent. Crowdfunding has grown from a creative way for startups to raise capital to influence almost every other industry: from lending and real estate to equity investments.

With that said, we have also seen projects that haven’t lived up to the expectations of backers or turned out to be outright scams. As we look forward, new technologies can help improve the crowdfunding experience for both consumers and businesses. In this article, we’ll explore how and why the blockchain can fundamentally transform crowdfunding. Let’s get started.

Leveraging Blockchain Technology

Popular crowdfunding websites require consumers to create an account and link a bank account or credit card. This method poses challenges for internet users around the world. Globally, more than 2 billion people do not have a bank account. Moreover, some who do have the necessary accounts are charged high fees for transacting across borders.

With blockchain technology, anyone with an internet-connected device and a mobile wallet could back a project. One can imagine a system where prices for pledges could be shown in multiple currencies — US dollar, euro, Bitcoin, and Ether — with the backers being able to choose their preference. This provides a more seamless payment experience and levels out the playing field, so to speak.

There are two main advantages to this new system. First, it opens crowdfunding to an even larger base of backers, meaning that more consumers have access to innovative new projects. This is particularly helpful for those in countries like China, India, Brazil, and Indonesia, 4 of the top 5 internet user bases in the world (source).

And second, crowdfunding projects have an even higher likelihood of being funded. With more potential backers, campaigns now have access to an even broader base of consumers. With each passing year, more internet users are comfortable with online payments and we expect this trend to continue. There are other benefits of a blockchain-based solution as well.

For instance, instead of relying on the high fees charged by credit card companies, more money can be given to the campaign founders. Lastly, a crowdfunding platform that accepts crypto would also improve alignment between projects and backers. Even projects that are successfully funded do not always ship products — this creates an opportunity where projects can be funded based on milestones or incentivized to provide frequent updates to their backers.

Another benefit that blockchain can bring to crowdfunding is offering bounties or incentive systems that are preemptively written as smart contracts. For instance, rewards can be set as referral fees that are offered to backers who introduce the project to friends. This creates an integrated marketing system that can help projects take off.

In addition, a gig-economy is created within the crowdfunding campaign. Actions like creating translations or valuable informative videos can be rewarded, creating a greater sense of alignment between project creators and the overall crowdfunding ecosystem.

Conclusion

In conclusion, the blockchain is a fundamental advancement that allows for immutable records and seamless payments. Applying blockchain technology to crowdfunding would allow more people to contribute to projects while also reducing fees along the way.

Pledgecamp, a blockchain startup, is building a new type of crowdfunding platform. They envision being able to back projects in crypto but also incentivizing projects to keep open communication and frequent updates well after a project is completed. The Pledgecamp team also created Backer Insurance, a smart contract that holds the project funds in escrow.

Backer Insurance and other features — like User Governance — provide much-needed transparency. Because blockchain platforms are decentralized by nature, the community and token holders have a larger influence on how the service is managed.

Learn more about Pledgecamp: https://pledgecamp.com/

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