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Everything You Need To Know About A Crowdfunding Platform

Everything You Need To Know About A Crowdfunding Platform

Thursday August 20, 2020,

6 min Read

In the present technologically advanced era, many of us would definitely be familiar with the term “ Blockchain”. Blockchain is considered the most disruptive technology that has come into existence in the past few decades. Blockchain has entered into the spaces of almost every major industry and transformed the industries into a whole new level. But recently, it has been gathering major momentum in the area of fundraising, as it helps businesses by creating new and interesting opportunities for crowdfunding. Let’s take a more detailed look on how blockchain crowdfunding is the viable choice for your business. 

Pain Points of Traditional Crowdfunding 

There are three common types of traditional crowdfunding such as self-funding, funding via banks, or venture capital funding. All of these methods come with their own challenges like for example, self-funding is extremely limited.  It is only easy to obtain funding from a bank, if the business is an already existing one that is bringing in good revenue and cash flows. And venture capital funding is possible for only a product or service that has mass market appeal. 

Due to such hassles, even a product or service that has a lot of potential finds it difficult to raise funds as it is new, and traditional crowdfunding is mostly limited to existing businesses. This is where blockchain crowdfunding comes into play and offers solutions for businesses, mainly startups to raise funds efficiently. How? Let’s find out. 

How blockchain crowdfunding disrupts traditional crowdfunding?

By providing enhanced transparency for individual campaigns, and by ensuring safety and trust between the creators and backers, crowdfunding can become more robust, efficient and effective with the help of blockchain technology. Blockchain also helps with complete access to any business irrespective of the size,  from anywhere around the world, to help them maximize their potential and success rate of the business. 

For this reason, and many more, businesses started inclining more towards blockchain crowdfunding platforms and so, many companies started offering a white label crowdfunding platform that will enable a quick and efficient fundraising process. If you are looking to be a part of a crowdfunding platform for your business as well, let’s take a look at some of the significant use-cases of blockchain-based crowdfunding to help you pin down the one that best fits your business. 

Notable use-cases of blockchain-based crowdfunding 

  • Decentralized Crowdfunding platforms 

Even though popular traditional crowdfunding platforms have helped businesses raise million-dollar profits in recent years, they take a considerable amount of shares from the profit for themselves. But when it comes to blockchain-based decentralized crowdfunding platforms, they remove the involvement from intermediaries and allow creators and backers to directly communicate with each other with the help of smart contracts. A smart contract is a digital contract that automatically facilitates and verifies transactions when both the parties agree to the necessary terms and conditions. It allows the involved parties to directly interact with each other, without going through an intermediary. 

  • ICO/STO/ IEO Crowdfunding platforms

These are the most popular public crowdsale, fundraising mechanisms, mainly for cryptocurrency related businesses or startups. How it works is that the company is issued coins/ tokens, that they sell to potential investors in the market, in return for investment. The crowdfunding methodology is the same, but the major difference between ICO and STO is that STOs are highly regulated and ICOs are not. And ICOs and STOs are operated by individuals or companies, whereas IEOs are operated directly by cryptocurrency exchanges. Any potential investor from anywhere can become a part of a project by purchasing these tokens. 

  • Real Estate Crowdfunding platforms 

A real estate crowdfunding, especially a white label real estate crowdfunding platform is highly beneficial when compared to traditional real estate investment because,

  1.  It provides quick and efficient accessibility, as in, anyone from anywhere around the world can now invest in real estate with just a computer and internet connection, and earn higher returns than what they would get with a bank.
  2. A white label real estate crowdfunding platform enables non-accredited as well as small-time investors to get involved with a real estate property without the need for large amounts of capital. 
  3. It improves speed, and efficiency of real estate transactions and removes the need for intermediaries. Also, as discussed earlier, it removes geographical barriers and allows anyone from anywhere in the world to be a part of a real estate asset investment. 

  • Peer-to-peer exchanges

Blockchain-based crowdfunding platforms enable peer-to-peer fundraising mechanisms. The contributors are provided with enhanced liquidity for their investments, which could generate more investors’ interest towards your project. This also increases the potential and increases the profitability of your crowdfunding business. 

These are the major use-cases of blockchain-based crowdfunding platforms and their benefits. There are many more such as increased wealth creation opportunities, complete elimination of middlemen, 100% backer protection, reduced listing fees etc. 

Is Blockchain the future for crowdfunding? 

There is no doubt that crowdfunding has enormous potential among investors in the market. Although the traditional crowdfunding mechanism has its own set of flaws, we cannot deny the fact that they have helped several entrepreneurs and creators raise substantial funds for their businesses and take them to the next phase. And with blockchain invading the crowdfunding space, creators and investors are assured more accessibility, flexibility, efficiency, and security. It is only a matter of time, blockchain disrupting the entire crowdfunding ecosystem. And, acquiring a blockchain-based crowdfunding platform can be the best thing that you do for  boosting the potential of your business.  

How to choose the best crowdfunding platform? 

As the demand and competition for blockchain-based crowdfunding platforms are strengthening with each day, many companies have started offering them for businesses. If you are overwhelmed with figuring out the right one for your business, here are a few factors you must consider, to identify the best crowdfunding platform for your business,

  • You must set clear, strategic and definable goals and ensure your crowdfunding platform adheres to it. 

  • Your crowdfunding platform should support projects in your particular niche or industry that you want to operate your business in. 

  • The platform should support different crowdfunding models such as equity model, donation model, lending model, hybrid model etc. 

  • Safety should be given top priority.

These are some of the basic factors that will help you jot down your choice of crowdfunding platforms. Apart from this, the most important factor is extensive research. Therefore, carry out your research without fail, choose the right blockchain-based crowdfunding platform, and ensure huge potential and profit for your business.