How Does the Blockchain Technology Elevate Crypto Crowdfunding Platform?
Crypto crowdfunding is an effective platform for startups and entrepreneurs to raise funds in a reliable streamline.
In this modern technology era, everyone might be aware of the emerging technology - Blockchain. Blockchain technology is continuously nourishing in acceptability over the last decade with several use cases across various business prospects. Blockchain technology is considered the most disruptive & complex technology. This technology is implemented in all major industries and transformed the industries into a new level. The real power of the technology is to keep track of transactions securely. Blockchain helps to maintain high privacy, transparency and provides a hack-free environment. Thus, it’s a suitable platform for creating crypto tokens and other crypto-related projects.
Blockchain technology gave birth to many crypto coins, tokens, and many innovative projects in the crypto space. In blockchain technology, there are two types of blockchains such as private blockchain and public blockchain. In recent years, Blockchain technology is gathering a vast amount of popularity and creating new opportunities for many budding crypto startups and entrepreneurs around the globe. So the people who start a business are implementing blockchain for making profits and enhancing security.
With the advent of Blockchain technology, innovative crypto fundraising concepts are gaining viability with the start-up community. Currently, crypto crowdfunding has grown steadily as a perfect alternative to venture capital funding. As a result, many blockchain projects had a new audience and raised funds for their cause. Therefore, many people showed interest in crypto crowdfunding platform development.
In this article, let us take a detailed look at how blockchain technology elevates the crypto crowdfunding platform.
Let us begin with
What is Crypto Crowdfunding?
In general, traditional crowdfunding is a process of raising funds for a new project or venture from the different masses. In this platform, people provide contributions/investments to create a larger investment for meeting the requirements. The crowdfunding concept has been around for ages now. Also, there are many examples where artists, startups, speculators, authors, and philosophers have crowdfunded their works. In traditional modern-day crowdfunding, there are three different types - Donations-based, rewards-based, and equity-based.
When it comes to crypto crowdfunding, it is the same as a traditional crowdfunding platform. But here instead of raising funds in fiat currency, people will raise the funds using cryptocurrencies through selling their newly launched crypto tokens. In a crypto crowdfunding platform, a company or a startup will share an innovative idea and a date for raising funds. In the crowdfunding campaign, they will release a white paper with complete information about their project and other paramount documents about the idea. Once the crowdfunding campaign begins, the project owner accepts contributions from different crypto investors globally. If you are a crypto enthusiast, then you can also try on creating a new crypto token in an existing blockchain platform like Ethereum, Tron, or Binance smart chain to raise the funds effectively through the crypto crowdfunding platform.
In case, if a funding threshold doesn’t meet their expectation to successfully run a crypto business. Then automatically the raised funds will return to the respective crypto investors. Suppose they got the funding above the expectation, then he/she can run the crypto business by making an ample amount of profits. As the usage of crypto coins is increasing daily, so many crypto startups and enthusiasts are showing interest in creating a secure crypto crowdfunding platform. That’s why there is a great demand for crypto crowdfunding platform development.
How Does Crypto Crowdfunding in Blockchain work?
As we know that blockchain technology is a powerful distributed network so it is perfectly capable of managing and exchanging under a smart contract. Blockchain technology will be more helpful when it comes to managing rewards and equity-based crypto crowdfunding campaigns. The process of assigning rewards and equity against their contributions can be completely automated by using blockchain smart contracts for performing the crowdfunding process.
Crowdfunding campaigns in the cryptocurrency world sell the newly launched crypto-tokens in exchange for either bitcoin, Ethereum, or any other popular crypto coin or token. The funds raised in the crowd sale platform are then used for further development processes. The new crypto tokens purchased by the users of the crowd sale are equivalent to both rewards and equity in traditional crowdfunding. Blockchain technology and cryptocurrencies are proven to be capable of meeting the needs of any industry in the world.
How Crypto Crowdfunding in Blockchain Disrupts the Traditional Crowdfunding?
As I previously said, the crypto crowdfunding platform works in blockchain technology. So it disrupts traditional crowdfunding by providing high-end security, privacy, and transparency for individual campaigns. Besides, blockchain technology ensures safety and trust between the creators and token purchasers. Experts in the blockchain community predict that crypto crowdfunding can become more robust, efficient, and secured with the help of blockchain technology. This technology will help with complete access to any big business from anywhere around the globe. So it automatically helps them to maximize the success rate of the business.
By considering these reasons, many startups, entrepreneurs, and business class people started to create blockchain crowdfunding platforms for making profits. Therefore, many providers started offering a best-in-class crypto crowdfunding development service and that will enable an easy and efficient crypto fundraising process. If you are looking to raise funds for your blockchain project through the crowdfunding platform. Then, you need to know the different types of crypto crowdfunding platforms available in the global marketplace. Let’s take a look at the various kinds of blockchain-based crowdfunding platforms which fit best for your crypto business.
Types of Crypto Crowdfunding Platform
In the world of cryptocurrency and blockchain, there are different types of crypto crowdfunding platforms. Here is the list of the three main types of crypto crowdfunding platforms that are prominent in the marketplace.
ICO (Initial Coin Offering)
Initial coin offering is a well-known crypto crowdfunding platform in the crypto industry since 2017. The Initial coin offering is also known as a crowd or token sales platform for newly launched crypto tokens. And those crypto tokens are completely hosted on a blockchain. By creating a new-fangled crypto token with extraordinary features will help startups or companies raise the funds effectively in this platform. While running an ICO campaign, investors, traders, or other individuals can buy crypto tokens with an exchange of any prominent crypto coins like Bitcoin, Ethereum, litecoin, or whatever it can be. In the ICO token sale platform, there will be no interference from the government or central authority.
In the Initial coin offering, anyone can visit the platform and read the documentation behind the startup’s idea. If any crypto investors want to support their idea or project, they need to wait until for the token sales. The crypto investors can use any crypto coins or tokens in exchange for some number of tokens from the token generation event. The owner of the blockchain project can set minimum funding. As already said if the expected funding isn’t met, then all crypto investors will receive a refund on their contributions. In the crypto industry, if anyone is having an innovative blockchain project or idea. Then, they will first go with the ICO platform and raise their funds quickly. Therefore, startups or entrepreneurs who are willing to launch an ICO platform will use bug-free ICO script software from the trustworthy ICO development service provider in the industry.
Pros of an ICO
- Anyone can easily raise their funds effectively with the proper white paper and innovative ideas.
- Anyone can create an ICO website and there is no need of being well-financed to get started
- Launching cost is low.
- The installation process is simple when compared to other crypto crowdfunding models
- High liquidity in a short period.
- Investors have full control of their funds
- No government intervention
Cons of ICO
- Less regulation and limited security options. So there is a chance of token scams.
- It is not a great option for long-term investment.
- Once you raise funds through the ICO, you need to wait until listing that token in exchange for making more profits.
IEO (Initial Exchange Offering)
Initial Exchange Offering is also a popular crowdfunding platform in the crypto sector. It also acts as a feature or module in the crypto trading platform. Some popular trading platforms named this module as an IEO launchpad. When ICO projects are gaining prominence in the crypto market, on the other side, the IEO model entered into the marketplace as a new crypto crowdfunding platform. Experts in the blockchain community say that the IEO model is the evolution of Initial Coin Offering. The IEO and ICO have one significant difference. ICO crowd sale platform can be developed by any developer. But the IEO module can be carried out only through crypto exchange platforms.
IEO is the secure crowd token sale platform where all the newly released utility token sales will take place. When it comes to IEO, the white paper will be completely checked, analyzed, and verified by the technical team of exchange to avoid fake token projects & crypto token scams. After the verification, one can easily participate in IEO and raise the funds.
However, to participate in IEO token sales in any exchange, you need to create your own crypto token with the help of a professional token development service provider in the industry. Here both the exchange owners and the one who is creating the crypto token will get profited. Besides, there will be no contribution to smart contracts but they need to create a KYC verified account in the trading platform.
Pros of IEO
- There is no need for additional efforts to raise the funds.
- IEO will remain as a reputed crowdfunding strategy.
- The regulatory level makes the platform trustworthy and protects investors from fraudulent activities.
- Crypto tokens will be listed immediately in the exchange
- There is no possibility of scammed tokens
- It requires only KYC/AML from the users.
Cons of IEO
- They are still utility tokens and not backed with any assets.
- Investors will have less control.
- Funds will transfer directly to accounts so there is a chance of losing your funds
STO (Security Token Offering)
The security token offering module is introduced into the marketplace to replace the ICO platform. STO is a powerful crypto crowdfunding platform where the newly developed security token sales will only take place. Security tokens are backed with real-time assets like shares, commodities, real estate, or some other real-time assets. The security tokens will have the whole ownership information of the investor. All you need to do is create a security token by considering all the SEC rules and native government rules. The STO platform reduces the risks of token issuers. If you want to build an STO platform, then you can buy premium STO script software.
Pros of STO
- In STO, security tokens backed with real-world assets. So there will be no chance of scammed tokens or any other malware activities.
- Security token offering is a trusted and more secured crypto crowdfunding model in the blockchain space.
- STO is more effective and productive for long-term investment
Cons of STO
- Fundraising costs will be high
- Complex to execute
- Security Token offering platforms will have strict regulations, so cross-border payments are difficult
- Like ICO, you have to wait for your security token to be listed on the digital exchange platform for trading.
These three are the main types of crypto crowdfunding platforms and are more popular in the global crypto marketplace.
As of now, crypto crowdfunding has great popularity and enormous potential among crypto investors in the industry. And with blockchain invading the crypto crowdfunding space, creators ensured more accessibility, efficiency, and security. At this current time, creating a blockchain-powered crypto crowdfunding platform can be the best option that you can do for boosting the revenue of your business. Hire a team of skilled blockchain developers from a leading crypto crowdfunding platform development service provider and launch a crypto crowdfunding platform right away!