Crowdfunding is an age-old concept prevailing in the market globally. It is a highly possible way for earning more investors for your business. Small start-ups primarily prefer this to raise funds for their businesses. There are many crowdfunding platforms on the internet for companies to conduct their fundraising campaigns.
But in recent years, crowdfunding platforms have become centralized. The crowdfunding platform will receive the funds from the investors and will not provide the entire funds to the companies. This has increased the need for a more decentralized platform for fundraising.
Explore the needs for a decentralized platform for crowdfunding
When it comes to raising finances, you need a trustworthy platform to carry out the actions. In some security cases, crowdfunding is also known as crowd investing. The crowdfunding portal is an intermediary for the companies to collect the finances from the investors and does not involve in selling the shares directly.
As a crowdfunding platform, there are many procedures involved in it as the platform deals with collecting money from the investors. Its role does not stop here, and the platform will transfer the money to the companies.
This is where the actual problem begins. Since it acts as a centralized platform, it will decide the funds and shares for the company. Apart from this, there are few points to take into consideration about a crowdfunding platform,
The first biggest concern is raising funds, as it is challenging to convince investors to invest their money in a company. Every fundraising campaign begins with a goal. If their targeted goal is not achieved, it will result in great loss for them.
Levying more fees
These crowdfunding platforms levy higher fees from the organizations to conduct their crowdfunding campaigns. For start-ups and small businesses, it is not affordable for them to spend too much money.
These crowdfunding platforms are centralized, and when the donor invests their funds, there is no guarantee that the companies will receive them. It is upto the crowdfunding platform to secure the money or give them to the company. This paves the way for scam and loss of funds.
Would you like to build a crowdfunding platform with Blockchain technology?
How blockchain technology enters the picture of a crowdfunding platform?
With a decentralized crowdfunding platform, the fundraising activities are transparent enough for the companies to understand the funding process. There are no intermediaries, and there is a trail over the cash distribution also. The fees for these decentralized platforms are considerably low when compared to the traditional crowdfunding platforms.
Moreover, these platforms also involve Smart contract technology to monitor the funds raised from the campaign. This will save the companies from wasting their funds.
Blockchain-based decentralized crowdfunding platform – An alternative to the traditional crowdfunding platform
Blockchain-based systems have created a massive demand among industries as it is safe, secure and trusted. It is decentralized that helps in overcoming the challenges faced by the traditional crowdfunding platform. Blockchain is also known as Distributed Ledger Technology, and it makes the history of digital data unalterable through decentralization and science hastings.
Blockchain decentralized exchanges provide a scope of peer-to-peer exchange of two digital assets without the interference of any third parties.
Benefits of a decentralized crowdfunding platform
Most of the traditional crowdfunding platforms depend on the conventional financial system. This kind of system will look feasible only for a particular set of people. To attract large masses of people, you need an intelligent financial system. With the advent of blockchain technology, the platform will accept both fiat currencies and multiple cryptocurrencies like Ethereum.
Through this, you can attract many people to your platform, and the reach will be worldwide.
Smart contracts are programs stored in blockchain, which run till achieving the predetermined goals. It helps to avoid intermediaries for crowdfunding by automating the execution of agreements written in two code lines with the buyers and sellers. The code controls the performance, and the transactions are also trackable and irreversible.
The Cryptocurrency market is reaching a great height. Cryptocurrencies like Ethereum are already a part of crowdfunding. A decentralized platform will raise its fund by creating its tokens on the blockchain and distributing them to investors. Asset tokens become their form of currency, enabling the organizations to own them profusely.
Unlike traditional crowdfunding platforms, there is quite a transparency in storing data and financial information. It is evident for the companies to keep track of the status of the fund transfers. The crowdfunding campaigns will take place without any intermediaries.
What are the other crowdfunding platforms?
Blockchain crowdfunding started with the Initial coin offering(ICO). It is a platform for businesses to raise funds from the public without centralization. It involves issuing digital tokens in exchange for cryptocurrencies like Ethereum.
Security Token Offerings(STO) is a combination of ICO and IPO. After the downfall of ICO, now STO has marched into the market. STO offers three different types of tokens – Equity tokens, Debt tokens and Real-estate tokens.
Initial Exchange Offering is a new entrant to the market. Unlike the ICO and STO, IEO deals with cryptocurrency exchanges.
White-label crowdfunding platform development
The advent of blockchain technology and cryptocurrencies gave a new dimension to crowdfunding. There are many options for entrepreneurs to conduct their crowdfunding campaigns. Crowdfunding platforms like ICO, IEO and STO are wholly decentralized and provide a secure platform for the companies to conduct their fundraising.
With the assistance of blockchain app developers, it is easy to launch a white-label crowdfunding platform. Appdupe is a leading blockchain development company that is an expert in offering blockchain solutions for various industries. Our White-label decentralized crowdfunding platforms will be an excellent avenue for entrepreneurs to earn more profits.
Blockchain technology has already set its foot in many industries to build their operations and activities. A decentralized blockchain platform is the dire need of the hour for carrying out crowdfunding campaigns. Are you willing to establish your crowdfunding platform with blockchain technology? Contact us soon and schedule a meeting with our expert team.
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