Cryptocurrencies and blockchain technology have disrupted the way many industries do business. One specific area where new opportunities have sprung to life thanks to this pioneering innovation is crowdfunding, or the business fundraising sector.
Traditional Business Funding Methods vs. Crowdfunding
When a company is looking to raise funds, it usually turns to banks, venture capital attempts, or it results in self-funding.
Nevertheless, these traditional business funding methods are proving to be more difficult as companies are being required to comply to several rules and regulations. This can lead to a restriction of receiving funds because cash flows or revenues aren’t performing well, or it can inhibit their growth potential.
These limited funding methods have introduced a new way of raising funds called “crowdfunding”. This is a relatively new approach for companies who want to raise money for their projects online.
There are different online crowdfunding platforms for investing opportunities, such as KissKissBank or Ulule. These platforms connect project leaders with agents who have financial power. Usually, the funds raised via crowdfunding come from regular people – they give small amounts that end up helping companies reach their fund targets.
Blockchain technology acts as a transparent public distributed ledger that makes the funding process safer, without any intermediaries. This technology has proved to be positively disruptive for the crowdfunding industry on a global scale.
Crowdfunding has proved to be a game changer in the industry as it decentralises the funding model, eliminating the need of a centralised body. This means that high fees which can influence projects are less likely to be incurred.
Thanks to this ingenious technology and its beneficial features, crowdfunding platforms and those who are issuing their own cryptocurrency via an ICO have a greater chance of success.
What is an Initial Coin Offering?
An Initial Coin Offering, also known as an “ICO” or “token sale”, is a relatively new way of raising funds by issuing digital assets (called tokens) that are exchanged for cryptocurrencies like Bitcoin.
Tokens usually represent “shares” in the project and they have the potential of gaining value – this type of investment is often called “crypto-equity”.
ICOs are often referred to as “crowdsales” – they work in a similar way to crowdfunding, as anybody that has an internet connection can invest in a project, provided that they own cryptocurrencies.
When a person wants to invest in a project, he/she usually exchanges a certain amount of cryptocurrencies for the equivalent tokens that are issued by the ICO. These tokens will appear in the blockchain to keep track of every transaction and everything remains immutable.
OpenLedger from CCEDK
OpenLedger is an example of one of the most famous crowdfunding projects to have launched using blockchain technology. This is a secure and decentralised trading platform, or a stock market for crypto-equity, where investors can exchange their new digital coins.
The use of blockchain technology could rise tremendously, introducing investors to more ways of investing their money.
The various uses of blockchain technology are likely to bring more and more innovations to several business applications. It looks like the crowdfunding industry is about to benefit highly from this ground-breaking technology.