Bitcoin’s Blockchain To Enable True, Decentralized Crowdfunding

Bitcoin and crowdfunding have been a bit of a mixed bag.  Various Bitcoin projects have had great success when it comes to reaching crowdfunding goals, whereas other equally promising projects won’t even reach 40% of the amount required.  Regardless of all of these statistics, decentralized crowdfunding is definitely attracting a lot of attention as of late.

Removing The Need For Third-Party Support To Hold Funds

The concept of crowdfunding is a revolutionary idea, both for individual investors and aspiring entrepreneurs alike.  Rather than relying on one or two major angel investors to help an entrepreneur’s idea come to fruition, every individual on this planet can back a project in exchange for items or privileges of some degree.

In recent years, platforms such as IndieGogo, Kickstarter and many others, have seen a tremendous uptake in number of users and projects being backed.  But there is one major flaw shared with all of these systems: they act as a third-party, effectively controlling user funds without offering any transparency whatsoever.

Granted, it is possible to see how many people have backed a project and what their name is.  But once the project has been successfully funded and the money is distributed to the entrepreneur(s), there is no way to see how this funds is being used.  As a result, various crowdfunding campaigns have been suffering from complaints by backers who never received their promised items or privileges.

Bitcoin industry experts go as far as saying that this was never a proper form of crowdfunding.  Only by using transparent technology, such as the Bitcoin blockchain for example, can we achieve “true crowdfunding” as it was intended to be used.  Early backers can buy digitally created tokens from companies looking to raise funds and obtain a share of the company/project they are supporting financially.

In a way, real crowdfunding could serve multiple benefits and solve a lot of issues and concerns regarding the current form of crowdfunding.  Investors receive stock in the project they back and blockchain technology can even be used to expand the Bitcoin ecosystem.  New projects, which aim to expand the number of blockchain-based applications, could be funded using this exact same technology.

Real Crowdfunding Platforms With Blockchain Technology

In the past 24 months, various blockchain-based crowdfunding platforms have opened their doors to the public.  Names such as Swarm, Lighthouse and Koinify have become synonymous with issuing digital tokens to represent a stock in the company looking for investors.  However, not all of these platforms are being used often enough, especially when it comes to expanding the Bitcoin ecosystem itself.

Bitcoin itself is a concept that proves to be difficult to grasp for the everyday person, let alone how they could use the virtual currency for crowdfunding purposes.  All of the aforementioned platforms could use a simplified user interface to guide novice users in the right direction.  Additionally, more consumer-focused projects would generate a lot more interest in these platforms, rather than just looking at Bitcoin 2.0 projects.

That being said, decentralized crowdfunding offers a lot of interesting perspectives for the Bitcoin ecosystem in the long run.  But there is also the danger of turning away venture capitalists, once they find out that individuals will have a say in these companies as well.  A mind shift will need to take place before we can transition from centralized to decentralized crowdfunding and Bitcoin will play an important role in achieving that goal.

Source: TechCrunch

Images courtesy of Shutterstock