What You Need To Know About Crowdfunding Platforms

One of the things you need to know in this media age is where & how you can raise funds for your business through crowdfunding.

”Crowdfunding” is a term that resonates with small, medium & big enterprises. Crowdfunding is basically the practice of funding a project or venture by raising money from a large number of people. In recent times, it is typically done via the internet.

Crowdfunding can be used to raise funds for several businesses including crypto startups. In this post, we’ll learn about cryptocurrency crowdfunding platforms. Before then, we’ll learn more about crowdfunding.

What is Crowdfunding?

Crowdfunding is the practice of financing a business venture, project, or cause by collecting small monetary contributions from a large group of people through online platforms.

These group of contributors could be friends, family, fans of your product, etc. depending on what you’re trying to fund.

This practice is known to be of help to entrepreneurs in many ways. It gives them a chance to promote their product, service, or venture to a large pool of investors with minimal financial risk.

This can be made possible by making use of online platforms dedicated to this course. To date, people have raised more than $34 billion worldwide using these platforms.

Types of Crowdfunding

There are three distinct types of crowdfunding that entrepreneurs can use to raise funds for their business. They are listed below in no particular order.

1. Reward Crowdfunding

This is a type of crowdfunding that offers backers of your campaign rewards. This could be exclusive experiences or an early version of your product or service.

2. Debt Crowdfunding

This method allows lenders to loan a portion of the funds and earn interest upon the debt repayment.

3. Equity Crowdfunding

This method gives supporters investment opportunities in exchange for equity or potential future return.

How Does Crowdfunding Work?

Crowdfunding presents you an opportunity to raise the substantial amount you need to launch your brilliant idea. Financing your products come from the online platform you choose.

When choosing where to launch your crowdfunding efforts, research your options—there are various fees involved. There are other sites which require no fee but you need to meet the target to get funds.

You’ll need to implement key strategies in promoting the products which is could be done via social media platforms.

What is a Cryptocurrency Crowdfunding Platform?

As Blockchain is getting a foothold in our world today, it is also having a great impact on crowdfunding. Many people have been making use of crowdfunding platforms for raising funds for their crypto projects.

In crypto crowdfunding, cryptocurrencies are used instead of the traditional fiat currencies. A cryptocurrency crowdfunding platform can be used to raise funds in this case.

In this regard, a startup will share an idea and a date for fundraising for that idea. A whitepaper, light paper, one pager or other documents about the idea is to be released.

Once the crowdfunding campaign begins, the startup accepts contributions from various crypto investors around the world.

If a particular doesn’t meet its goal, the funds are returned to the investors who have been part of its fundraising. If they got the funding above the threshold, then they can run their business with endless profits.

In some cases, a token can be created by the startups in an existing blockchain. This is to raise the funds through the crypto crowdfunding platform.

Types of Crypto Crowdfunding

In the crypto world, there are three types of crowdfunding. They are discussed below.

1. Initial Coin Offering (ICO)

An initial coin offering (ICO) also known as initial currency offering is a form of funding using cryptocurrencies. It is a popular way to raise funds for products and services usually related to cryptocurrency.

A company seeking to raise money to create a new coin, app, or service can launch an ICO as a way to raise funds. Investors or speculators buy this tokens or coins in exchange for fiat currency or other generally accepted or stable crypto assets.

The tokens/coins are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project successfully launches.

The token in question may have some utility related to the product or service that the company is offering, or it may just represent a stake in the company or project.

2. Initial Exchange Offering (IEO)

An initial exchange offering (IEO) is regarded as the evolution of ICO. IEO is far similar to ICO websites but has some significant differences. ICO websites can be created by any developer but IEO is carried out through crypto exchange platforms.

Here the startup’s white paper project will be completely checked and verified by the separate technical team of exchange to avoid fake IEO projects & crypto token scams.

Once your project is verified, you can easily participate in IEO and you can raise the funds. It is important that you will have to pay fees to the admin to help promote your project for token sales.

You’ll need to create your own token in this case. IEO is also recognized as the secure token sale platform where all the newly launched token sales will take place.

3. Security Token Offering (STO)

A security token offering (STO) is an an ideal crypto crowdfunding or fundraising platform where the newly released security token sales will take place.

In ICO’s and IEO’s, only the utility tokens will be taken place for the token generation event. Here, only the asset-backed security token will be sold to the distinct investors across the globe.

These security tokens are completely pegged with real-time assets like shares, commodities, real estate, or any other assets. STOs will have the whole ownership information of the investor. All these crucial data and information are digitally recorded in the secure blockchain.

STO platform offers a high level of security to investors and reduces the risks of token issuers as it is regulated. Like ICO & IEO, you’ll need to develop a security token to run an STO platform.

Conclusion

Crowdfunding is an effective way of raising funds for your business idea, nonprofit cause, or personal needs. This can be done through online platforms.

Crypto project startups and entrepreneurs also make use of crowdfunding. In this case, the funds are in cryptocurrencies. This has led to the creation of several tokens for this course.