Bitcoin And Crowdfunding

Bitcoin has created many financial opportunities for businesses and individuals. One of those opportunities that sometimes gets overlooked is raising money through crowdfunding. Those who are trying to raise the money to complete a project, produce some creative work such as a music album, or even to help with unexpected medical expenses can use crowdfunding to attract many donors. It can also be beneficial to allow crowdfunding with Bitcoin in addition to fiat currencies.

Decentralization is Common to Bitcoin and Crowdfunding

It seems that Bitcoin and crowdfunding were made for one another. They have both achieved mainstream recognition and popularity within the last ten years, allow for some level of privacy and anonymity, and are both decentralized platforms.

Decentralization has different meanings in the context of Bitcoin and crowdfunding, but the main definition is the same for both. It means lacking a central authority. With Bitcoin there is no single authority that controls the cryptocurrency. With crowdfunding there is not one donor or one donor platform. There can be many donors, each of which can decide their own amount to contribute independently of everyone else.

There are some individuals and businesses that want to decentralize the process of raising funds. The answer is crowdfunding combined with Bitcoin.

Think about this. How many times have saw a television program or a commercial about children with medical issues or perhaps children that have no access to clean drinking water? Most likely many times. You want to help a child in need but you want to be able to donate to the child or their family directly. That is what a decentralized platform allows you to do. You can give funds directly to the one in need without a middleman or third-party.

Blockchains and Bitcoin as Disruptive Crowdfunding Technologies

You might often hear of Bitcoin and blockchains described as disruptive technologies. In this context disruptive means in opposition to the status quo. It means something that has the power to change an existing way of doing things. Bitcoin and the blockchain are disrupting a lot of industries right now, and with each passing day it is like a snowball effect.

Bitcoin is very much disrupting models of business fundraising. You already should know a few basic things about a blockchain. It is essentially a decentralized ledger that is immune to alteration once records have been added to the ledger. The fact that a blockchain record cannot be changed or manipulated means that it is very secure.

Enhanced security for a fundraising campaign can’t be a bad thing, right? But there are more blockchain advantages when it comes to crowdfunding than just increased security. One of the most important is access to funding that one might not be able to get otherwise.

The traditional ways of funding a business include self-funding, a bank loan, or someone willing to invest venture capital. All of these methods carry their own disadvantages. The great majority of small businesses are self-funded which puts all of the burden on the owner of the business. A bank loan can be expensive and also hard to qualify for. Ask anyone who has wanted to open a restaurant how easy it was to get a loan. It isn’t. More people are turned down for loans than are ever approved. For venture capital you need a big idea that it potentially worth millions. Otherwise, you won’t even get a meeting with a venture capital firm.

Crowdfunding businesses potentially solves this problem. There are many crowdfunding platforms available to those who need to raise funds. These include Kickstarter, Indiegogo, and more. While some people do very well with these platforms, the great majority fail. Only 78 percent of those who create a crowdfunding campaign on one of these platforms reach their goal. But what it most concerning is that these platforms completely overlook many individuals who need capital the most. These are those in developing countries. Just 1.9% of crowdfunding campaigns benefit developing countries.

How Bitcoin Could Change the Crowdfunding Game

Think about this. You are living in a very poor country that has little access to clean drinking water. You have come up with an idea that will solve this problem to some degree, but you need money to make it work. There is little money available in your own country. You need to attract potential donors from more affluent areas of the world.

To further complicate matters you have no standard form of ID, perhaps because at one time you were forced to flee a region of the world as a refugee. That means that you cannot obtain traditional banking. How are donors to your water project ever going to get you the funds that you need to supply clean water?

The answer could be a crowdfunding campaign with Bitcoin. Bitcoin does not require a bank in order for you to receive and even use it. You do not need an ID to create a Bitcoin wallet, although you are required to have one if you use a crypto exchange. Best of all, you can accept Bitcoin donations from all over the world without worrying about fees for fiat currency conversion. Accepting Bitcoin also simplifies the process for donors in this way. They don’t have to figure out a way to send money across borders through an international transfer.

Now, we get that this is a very basic example and that it doesn’t address some of the hurdles in crowdfunding. For example, there really isn’t an established and successful Bitcoin-only crowdfunding platform like Kickstarter or Indiegogo. There are a few that are attempting to do it but their success has been minimal. There needs to be work done in this regard. There are some platforms beginning to emerge that will allow people to borrow Bitcoin from individual lenders.

The point that we are trying to make here is that Bitcoin and blockchain technology offers a lot of potential for crowdfunding. This could be a huge help to those who find it hard to raise funds in other ways for their business or project.

Leave a comment