Here's an idea to fix Crowdfunding.
Initial coin offerings are one of the most utilized benefits of blockchain technology. They’ve enabled visionaries to grasp opportunities despite the burdens that may be forced upon them by the lottery of birth. ICOs have allowed investors to access valuable cross-border investments that would otherwise be limited to only major venture capital firms. Despite their benefits, ICOs, which are a form of crowdfunding, are now undergoing an evolution as initial exchange offerings (IEOs) are gaining steam.
IEOs diminish the key issues that were faced by ICOs. The main problem with ICOs is that the public has to personally vet the teams hosting a crowdfunding campaign; meanwhile, in an IEO, exchanges leverage their deep resources to vet teams themselves. Such a mechanism greatly limits the potential for scam token sales which were so common in 2018.
A few examples of exchanges that are offering IEOs.
IEOs are redefining crowdfunding for blockchain and blockchain-enabled developments, but not all crowdfunding campaigns can benefit from IEOs. Many products exist in the physical world or simply operate as a software that cannot integrate a token.
Non-tokenized crowdfunding campaigns have regularly turned out to be a scam, faced a delayed launch, or complete product failure. In the end, the crowd funders are left with nothing and thus few first-time funders become repeat crowd funders. While IEOs cannot help the non-tokenized crowdfunding campaigns, a new blockchain project can.
Starting from Scratch: Crowdfunding
One of the key benefits of blockchain technology is transparency and this is what gave people the initial burst of trust in public token sales. While public sales weren’t perfect—and thus led to the rise of IEOs—they were at least not as opaque as centralized crowdfunding platforms.
Leading crowdfunding platforms like Kickstarter are open grounds for anyone to pitch a product even if they are unwilling to deliver on the promise. Such channels have become an easy means to acquire capital through the use of sly marketing tactics and portraying a seemingly good list of qualifications.
Platforms hosting such campaigns have little interest in whether or not the project is delivered as they claim their fees when the funds are issued to the project. Commission is guaranteed irrespective of product success and so many platforms unwittingly promote projects that can be well-marketed, even if the people behind the project are mere hustlers.
This is one of the few cases where an industry can legitimately be described as completely broken.
The crowdfunding campaign is in such a poor state that it doesn’t need enhancements, but a complete recreation. PledgeCamp, a new blockchain-enabled platform, hopes to create the first platform that is centric to the needs and safety of crowd funders.
Milestone-Based Fund Release
PledgeCamp is creating a platform where payments are released to founders over a period of time rather than an instant release. As a project reaches its milestones, additional funds are made available. Thus, projects on PledgeCamp will have to provide evidence of their progress to unlock raised funds.
The milestones and the approval of milestone completion is decided by the crowdfunders of a product. Through such a mechanism, a project’s backers will be able to decide how much capital to release during varying levels of progress in a project.
Insuring against Scams
PledgeCamp takes a unique means to security against scams. Whenever a person wants to launch a project, he/she must deposit a minimum stake that will be refunded if the project founder provides documents that add transparency to the development.
Moreover, with the milestone-based capital release, funds won’t be released in advance to begin with. Thus, if a scammer tries to launch a project, he/she will lose the stake that was deposited at the launch of the project. Once a project fails to prove its legitimacy, its staked funds are distributed among the crowdfunders.
Systematic Review and Mentorship
PledgeCamp is going to review and vet projects prior to allowing the public to view them. This is something that aligns with the evolution of ICOs to IEOs since an experienced team will make sure vetted projects make their way to the public eye. Beyond this, PledgeCamp also integrates some key aspects of an incubator.
Projects launched on PledgeCamp will receive advice from the PledgeCamp team, which includes successful entrepreneurs who have raised millions of dollars and delivered multiple products for mass usage. This experience will be invaluable to new projects but is typically only provided by incubators. However, new projects often need the mentorship of an incubator and so PledgeCamp will ensure this void is filled with its own team’s expertise and knowledge.
Crowdfunding is quickly becoming an integral part of the internet age. It allows people to circumvent the norms of fundraising and quickly bootstrap their way to delivering incredible products. Of course, such an opportunity has attracted nefarious interests but that isn’t enough to negate all the positive aspects of crowd funding.
Crowdfunding is genuinely broken, and the industry is in a dire need of evolution because of the incredible opportunity it can offer to the world by enabling the realization of tomorrow’s innovation.
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I have always just found the whole crowed funding thing to be super risky, and thought it would just fade out, but it is almost getting stronger.
I like the idea of having some form of collateral. There should be consequences for failing to deliver, unlike now. However, as long as the funding is greater than the collateral there is still an incentive to try to scam people. Regardless, it is still a great idea!
Note the part of the milestone-based distribution.
If the person doesn't deliver, he/she won't get funds past the first milestone.
Great point! You'd lose the collateral AND the remainder of the funds would be kicked back to the funders. If you make the collateral larger than the first distribution then it would make 100% scams impossible!
Since the project backers decide on the milestones, they have the power to make the stake equal to the first milestone. :)
this also is a good point, banks have operated this way for a long time. you must prove that the project is on course before the next stage of funding is released. good way to proivde confidence and protection to investors
Any efforts that work securing against scam is highly appreciated in today's crypto based economy. What a pity heard today from Binance.....
Yep, there's a lot to do to make web interactions safer.
Still longway to go as project still has to have a platform to interact. 2-3 years normally the time this type of projects take and then rest will depend on developing the userbase
You're up to date with things! :)
Though, I don't think it'd take 2 - 3 years.
Thankyou for the info. Im looking forward to next level africa to begin, the first of its kind crowdfunding product to exist with a asset based NLA cryptocoin.
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I do think crowdfunding can play a major role in that.
I deeply understand that market need protection and that investors needing it too, but... what about Creator/Project Founder? If Creators have starting capital, maybe they can fund investor by himself, not needing a expensive Crowdfunding campaign.
Mentors and Incubators already ask to the Creator a lot of money to "certificate" business model and business plan, marketing strategy and team skill.
In other hands, Investors have a good opportunity to get great revenues from a success project and... in my mind, where a great revenue is possible then a big risk is included. Don't you?
Realistically, the founder only needs to match the first milestone for the project to be completely safe. There could easily be 20-some milestones in a good project and that means with 5% of the needed capital, a founder can reach funds for the entire project.
It's an intriguing outline and well thought out. Cryptocurrency is still a bit of a niche concept. Crowd funding reaches out easily to just about everyone. The idea may be to find ways to introduce more people "Normies" to cryptocurrency.
@hatu, You've travelled in depth way in this post and yes, Blockchain brought the true Transperancy and definitely more adoption of Public Blockchain system will raise the trust because of the Point Of Transperancy.
Keep up the great work and keep spreading more knowledge.
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I liked thanks for the information @hatu
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This post has been resteemed!
Good luck!
Thanks! :)