Blockchain Crowdfunding Meets Kickstarter: Is This The Future?

In the last few years, sites like Kickstarter and Indiegogo have revolutionized the world for startups. Ideas that didn’t have mainstream business appeal were not only getting off the ground, but flourishing. Blockchain crowdfunding might just be the next step in startup evolution, helping important and interesting projects come to fruition.

Crowdfunding provides an excellent way for creative projects to find cash. Many small or obscure projects lay outside of the scope of traditional investment. This makes it very difficult for them to get their ideas off the ground. Kickstarter, Indiegogo, and others changed that, by allowing startups to connect directly with potential consumers in order to seek funding. They acted as a trusted third party to keep the money in escrow, helping to protect potential investors from being scammed. If the funding succeeds, customers get whatever was promised to them as part of the campaign. If not, their money will be sent back.

The problem with these established crowdfunding companies is that they are centralized bodies, charging high fees and also influencing the projects. Blockchain-based crowdfunding is set to be a game changer because it decentralizes the funding model from the likes of Kickstarter and other companies.

Kickstarter provides a service and there are costs to run that service, so it’s hard to blame them for charging 5% of the total funds received, with an additional 3–5% going towards payment processing. Despite this, it is still expensive. With blockchain’s distributed ledger, there is the potential to remove this third party, which will save a considerable amount of the fundraising costs.

Blockchain crowdfunding works by allowing startups to create their own digital currencies and sell them. This allows them to raise funds from early investors, while the investors also have the potential to make money if the value of their cryptographic shares increases.

Some advocates consider this a more pure form of crowdfunding, because it removes any intermediaries standing between the backers and the startup. It also has the potential to boost new blockchain platforms, because it will give the blockchain community a new way to fund its own projects. It appeals to the more anarchistic blockchain enthusiasts as well, because it allows them to avoid traditional funding methods.

How Does Blockchain Crowdfunding Work?

It is similar to Kickstarter, with the creators posting their project and then soliciting funds from a community of interested people. Where it differs is that the startups will be able to make their own cryptocurrency to sell to potential backers. These cryptocurrency tokens will be accounted for and kept track of by the blockchain, which makes it immutable and impossible to forge. The tokens represent shares in the project, and just like normal shares in the stock market, they have the potential to go up in value. These investments are referred to as cryptoequity.