Hackernoon logoWhy Decentralized Crowdfunding Could Be The Better Option by@Sergeenkov

Why Decentralized Crowdfunding Could Be The Better Option

Andrey Sergeenkov Hacker Noon profile picture

@SergeenkovAndrey Sergeenkov

Cryptocurrency analyst. Founder and editor at btcpeers.com

Running a successful crowdfunding campaign in the cryptocurrency space has posed many roadblocks over time.

Finding a solution to this problem will require a decentralized approach. Centralized crowdfunding is not what this industry needs right now. 

Centralized Crowdfunding Has Many Downsides

Although the concept of crowdfunding offers many opportunities on paper, one can't ignore the drawbacks either. The fast way of raising money and different take on pitching projects or business has helped many companies become successful.

More importantly, crowdfunding can help generate community feedback before launching products or new ideas. 

While all of those advantages are positive, one has to consider the drawbacks of traditional crowdfunding too. The first hurdle to overcome is raising money successfully.

It may not necessarily be easier to convince the public rather than VCs or other traditional investors. More potential investors mean more people that may reject the proposal, potentially resulting in fewer funds being raised.

Secondly, there are numerous centralized crowdfunding platforms to choose from. In the cryptocurrency industry, the majority of those platforms are operated by exchanges.

Having such a strong brand facilitating the sale is worthwhile, but there's also a trade-off. When raising money through these platforms, there are fees and other requirements to contend with. 

For many companies, it is essential to weigh up these downsides to the potential benefits one can achieve through centralized crowdfunding. Moreover, it is essential to look beyond the traditional platforms to raise capital in this modern era.

Trading in centralized options for solutions that offer more decentralization and better transparency can prove worthwhile for those willing to take the plunge. 

The Benefits of Decentralized Crowdfunding

There are several advantages associated with decentralized crowdfunding today. The first benefit is how it is considered to be more accessible. Not just in terms of giving the public access to companies looking to raise money, but also for companies looking to raise money quickly.  All of this still hinges on whether the business plan is viable, however.

The biggest benefit of decentralized crowdfunding is the transparency it brings to the table. As there are no intermediaries involved, there is a clear money trail to follow.

Moreover, platforms often rely on smart contract technology to ensure the money being raised is spent on what the companies need to pursue rather than wasting funds. For example I am considering investing in Teslafan, which enables interaction between fundraisers and the crowd through smart contracts. Also, their users can donate to sustainable energy charities through the platform. Participants can unlock this functionality through the TESLF utility token. 

Another benefit to explore is the cost-efficiency of decentralized crowdfunding. As no intermediaries are involved, there is a significant reduction in costs to organize the sale and collect money afterward. As startups often need every cent they can scrape together, efficiency on the fees front is essential.  

Closing Thoughts

The internet has given way to crowdfunding opportunities in many different forms. For some companies, the traditional and centralized approach - with its lack of transparency, high fees, and other drawbacks - remains favorable due to its "legacy appeal". Centralized platforms are more commonly used than their decentralized counterparts, but that narrative can change over the coming years. 

The advantages of decentralized crowdfunding solutions are visible for everyone to see. More transparency, global availability, and lower fees will benefit both companies and potential investors alike. To make these benefits stand out, project operators will need to enhance the overall appeal of blockchain-based crowdfunding solutions. Landing some big projects, or tackling prominent industries such as renewable energy, are potential ways to achieve that goal.

Disclaimer: I have plans to invest in Teslafan, so I can have a vested interest in the project

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