Crowdfunding x Tokenization

Source: Coinstelegram

Crowdfunding, or startups selling pre-orders for a future product, is a business model becoming more and more common among entrepreneurs and companies. It refers to both starting their business from scratch and those who are eager to develop it.

Crowdfunding stands for convenient and affordable financing directly on the part of future clients (sponsors). This concept is crucial for aspiring entrepreneurs at the idea stage since none of the banks in any country would offer a loan: after all, there is no operating business yet. Moreover, being at the zero stage, you should not expect financial support from venture capital companies. Therefore, crowdfunding is really an optimal solution, although it also has its drawbacks.

Crowdfunding Problems

The potential of investment capital pools is enormous. People will always look for new opportunities to increase their savings. Thus, crowdfunding, as one of the most affordable simple investment schemes, should bring massive incomes.

Unfortunately, this is not the case so far, and it only covers US $5 billion of the market overall, which is a drop in the ocean on a global scale. As a rule, crowdfunding only covers private markets, and this type of investment sorely lacks globalization.

In addition, investors do not have the opportunity to sell their deposits within a reasonable time. That is, this market has no liquidity as such. So now, in 2021, it’s safe to say that crowdfunding hasn’t gained massive interest yet.

Blockchain technology and the digital economy are entering almost all fields of activity, and crowdfunding is no exception. Tokenization can solve the above problems of this sector. However, it is not like classic ICOs, yet, it is the future for most projects.

Problems of current ICOs

  • The overwhelming number of ICO investors are just short-term speculators who want to fix profits as soon as possible. They absolutely do not care about the project`s future. Compared to equity investments, such investments are measured in years.
  • Lack of regulation at the local level. About 95% of all ICOs are just capital raising, nothing more, as their offer does not meet actual user demand.
  • Many projects do not inspire trust at all.

Tokenized crowdfunding should solve all of the above problems.

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