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Crowdfunding: Crypto’s Newfound Lifeline
By Laxmikant Khanvilkar
We are aware of crowdfunding activity in social sector which has given a big boost to start-ups of all kinds. More recently, entrepreneurs who announced digital currency projects have found shelter in crowdfunding.
It is believed that traditional funding options such as venture capital firms or angel investors proved autocratic, which at times made the possibility of striking business deals too challenging. However, the emergence of crowdfunding is viewed as a more democratic way for fund access and has a potential to revolutionize the way new projects are financed while tapping into a global investor pool.
There are many advantages of using crowdfunding option. Ability to reach global audience has been a key factor to turn the tide in favour of exploring the crowdfunding option. That’s the most viable proposition for securing funds as compared to traditional channels. It is a way to leverage the power of internet and blockchain technology which helps secure funds from potential investors comprising of diverse group of supporters.
Besides widened investor base, crowdfunding enables building a more transparent and accountable relationship with investors. Through smart contracts, the company looking to raise funds can automate fund distribution activity while ensuring desired returns to investors. In a way, the option allowed to develop trust-based relationship as well as credibility of the crowdfunding process. This is very essential in an era of growing skepticism about traditional financial system and a desire for more transparent and accountable investment opportunities.
Apart from democratizing access to funding, crypto crowdfunding looks to liberate the decision-making process from the traditional crowdfunding models, such as venture capitalists or angel investors overriding the decision about projects viability. While in case of crypto crowdfunding, the decision solely resets within a decentralized network of investors, giving projects the opportunity to secure funding from a larger and more diverse group of supporters.
Not all is rosy for crypto crowdfunding, there are certain challenges as well that needs to be addressed. Regulation is the key challenge since the legal landscape surrounding crypto crowdfunding is still evolving in many jurisdictions. This can make it difficult for projects to navigate the regulatory environment and ensure compliance with relevant laws and regulations.
Another concern is the security issue. There have been instances of scams or frauds in the past. It is important for investors to thoroughly evaluate the risks and rewards of any given project before deciding to invest, including reviewing the team behind the project, understanding the technology and business model, and carefully reviewing the terms of the crowdfunding campaign.
To sum up, the potential benefits of crypto crowdfunding are clear. By democratizing access to funding and empowering projects to tap into a global pool of investors. There is immense potential to revolutionize the way projects are financed and create opportunities for entrepreneurs around the world. Given that the technology is still evolve, it may see more and more projects turning to crypto crowdfunding to raise capital and bring their ideas to life.
Yet, it is important to take a stock of challenges and risks involved, the issue of regulation and the security of funds, to make informed investment decisions.
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