How Crowdfunding Impacts the Crypto Market

Crowdfunding is a process where an organization raises funds for their project by asking the public directly instead of going to institutional investors. When it comes to the cryptocurrency market, crowdfunding has grown to become one of the most important parts of the ecosystem.

Crowdfunding in the crypto space started in 2013, with the first Initial Coin Offering (ICO) for Mastercoin. Later ICOs gave birth to projects that include Ethereum, Polkadot, and Polygon. NFT mints are another form of fundraising where project owners raise funds by allowing users to mint NFTs in exchange for a fee. 

Below we'll look at crowdfunding and how it relates to the crypto market.

Crypto projects trying to get off the ground and raise seed money may not have the resources to devote to seeking conventional sources of funding. Crowdfunding enables founders to get their project in front of the appropriate people and is more efficient and effective than trying to acquire a loan or find investors on your own. Founders can crowdfund directly on their site via an ICO or use a platform to run an ICO or Initial Exchange Offering (IEO). 

Founders can convey their projects' narrative, offer incentives for early investors (i.e lower token prices shorter lockup periods, etc.), and if using a crowdfunding platform they can benefit from having everything in one centralized area where their project can be easily discovered. 

In North America, $17.2 billion is generated through crowdfunding each year. Despite the ease of use and the potential to rapidly acquire cash, most crowdfunding platforms operating today come with inherent risks for project creators and investors.

For project creators, the risk revolves around privacy and the safeguarding of sensitive details, and for investors, it has to do with fraud. While some of these crowdfunding platforms have made attempts to combat scams and fraudulent projects, the vast majority fail to effectively protect both investors and entrepreneurs. 

SeedOn, a blockchain-based crowdfunding platform, has started officially accepting projects. Built on the Binance Smart Chain, the platform leverages its unique smart-contract escrow model to verify projects on three levels before they can start raising funds, offering a higher level of security and transparency. The expected launch of SeedOn’s platform will take place in late Q3.

SeedOn’s platform aims to make equity crowdfunding safer for investors and entrepreneurs alike by leveraging the transparency provided by blockchain technology. The platform releases the raised funds in stages based on the achievement of specific milestones, returning the remaining funds if a project falls short of any milestone. Projects looking to raise money on SeedOn undergo a three-step verification procedure before they are approved. 

The startup screening process starts with an AI algorithm checking for copyright infringements and ultimately ends up with a human manually checking and validating the AI system’s findings. In addition, SeedOn protects project creators by requiring investors to sign an NDA, which protects intellectual property by only allowing registered investors access to the project’s sensitive information.

To participate in a SeedOn crowdfunding campaign, investors simply purchase SEON, SeedOn’s native token, on a public exchange to then deposit into the SeedOn Finance wallet. Users can also pay with fiat money either directly on SeedOn, which is then converted to SEON on the platform’s backend, to raise the balance of SEON in the investor’s wallet. 

They can also pay directly through the crowdfunding campaign investment section, offering a viable option to non-crypto holders. SeedOn offered two private and public presales during SEON’s token launch in December 2021, collectively raising $1.4 million and selling out the second presale in under five hours.

Crypto projects usually create Discord and Telegram communities where prospective investors can speak with the founders, stay up to date with the latest news and discuss the project with each other. To develop social proof for their projects, founders need to attract clients that are interested in their product or service. It's more probable that people will accept their concept if early adopters have already done so. A big number of supporters, pre-orders, or media attention is all forms of social proof that may be used to your advantage when making a presentation to additional investors.

Interested investors may poke at weaknesses in a project's service or strategy. The truth is that project founders don't always have things figured out and it's not uncommon for projects to pivot away from their initial concept. Feedback from investors can play a role in the development of a project, these investors will often test out beta versions of the project and point out any pain points they come across. Founders should take this feedback on board and see these investors as early users of their product or service.

Starting a business is all about identifying a critical, unmet need in a project's target market and taking action to fill it. Founders should take advantage of any input they get from customers and incorporate it into their project's strategy. Crowdfunding has the advantage of bringing project founders closer to their investors and users, allowing them to interact with each other and respond to their inquiries, concerns, suggestions, and ideas.

Investors and early adopters and prospective brand champions help crypto projects to grow and gain additional users. They're the ones that put their money where their mouth is when it comes to your narrative, product, or service. Early adopters can help crypto projects to succeed by spreading the word about the product or service that is being offered. These early adopters often become evangelists for the projects they are invested in.

Crowdfunding has played an important role in the crypto market, helping to bring us new advancements, blockchain networks, and technologies. By working together with early adopters and community investors, project founders can bring new innovations into the crypto space.