Crowdfunding is a popular way for businesses to raise money for projects. In truth this method has opened up new opportunities for start ups. So, to make use of the opportunity a number of crowdfunding platforms have also come up. Their job is to host the projects and connect them to potential investors. However, the centralized structure is a big flaw in the whole system.
Lack of transparency
Not all the projects are able to raise enough money and so are not realized. But despite this, the pledges are collected and an investor cannot get their money back as by the time they realize that the project will not come to reality, the money back period is over. Also the platforms themselves charge a big percentage as fee which is an added burden on the project creator. All of this add up to give crowdfunding a bad name.
How decentralizing can help
Use of digital currency or tokens to collect the money can truly turn crowdfunding into Decentralized Crowdfunding. Blockchain compliant hosting sites are the best option for anyone trying to raise money for a project. This technology can be used as a bookkeeping tool that can keep track of all the investment made till date.
The investors will be able to see where the money is being allocated and how much money has been raised. The investors can be kept appraised of how far the project has gone and the rate of progress; being able to be in touch will help increase investor confidence in a project. Decentralized Crowdfunding will ease the exchange of money as the transfer will be direct without the need for any third party. And all the parties involved can communicate with each other at will. This increased transparency will attract more and more investors to a project and increase the chance of raising the amount of money required to take the project forward.