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With cryptocurrencies like Bitcoin, we’ve already seen the potentially disruptive effect of blockchain technology. Using blockchain, all transactions are completely peer-to-peer and decentralized, and that means that these transactions can take place in a much faster and much cheaper way than if financial intermediaries were involved. So what does all that mean for the world of crowdfunding?
Kickstarter on steroids
One way that blockchain could impact the world of crowdfunding is by making possible an entirely new fundraising platform for social media creators. The amount that people could potentially raise would dwarf the current levels of online crowdfunding. Moreover, in a world where creative projects are funded with blockchain technology, it would be possible to raise money for meaningful creative projects without the need for venture capitalists and angel investors.
A world without VC firms is already the reality for a crowdfunding site like Kickstarter, where people raise money from “the crowd” without needing to involve a VC firm or any other financial intermediary. If you have decent social media skills, you can then promote your crowdfunding project across every social media platform – like Facebook, Twitter and Instagram. You simply direct people to your Kickstarter campaign page and watch the funding commitments roll in!
Goodbye, venture capitalists and banks, it was nice knowing you
But the blockchain takes this to the next level by transforming how money changes hands. You no longer need financial intermediaries – everything can take place peer-to-peer without banks or credit card companies. With a crowdfunding site like Kickstarter, you still need Visa or MasterCard or PayPal, right? How else are you going to get your money to the creator who is running the crowdfunding campaign? Unless you physically live next door to the guy or girl running the campaign (and can walk over with a suitcase filled with cash), you need the help of banks, credit card companies and financial companies to move money.
But what if I told you that there was a way to avoid the banks entirely? Yes, you’re right, it involves blockchain technology. There are now more than 1,000 blockchains in the world. The one that everyone has heard of, of course, is Bitcoin blockchain. But there are also plenty of popular blockchains – like Ethereum and Ripple – that are gaining major traction. Just like Bitcoin blockchain, these alternative blockchains are also powered by digital cryptocurrencies.
A new paradigm for crowdfunding made possible by blockchain
And it’s these cryptocurrencies that are the key. Some people have referred to them as “Internet magic money,” and it’s easy to see why. It’s almost as if money has been created out of thin air and is now able to be traded worldwide, to anyone who is also on the same blockchain. And it’s all encrypted!
This is where things get really interesting, because a social media creator in Philadelphia can now get funding for any project he or she wants in a matter of minutes simply by getting on the Ethereum or Ripple blockchain. Once you’re on the blockchain, people can send any amount of cryptocurrency they want to your digital wallet. Once it’s in your wallet, you can use it however you want.
It’s easier than you might imagine – and it’s also mindboggling. You are still raising money from the crowd, but this “money” is the “Internet magic money” made possible by blockchain. And guess what? You can pull this off without ever pulling out your credit card or calling up your bank. That’s what makes it so revolutionary and head-spinning.
One day, instead of talking about a major Hollywood movie with a budget of $100 million, we might be talking about a movie that cost 10,000 BTC (Bitcoin). Instead of book authors getting advances and royalties measured in dollars, we could be talking about ICOs (initial coin offerings) and free airdrops of the next big alt-coin. Exciting times, indeed!