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Tania Grebennik
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Aug 15, 2018 · 4 min read

How Blockchain Can Make Crowdfunding More Secure

Today, the crowdfunding industry represents a $1 billion dollar industry

that is expected to grow to $1.55 billion dollars by the year 2022 (source).
Each year, the largest crowdfunding platforms host thousands of campaigns
and see hundreds of millions of dollars exchange hands.

Crowdfunding has undoubtedly provided broadened access to capital and

provided a viable alternative to loans and venture capital. With that being
said, there are also a number of shortcomings to the conventional
crowdfunding model.

In this post, we are going to explore problems around crowdfunding

security and potential solutions to these problems.

Crowdfunding Today

At its core, crowdfunding relies on trust: A new company or product is being

launched and the backers must put their faith in the founding team to be
good stewards of their capital. Platforms try to do their best to vet teams but
there they have little incentive to x this system, as it works well for them.

There are a rising number of Kickstarter scams — and there is a less talked
about problem as well. Some well-intentioned teams raise funds, start
developing (or manufacturing) their product, and run into problems.

Those familiar with crowdfunding will know what happens next: delays,
fewer and fewer updates to backers, and eventually an apologetic letter
saying that the product can’t be provided.

Wait. So where did all of my money go?

Enter Blockchain Technology

The current crowdfunding ecosystem relies on a standard set of tools: a

website, credit card payments, and email. The current system works but
was not designed, from the ground up, to handle crowdfunding projects.
When things go well, there appears to be little need to improve. But when
things go poorly, it becomes obvious where the current crowdfunding
system is de cit. One can reimagine the crowdfunding industry leveraging
the bene ts of a blockchain-based solution.

Blockchain technology provides the underpinnings of popular

cryptocurrencies like Bitcoin and Ether (the currency on the Ethereum
network). The blockchain also provides a robust, decentralized way for
information to be stored in immutable blocks — great for crowdfunding.

The ledger in a blockchain system would allow for accurate record keeping
of all campaign activity: before the campaign starts, during the donation
period, and after the campaign is funded. This level of visibility into a
project helps all parties involved, including the creators, backers, and
platform administrators.

By having an immutable receipt, you can have proof of your contribution

and the reward that is due to you. This is something that cannot be
guaranteed by the current system.

Furthermore, using blockchain technology allows for a more seamless

payment experience. Instead of requiring a credit card or debit card, a
blockchain-based crowdfunding platform could support at payments as
well as any number of cryptocurrencies. This opens crowdfunding up to any
person with a digital wallet and access to the internet.

A blockchain payment infrastructure is also inherently more secure, because

you are not entering your sensitive nancial information into a browser.
The blockchain also opens up a new world of features that are not possible
today.

For instance, we can use advanced identity veri cation that leverages the
blockchain — to ensure people are who they are they are. Blockchain
identity is well-documented and provides a level of security and trust that’s
not possible with today’s technology.

These features include the ability to reward helpful community members.

Today, there are a niche group of “superbackers” who have backed dozens,
if not hundreds, of individual projects. Superbackers are known for
providing helpful comments, sharing projects within their network, and
more.

A blockchain crowdfunding ecosystem could reward these superbackers by

providing special rewards or micropayments. Similarly, one could build a
reputation system that is secured with a blockchain — reducing the chance
that both creators and backers fall prey to scam.

Conclusion

At Pledgecamp, we’re working hard to develop a new type of crowdfunding

platform. We are building a platform where users can pay in crypto, but our
team wants to go well beyond that. A key feature of Pledgecamp is Backer
Insurance, a smart contract that holds the project funds in escrow until
conditions are met.

Smart contracts are important because funds can be provided to campaign

creators slowly, as certain predetermined milestones are met. These
contracts can also be written to allow community members to be a “check”
on projects. Community members themselves become a point of governance
and control — again, something not possible today.

Backer Insurance builds trust between creators and backers, while also
carefully tracking how funds are used, a breakthrough in the crowdfunding
world. We look forward to sharing more about our platform as we get closer
 to our launch date.

To learn more, please visit:

Our Website: https://pledgecamp.com/

Our Telegram Group: Pledgecamp Telegram

Blockchain Crowdfunding Crypto Pledgecamp

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WRITTEN BY

Tania Grebennik
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Pledgecamp
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The Next Generation of Crowdfunding.

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