By Tecra Space Team
How popular is crowdfunding nowadays and what new shape is it taking?
Interestingly, few people know, that the world-renowned Ethereum Cryptocurrency project was launched using funds gathered through conducting a crowdfunding campaign. Back in 2015, the creators raised $18,439,086, which allowed them to launch a project that is now well-known and in full demand by people all over the globe.
But what is crowdfunding, and why is it a future we should look out for? The official Cambridge Dictionary defines crowdfunding as the practice of getting a large number of people to each give small amounts of money in order to provide the finance for a project, typically using the Internet. Over time, the concept has definitely changed and evolved, as even one person can contribute a large amount of money to help a project grow. All in all, crowdfunding can be for any purpose. If you have a dream that you want to achieve, you can go ahead and start a crowdfunding campaign. It’s not important whether you want to establish a company, get involved for philanthropic reasons, or simply purchase a bicycle. The most crucial step is to get people interested in your project or idea, and the participants will gladly get involved in helping you reach the goal.
Now, let’s take a look at how crowdfunding works from a more commercial point of view. In this type of fundraising, both the creator and the investor have high interest in the growth of the project. For obvious reasons, every company wants to become more prosperous over time and receive only good market returns, regardless of the amount of money to raise. If the project is successful, the stock market value will spike and the investor will be rewarded for their loyalty.
But is crowdfunding really just a form of raising funds for a project, and a way for an investor to earn money? In reality, it has numerous advantages that are beneficial for all participants.
For the creator
- Raising non-credit funds
- Getting initial recognition on the Internet
- Developing the community
- Getting an objective assessment of the project from the existing community
- Adjusting the project plan, even during the campaign
- Absence of bureaucratic fuss and preparation of documents for investors.
For the investor
- Low entry threshold
- Receiving bonuses from the company
- Earning income, if the project is successful
- Having the funds returned, if the project is failing
- A well-diversified investment portfolio
- Tax incentives.
The disadvantages of crowdfunding
- Tight projects filtering
- A need to increase project renown from the ground up
- All or nothing principle, which means you either reach your financial goals, or all funds are returned to investors
- Possibly a long period of waiting to receive rewards for the investor
- A risk of not starting the project, even after the campaign is over
- A theft of the idea by big corporations, which implement them faster
- Handing over too much of one’s business to investors.
The elements mentioned above are more present in the traditional crowdfunding. Despite its fast development, there are various other forms of fundraising such as crypto crowdfunding, which is gaining more and more popularity. Even though these two forms are similar in many aspects, there are still some key advantages to blockchain fundraising.
Crypto crowdfunding on the Tecra Space platform
To understand the whole idea better, we will analyze it using Tecra Space, as an example. One of the main elements of our platform is the ability to conduct crowdfunding campaigns using blockchain technology. We use it to ensure user privacy: reduce the costs, create smart contracts, simplify the investing process and secure all transactions. All in all, we wanted to have those qualities implemented into our platform to improve the experience for both project creators and investors.
If the project complies with the platform’s requirements, then we accept it and the following step is to prepare all the materials necessary to have the project listed on Tecra Space. At the moment we manually upload it to the platform, but in the future the content management system will be fully controlled by the creator of the project, and they will be able to implement changes as they see fit.
Tokenization of the project
For every project listed on Tecra Space we create a project token on our blockchain. Even though they can be bought directly on our platform, it is possible to put tokens of completed projects in your Metamask wallet. Available options of purchase are FIAT, USDT and TCR, but we recommend TCR since discounts apply with that form of payment.
Hard Cap and Soft Cap
Deciding on these two amounts is an indispensable element of the crowdfunding process. Hard Cap is the maximum amount of money, that the creators want to raise, while Soft Cap is the minimum amount, without which the project cannot come to life. Each campaign has a time limit set up in which it has to raise Soft Cap, although there is an option of investing even after that. However, if the minimum amount is not gathered in time, the collected funds are returned to the investors and the fundraiser closes.
A crucial advantage for project creators are low fees for using the platform, collected after the fundraiser is finished. The project has to pay 7% of the total amount collected: 3% for Tecra Space commission and 4% for TCR burning.
Our platform model is very convenient for the investors, because each startup has an obligation to redeem project tokens at the market price during the period of time set by the plan. There’s no need to wait for the company to be listed on an exchange, and there are lots of bonuses from both the project itself and from Tecra Space.
To ensure the investor’s safety
- Secure token buyout plan
- No minimum investment amount
- Project payout in stages, along with achieving milestones
- The transaction is always confirmed with a smart contract and recorded on the TCR 2.0 blockchain
- Automating the process of investment, funds allocation and withdrawal
- Secure data storage — all the documents are stored digitally on blockchain.
Traditional crowdfunding has been present in our lives for a long time. Despite its great popularity among Internet users, it presents various difficulties, such as minimum entry threshold, strict filtration, no guarantee of the actual launch of the project, etc. Our crypto crowdfunding method solves the issues listed above, opening investors and project creators to new possibilities available on the market. Even though our platform is still in its MVP form, we can say with full certainty that blockchain-based crowdfunding is superior to traditional one in multiple ways. We wanted to have more than one fundraising model to provide flexibility and diversity, but we strongly suggest crypto crowdfunding, due to a higher success probability. No minimum investment amount makes that method very inclusive, because anyone can get involved in the fundraiser. The investor can feel secure, since every transaction is recorded with a smart contract, and a clear token redemption plan makes receiving income more intelligible. Additionally, we disburse the funds according to milestones reached by the company, so in the worst case scenario the funds will be fully returned to the investor.
All in all, we are facilitating the use of our platform to improve your experience with Tecra Space, no matter if you’re an investor or a project creator. If you’re unsure as to which crowdfunding method will suit your business better or just have some follow-up questions, you’re welcome to reach out to us on Telegram or via email.