Why crowdfunding on the blockchain attracts hundreds of millions of dollars

The idea of crowdfunding is not new. In the eighteenth and nineteenth centuries, writers and philosophers were often drawn to cash or a security of investment for their future works. After some time, this concept has found application far beyond the arts. During the construction of the pedestal of the statue of Liberty government funding was not enough. The result was the public campaign to raise funds, which attracted more than 160 thousand donations, and they helped to complete the construction.
However, only with the growing popularity of online projects, primarily — again, in the field of creativity and entertainment — has obtained access to financing of the parties concerned in them of ordinary members of society.
And here about 2013, when implying a direct and equal interaction between the cryptocurrency bitcoin first began to attract General attention, the idea of a direct public support has been combined with the new technology of the blockchain. The result of this Union was born the concept of ICO, or Initial Coin Offering: a new, highly efficient method of fundraising in the Internet era.
ICO and classical crowdfunding

ICO (perechea offer token) — crowdfunding campaign on the basis of the blockchain. She has a lot in common with traditional crowdfunding, but there are some key differences.
As with traditional fundraising, the ICO is committed to investment in a new project from the concerned community. In this case, funding is likely to be using bitcoins or other cryptocurrencies. The nature of these digital currencies allows you to send them to the recipient anywhere in the world, quickly and almost without cost, as well as outside the traditional banking system. Anyone who has ever tried to transfer funds abroad, just appreciate these benefits.
In exchange for their investment, each supported the project participant receives the amount invested the corresponding number of tokens. In the early days of the holding of the ICO often involves the creation of a new, separate blockchain — operation, which usually is achieved by copying the bitcoin code and make a few changes in its basic parameters — for example, changing the total amount of cryptocurrency in the system. There were, however, some crypto platform, created from scratch. Recently, the accepted tokens to create and store existing and proven blockchains, which greatly simplifies the process of ICO.
Tokens can generate profit different ways, but usually this is due to the growth in demand, due to demand provided by the service platform, since the implementation of dividends on the basis of the blockchain, being a very simple technical challenge, in many countries it is considered illegal scheme for profit. As in the case of bitcoin and other cryptocurrencies, these tokens are freely exchange or trade between users. If attracting the attention of investors the project is successful, the value of tokens will grow.
ICO become a mass phenomenon

One of the first ICO was conducted in 2013 by the founders of the cryptocurrency platform called NXT. At that time the idea was bold: the platform allows anyone to create their own tokens and trade them for peering exchanges as well as to send encrypted messages and more. Project creators set a maximum limit to raise funds for 21 BTC, and the campaign was attended by about 70 investors, received its proportional share of tokens for about 2 Satoshi. A few months later the NXT token cost on exchanges 8-10 thousand Satoshi. The experience of this campaign formed the basis for many later appearing projects, but it looked like all done in the spirit of the time: progressive, but rough.
The gold standard for crowdfunding on the blockchain became Ethereum, ICO which was conducted in the summer of 2014. The Ethereum (Ethereum) — platform for smart contracts, execution of code, which occurs automatically, without the involvement of trusted intermediaries and irreversible, similar to the approach of bitcoin in relation to money. Campaign for one month collected $ 18 million in bitcoins. It was one of the first success stories in conducting the ICO, and the Ethereum thanks to the funds has grown significantly and gained momentum over the years. As a result, the platform is a second blockchain with a market capitalization of almost $ 30 billion.
The precedent has inspired many, causing serious interest. So the time has come for the ICO. When the situation in cryptocurrency markets has improved and the currency began to rise in price, the interest increased dramatically. Last year was rich in large ICO, but apparently, his records seem to us insignificant at the end of the year.
One of the most important campaigns of 2016 was ICO Waves platform to create a "specialized tokens", developed with the aim of providing everyone the opportunity to raise funds and run its own token. Despite the fact that for this purpose it is quite suitable and Ethereum, and even earlier blackany like NXT, its the best time-traveled, and prosperous multimillion-dollar projects, project Waves was developed specially in order to make this process as simple and intuitive. Waves caused considerable community interest, with the result that he managed to gather 30,000 BTC or $ 16 million at the exchange rate at the time.
Today, many prominent projects are launching their own ICO as Ethereum and Waves. Hundreds of millions of dollars of investment already made in conducted on these platforms ICO. Most of this amount came in Ethereum — a consequence of the larger it community, market capitalization and an earlier start of the project. As examples, some success stories can allow the ICO innovative browser Brave (token BAT), held on 31 may on the basis of Ethereum and collecting 35 million dollars per minute, the decentralized control Aragon (Ethereum, $ 25 million, may 17, less than 15 minutes), applications for market forecasting Gnosis (Ethereum, 12.5 million dollars, April), and many others.
Today there is a tendency at the same time use for ICO and Waves, and Ethereum, for redundancy and attracting attention to both communities. This approach recently helped MobileGo, an initiative that promotes cryptocurrency payments among online players, to attract a record amount of 53 million dollars. In addition, the ICO began to use cryptocurrency or virtual Internet projects: a new approach gradually penetrates the market for traditional venture capital, providing funding for very real, tangible business. Project ZrCoin recently managed to raise over 7 million dollars on the Waves to launch eco-friendly plant for the production of zirconium dioxide — a key raw material for many industrial applications.
Competition with venture capital

In the past year in various ICO was invested in a total of 331 million dollars, that is a third of a billion dollars, against which eclipsed $ 140 million venture investment into blockchain startups. And this trend is only gaining momentum. Fees eight-figure sums are not uncommon, and the very pericei offer tokens in fact has become the most profitable method by which the blockchain can provide funding for their initiatives.
ICO — competitor for traditional venture capital financing, although it is a competitive indicators are currently very small: despite the General decline of the venture market in 2016, its size is still impressive $ 127 billion.
However, the blockchain is just a set of tools that can be used by any needed, including those for a very effective Supplement conventional VC funding. Starta ICO — another run on the Waves initiative is an effective combination of these two approaches: the project plans to provide promising Eastern European technology startups with all the necessary resources ("crowd" or conventional financing) and other training that will enable them to access the lucrative American markets.
More probable is the scenario of the democratization of venture financing with the help of the blockchain that allows people to invest in fast growing companies without the typical for such cases, obstacles that previously always faced ordinary investors.
About the author

Kairat Kaliyev - CEO Cross Coin, ICO conductive Starta Accelerator. Economist with more than 13 years of experience in the financial sector, expert in the field of Finance and ecosystems for startups. Currently is the Deputy Director of the Department of financial technologies International financial centre "Astana" in Kazakhstan.

Source: https://bits.media/news/pochemu-kraudfanding-na-blokcheyne-privlekaet-sotni-millionov-dollarov/

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