What is token crowdfunding and how does it work

Sep 13, 2021
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What is token crowdfunding and how does it work

           Traditional crowdfunding is simply defined as raising money (particularly through an online campaign) for different kinds of reasons. It is sometimes an even more powerful way of financing a project over banks or angel investors because it can include, all in one, the support of friends, family, and those who can identify with the struggles of wanting to achieve a dream and not having the means to.

It is indeed such a wide idea, that it has found life in every existing niche, artistic, cultural, and sports type projects, raising funds for charitable causes or supporting individuals in need in a collaborative fundraising fashion. Also, crowdfunding campaigns support the development of products, inventions, or commercial ventures.

What is crowdfunding through tokens?

          However, nowadays a new way of crowdfunding has come to life, and that is through token creation. The global tokenization market size is expected to grow up to USD 4.8 billion by 2025, the opportunities are rising in such a way that it is impossible not to idealize it. Tokens brought into the game the chance to fundraise, yet invest in people as if you were investing in stocks.

Since tokens can give people 2 main features that traditional crowdfunding cannot give:

-Trading: To allow your supporters to earn back on the success of your project. It means people can support you like they could with any traditional crowdfunding campaign but since they become token holders as well they also can get monetized if your idea turns out to be truly successful in the future. They can resell your token and let other traders buy it for different prices speculated in the market and enjoy the benefits, services, and products that you offer through your tokens.

If people use tokens to crowdfund they are giving others the chance to participate in the market fluctuations and keep the project ideas alive, for as long as it is demanded. This means a wide range of usability and true sustainability, nor like a simple crowdfunding campaign that would get to an end.

-Independence: People can list their tokens on other trading and exchange environments and get paid for their tokens using different platforms thus encouraging autonomy. This also means people can have more control over their money choosing where they want to sell, in which market, and if they want to sell part of their tokens at a certain moment and release the rest on another.

This also includes the fact that crypto crowdfunding platforms are more friendly to accept other kinds of projects that aren’t welcomed at all inside the usual method. People can choose to change the motives behind their campaigns and keep using the same token if they want since a campaign through tokens isn’t necessarily linked to a platform and a particular unchangeable reason.

How does it work?

          Just like in traditional crowdfunding methods, tokens can be used by inventors to fund their projects. Anyone can ask for small contributions which can quickly add up to thousands of dollars to be used in the development of their ideas.

A token creator can hope to find individual investors who will give large sums of money, perhaps in exchange for a reward when the project is completed. This doesn’t mean he is selling securities, but people love to be recognized as early adopters or get public recognition for their support. Such recognition can come in the form of a VIP session, a special badge, participating in a live broadcast, a personal interview with the creators, and much more.

Crowdfunding through tokens can also help people raise funds when tragedy strikes. For example, a crowdfunding campaign can easily be set up to help a family member or person who needs money to pay for medical expenses. There is the chance as well to create campaigns to support a wider issue such as a natural disaster and the consequences of economic crisis for children.

Learn to do it:

          Through tokens, anyone can choose what is the path their campaigns will take. Whether it's meant to raise a little or a lot of money, or if you want to do it for a business project, an individual, or a charitable cause, the steps are the same.

-Get started by learning about cryptocurrencies and understanding the basics.

-Create your own token and describe the project or idea you have to let others know about you.

-Plan your token release period considering your objectives.

-Back up your tokens with the services and products you offer.

-Create airdrops to encourage holders.

-Share, share, share.

Overall, don’t forget to be honest with what you do. People want to be able to trust in you and your idea to become supporters till the end. Being truthful can make the difference to become really successful.

You can find more information about this in our HELP section. Don’t forget to join our social media as well, and ask our admins if you need guidance.