Introduction

Crowdfunding has been around for decades, with the first successful campaign being for a short film in 1997. Since then it has become a staple of the internet and many businesses have used this method to fund their ventures. In recent years, however, there has been an influx of new methods of crowdfunding that involve blockchain technology and cryptocurrencies. These newer forms of crowdfunding are often more focused on providing broader utility rather than just raising funds from investors who want some sort of return on their investment (ROI) in the future. This article will compare traditional ways of funding projects with emerging ones based on blockchain technologies and cryptocurrencies like NFTs (non-fungible tokens).

The old traditional way of funding a project is by asking people with large pockets

Up-and-coming business owners would talk to banks and investors and try to sell them on their ideas. The investors would then get shares in the company in exchange for their money. The problem with this funding is that you give away a significant amount of control over your company, since now it's not just your money at stake but also someone else's.

This way of getting funding is not ideal for all businesses. If your idea is bold and unconventional, rich investors might not want to take the risk. Look at the example of TerraVision - the company that created the protoplast of Google Earth. They wanted to find investment but weren't able to, because their idea was too visionary for their time.

The idea of 'normal' crowdfunding is to ask people with small pockets as well

Crowdfunding is a way to raise money from small investors who are willing to invest in you, your product or service. The idea of a “normal” crowdfunding is to ask people with small pockets as well. It's a great way to get exposure and funding for your project. However, it's still notoriously difficult to comply with regulations and market your company among investors. Also, you have to provide them with information that might give your competition an advantage.

The problem with classical ways of funding your business

Have you ever wondered why it’s so hard to get funding for your business? It’s not just because of a lack of money, but also because there is no way to easily distribute equity in a company. This means that traditional methods of fundraising are slow and difficult, as they involve many different people who all have their own interests to consider. For example, giving shares requires you to give up some amount of control over your company. You may also have to comply with regulations and provide extensive business data if you apply for bank loans or venture capital investments on top of the legal fees associated with them.

Emerging ways to fund your business

With the rise of decentralized finance, new ways of funding have been created. Blockchain technologies are used more and more often by companies of all shapes and sizes. In fact, they’ve already become a standard way to fund startups in the web3 world.

Blockchains in themselves are not a separate way of funding. They're just a container for different types of instruments. In fact, there are two most popular ways of receiving backing using blockchain technologies: tokenization and creating NFTs.

Tokenization

This is the process by which an asset can be represented by some sort of digital token. This enables investors to perform all their typical trading activities on exchanges or in other channels while still being able to trade with physical assets that have been converted into cryptographic tokens.

For example, Google could create their own GOOG token and allow people to own any amount of it. The owners of the token (knows as holders) would then get a portion of Google's profits and any other benefits Google decides to provide them with.

NFTs (non-fungible tokens)

NFTs are also known as non-fungible tokens. They are a special type of tokens that can't be broken into fractions. That is, you can't buy 0.5 of an NFT. You have to buy a whole amount.

One advantage of NFTs is that you can distinguish between individual tokens. Since people cannot break a token into pieces, each one becomes its own entity. This allows you to reward the most helpful token holders or create "tiers" of tokens to attract investors.

This individuality can also be a disadvantage. If your token gets expensive, people unwilling to invest large amounts might be driven away.

Tokenization of assets was introduced only recently with blockchain technology and cryptocurrencies

With a platform like Kickstarter and Indiegogo, entrepreneurs can raise funds for their idea by pre-selling the product to investors. The investors get a stake in the company by buying shares. In return, they receive a portion of your business's income over time.

This is called equity funding or traditional equity financing. Investors can also have voting power on important matters regarding your company if you choose to give them that right—in other words, they're shareholders who have rights over how you run your business and make decisions on behalf of everyone else involved.

Launching NFTs is a different way to fund a single product or even your entire firm

Tokens, or NFTs (Non-Fungible Tokens), are a new type of token that can represent ownership over different assets. They don't have to be fungible tokens, which means that they cannot be broken down into smaller parts and can only be traded as a whole. Non-fungible tokens are distinct from one another like trading cards or coins, so it's possible to have multiple copies of the same token with different attributes.

The most popular use case for NFTs is financing a single project. For example, an e-commerce business can create a club for most loyal customers. Entrance to that club would only be allowed if you have the right NFT in your wallet. People inside would get benefits such as free shipping, discounts and webinars.

NFTs are often more focused on providing utility, they don't need a tangible underlying asset

When you create a NFT, it's not just about creating a digital representation of an item with little to no functionality. The NFTs themselves can have their own utility. For example, you may allocate voting rights for one year or lifetime to someone who buys your tokenized ticket to an event. With this model, people buy tickets from the company and then get access to exclusive content within the platform itself. In addition, they could be given exclusive rights on other products that come out later on in the future as well as being able to sell those rights if they want at any point during its tenure within the network itself. This way everyone wins because there is more value being created by everyone involved!

How do I even launch a token?

To launch a token, you need:

• A blockchain that supports smart contracts. Ethereum is the most popular one, but there are other options like Cardano or Solana.
• An ERC20-compliant smart contract for your token. These are programs that will manage the lifecycle of your token and allow users to interact with it (buy/sell/receive tokens).
• An ICO marketing strategy. This includes building an audience around your project and its vision, as well as promoting it among potential investors before the launch date (if applicable).
• Legal counseling. Only an experienced lawyer will be able to create the appropriate documents and terms of service that would apply to the buyers of your token.

Fortunately, Parlour Development can help you with all of this. We can write the code of your token and contact you with the best legal and marketing experts in business.

What about the environment?

Most blockchains use great amounts of energy while confirming transactions. This contributes negatively to their carbon footprint and sustainability. However, not all chains are like that. To give an example - Solana uses a method called Proof of Stake that radically cuts down on wasted resources.

Apart from choosing an environmentally-friendly blockchain, many projects try to offset their footprint by planting trees or contributing to awareness campaigns. With good marketing, such a contribution might even become a magnet for new customers.

We are happy to help you find the balance between sustainability and profit when choosing between normal funds and blockchain-based ones!

Conclusion

If you’ve read this far, then I hope it has convinced you of the need to explore tokenization as a fundraising alternative. It’s not only a great way to raise money for your project or business, but also saves time and effort compared with traditional methods like equity crowdfunding. The process itself is simple enough if you have some basic knowledge of how blockchain works: all you need is an idea and some capital investment from third parties who are willing to buy tokens in exchange for future profits (or even just because they believe in your vision!).