Crowdfunding platforms such as Kickstarter have had tremendous success over the past few years, but just imagine the advantages that blockchain technology could offer to crowdfunding platforms.
The concept of User Issued Assets is starting to gain some traction within the cryptocurrency community, and the first thing I think of is how blockchain technology could forever change the method by which individuals crowdfund and raise capital. I'm not talking about companies that try to have individuals place pre-orders for products in the future, but rather the companies that use these platforms to raise capital in exchange for an equity stake in the company. While companies have more access to Venture Capital than ever before, raising capital is still a very tough task for many small businesses and startups. The use of a centralized platform such as Kickstarter is an excellent method of connecting those looking for capital with investors, but there are still many flaws in the platform and the way in which the equity is distributed.
A great example of how a company could utilize blockchain technology to enhance their crowdfunding attempts is the EOS token distribution. While the EOS token distribution is a bit different because of its length and the method in which it was established, the idea that a specific amount of equity will be distributed to investors based proportionally on the total amount they invested compared to the total invested. These types of crowdfunding contracts are used today, but the ability for investors to hold a token that entitles them to a portion of ownership or equity could be much safer for potential investors. Instead of a small company attempting to distribute ownership in the form of stocks, utilizing tokens to represent ownership is a revolutionary concept. Unlike stocks, these tokens could likely be traded between individuals with ease and speed, and would allow investors of all size to have the ability to move their holdings 24/7 rather than only within the hours of the market. Large investors have the ability and connections to trade during off hours, but many small investors simply have no practical method to trade outside of the market hours.
'Tokens' represent a more physical form of ownership than traditional financial instruments.
If the tokens are distributed properly, than they could enable users to have the ability to vote on company matters proportional to their ownership stake, just like stockholders do in a traditional company. While this may not seem revolutionary a whole new level of transparency and power could be granted to stakeholders big and small, and would likely be much more efficient. The 'wait period' when buying stocks and other financial instruments is completely unnecessary and inefficient at this point, and a properly designed token would be able to clear in under 5 minuted compared to numerous days. The use of tokens could grant a whole new level of liquidity to stakeholders and investors, and would really give a greater ability for everyday individuals to invest in the platform.
Both Bitshares and the Peerplays network have implemented a method of paying 'dividends' to their stakeholders, which is a revolutionary idea within the cryptocurrency market. The idea of 'redistributing' network fees back to the stakeholders is a genius idea, and will likely continue to gain traction and attention over the following years. Offering incentive to stakeholders to continue to hold the token is very important, and many projects have presented very achievable and practical methods of achieving this. Regulation within the United States and many other countries will definitely be a major hurtle to the adoption of utilizing tokens to represent ownership, but the government will either come to their senses soon and propose reasonable regulation, or a platform will find a method to enable this type of system outside of the reach of the government agencies.
Crowdfunding could be so much more than just raising capital for a new business, everyone from musicians to sports starts could benefit from distributing 'ownership' assets.
It may seem crazy to imagine being able to buy an 'ownership' stake in your favorite musician, but it's actually been done before. In 1997 David Bowie released what came to be dubbed 'Bowie Bonds', and was able to raise over 55 million dollars. The 'Bowie Bonds' simply entitled the holder to a portion of all of his future earnings, so it could be compared to owning a direct equity stake in a company. This may seem weird, but this could enable both artists and investors to enter into a mutually beneficial relationship. It could be used as a method for the artist to virtually 'hedge' against poor record/ticket sales in the future, while enabling them to ensure that they have enough money regardless of the outcome. If future revenue is much greater than they expected, they still have access to a portion of that revenue, and the stakeholders of his bonds would have access to the rest. If future revenue is lower than expected, then the artist is still okay because they hedged against the possibility of that happening, and it's the stakeholders that may experience the financial hit.
If a small or local band is very good but simply can't raise enough money to have a chance to 'make it big', then they could give up a portion of their lifetime earnings in exchange for the capital they require. The current regulations that surround the financial industry would make this insanely difficult, but it could be easily achieved through the distribution of token based assets. These token based assets would have to be a recognized instrument, or something else to that extent to ensure that the agreement is honored into the future.
As cryptocurrencies continue to gain traction and popularity, the concept of distributing the earnings automatically through cryptocurrency payouts becomes realistic. The power of being able to distribute individualized token based ownership assets is an incredibly powerful concept, and will only continue to become more popular into the future. This ability to distribute ownership stake and the ability to pay out 'dividends' are some of the buggiest indicators that Bitshares is a great investment and will be brought into the mainstream over the following years, and I am beyond excited to see how it ends up playing out.
I really hope that you enjoyed this post, and as always I urge you to leave any comments, input, questions, ect. in the comments below! Thanks for the continued support and thanks for reading!