Bitcoin 2.0 Crowdfunding Is Real Crowdfunding

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TechCrunch | | Oct 18, 2014

Bitcoin as real crowdfundingEditor’s note: Sandrine Ayral has been involved in the Parisian startup ecosystem for a few years, working for startups, a VC fund and TheFamily, a startup accelerator. She joined the bitcoin sphere for good last February when she joined Coinbase‘s remote team for a few months, and is now working on a new cryptocurrency project.

In the past few months we’ve been hearing a lot about how bitcoin’s underlying technology is going to revolutionize not only our monetary system, but also notary services, DNS, authentication, intellectual property ownership and data storage.

While most of the products and services that were supposed to emerge on top of the bitcoin protocol have yet to see light, there’s actually one application of the bitcoin protocol that has been developed by several bitcoin 2.0 startups: decentralized crowdfunding.

Kickstarter, Indiegogo and all the other traditional platforms act as the trusted third party that enables a crowdfunding campaign. Thanks to them, a backer can feel confident that the money he sends to the platform for a specific project will be effectively sent to the selected project if the target amount of the campaign is reached – or that the money will actually be sent back if the campaign fails. In exchange for his money, the Kickstarter investor gets access to a pre-order or T-shirts and other various “goodies.”

Crowdfunding platforms powered by blockchain technology remove the need for this trusted third party. They allow startups to raise funds by creating their own digital currencies and selling “cryptographic shares” to early backers.

In more intelligible words, this means that investors in a crowdfunding campaign get tokens that represent shares of the startup they support and can actually benefit from the token value appreciation. You would never see an Oculus Rift situation with such crowdfunding platforms.

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This is why the bitcoin community refers to bitcoin-powered crowdfunding as real crowdfunding. Enthusiasm around these projects is also tied to the fact that these platforms would be a real source of investment for other types of blockchain-powered applications and would help with the funding of bitcoin infrastructure.

Swarm, Koinify and Lighthouse are three decentralized crowdfunding platforms that have generated quite a buzz in the bitcoin community and actually received funding for their development in various forms.

Swarm used its own crowdfunding platform to raise funds in July and received $1 million from backers. The platform focuses on projects based on blockchain technology for now. It provides crowdsourced due diligence on each entrepreneur and team its platform backs to eliminate potential scammers.

Swarm just opened applications for the first five projects its platform will support, which will be presented at a demo day on November 5 in Silicon Valley. The company also “soft-launched” an incubator in Palo Alto to host bitcoin 2.0 projects: just like startup accelerators or incubators are a source for quality deal flow for a VC fund, building a bitcoin 2.0 incubator for Swarm seems like a smart strategy for the platform to spot interesting projects and encourage them to use its blockchain technology.

Another decentralized crowdfunding platform, Koinify, has just raised $1 million from IDG Partners, Brock Pierce’s AngelList syndicate and zPark Ventures to fund its development and build an easy-to-use interface. Koinify is focused on funding very specific projects related to blockchain technology and cryptocurrencies: decentralized applications, smart corporations, crypto infrastructure to make access to cryptocurrency easier.

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Mike Hearn, a BitcoinJ developer, developed Lighthouse, a crowdfunding application of the bitcoin blockchain that was more specifically built to fund bitcoin core development, lobbying and community involvement and — like Swarm and Koinify — next-generation bitcoin projects. Hearn won a $40,000 bounty offered by self-proclaimed bitcoin millionaire and entrepreneur Olivier Janssens.

True enough, for now most bitcoin-powered crowdfunding platforms don’t focus on consumer projects and are only going to appeal to bitcoin technology-savvy investors. Even if not mainstream, targeted projects by these platforms still deserve attention. They’re all based on one core principle and change of paradigm: switching from centralized to decentralized models and removing usually costly intermediaries and trusted third parties. A few examples of these projects are collaboratively owned IP and autonomous agents.

With collaboratively owned IP, instead of patents owned by huge corporations, patent pools can be owned by whomever holds a particular coin, decentralized autonomous organizations or distributed package delivery network.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place.  Join our growing network of industry stakeholders, fundraisers and investors. Learn more About Us | Support Canadian Crowdfunding.

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