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Blockchain-based replacement for traditional crowdfunding: DAOs

Cointelegraph | Okonkwo Chinonso  | May 2, 2022

DAO funding - Blockchain-based replacement for traditional crowdfunding:  DAOsDecentralized autonomous organizations are providing relief from some of the problems that plague fundraising.

One of the most out-of-the-blue crypto headlines of 2021 is probably ConstitutionDAO. A hurriedly assembled group of United States constitution-loving crypto believers. The group raised more than $47 million in Ether (ETH) to purchase an original copy of the United States constitution at auction. The group ultimately fell short in its bid but the audacity of that endeavor brought DAOs power to crowdfund to mainstream attention.

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The ingenuity of that move and what it nearly accomplished provides a template for how traditional crowdfunding could be better managed. ConstitutionDAO got tens of thousands of addresses to donate $47 million without a marketing team or a dedicated growth director.

DAOs are next on the ladder of modern crowdfunding

Digitalized crowdfunding in the form of DAOs has eliminated some traditional limits of the financing form. The simplicity makes it a disruptive force to traditional crowdfunding methods.

Blockchain technology allows for more reach: One perk of blockchain technology is that it is censorship-proof. This makes all applications built on blockchains censorship-proof as well. This removes restrictions that traditional crowdfunding sites might otherwise impose on individuals or businesses. In the United States, businesses are not allowed to raise more than $5 million in a year from crowdfunding websites. 

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High flexibility and low regulation:  DAOs are highly flexible and so far have minimal regulations from authorities. Every member that joins the DAO shares the risk among themselves (depending on their financial contributions) should the purpose of the DAO fail to materialize. The members of the aforementioned ConstitutionDAO who requested refunds received their money back, although gas fees were lost.

It’s feeless (mostly) and leaderless:  Using conventional crowdfunding platforms exposes you to fees that vary by platform and can be a fraction of whatever amount you submit for a project. With a modern ecosystem and cryptocurrency protocols, you can send money across borders without paying neck-breaking transaction fees.  DAOs also encourage public participation in a project as it leaves all decision-making processes to be made by all participants.

The decentralized nature of crowdfunding has made DAOs more popular over the years. As of April 2022, there were over 6,000 DAOs with a valuation of $10 billion in liquidity.

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