Crowdfunding is a powerful mechanism for innovation and support for social enterprises. Platforms like Kickstarter and Indiegogo have spearheaded the Web 2.0 crowdfunding movement that has led to the creation of several multi-billion dollar tech startups like Oculus and raised millions for thousands for charities.
These platforms have allowed online communities to join forces and mobilize resources at unimaginable speed and scale, but only up to a point. Today’s crowdfunding is dramatically constrained by its reliance on legacy funding, preventing the vast majority of the world from accessing it.
The crowdfunding revolution fueled by the internet can now be taken to the next level with Bitcoin, which can dramatically increase the size of the “crowdfunding pie” and lead to unimaginable impacts on life around the world. As we will see in this article, some experiments are looking promising.
Crowdfunding is broken
The main problem with crowdfunding is its reliance on legacy financial infrastructure, which is not only costly but also globally fragmented.
If we look at the major crowdfunding platforms that exist today – GoFundMe, Indiegogo, and Kickstarter – they only operate in about 30 countries. And you guessed it, these are only developed economies. The main reason for this is their reliance on payment providers like Stripe, which offer limited reach and an exclusive regulatory financial system due to highly fragmented global payment networks.
This also means that the cost of running crowdfunding on this network is very high due to the many intermediary third parties involved. The average crowdfunding platform charges a fee of 7% per successful project.
Another limitation of this reliance on outdated financial infrastructure is that there is so little it can do on the financial tracks! Take for example the fact that current crowdfunding platforms have a limit of $1 or even $5 per donation. What if we instead allowed anyone to fund cents, microcents or nanocents to encourage more people – ie the “masses” – to donate?
All of this leads to the fact that the current state of crowdfunding lacks the “masses”.
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Crowdfunding Experiments on “Crypto”
This close reliance on outdated financial infrastructure has prompted some crowdfunding platforms to shift to a so-called “Web 3.0” model. For example, Kickstarter has decided to transition from its reliance on Stripe to building its own crowdfunding protocol on other blockchains. This can make sense for equity-based crowdfunding, which can allow the platform and others to invest in new businesses and their ideas.
While this might be an interesting experiment for equity-based crowdfunding, global donation- and reward-based crowdfunding and peer-to-peer lending can only make sense when using the asset with the greatest global acceptance worldwide, and that is Bitcoin.
Experiments on Bitcoin: From HODLING to GIVLING
In 2021, you may have noticed the emergence of crowdfunding projects with social and humanitarian projects in emerging markets. A popular one that went viral was Bitcoin Smiles, which raised 1.88 BTC to support dental care in El Zonte. Another recently launched project is Kivéclair, a development project that educates people in the Democratic Republic of the Congo about Bitcoin and has reached 50% of its goal.
These are just two of several project initiatives supported by the team at BTCPay Server, helping with the self-hosting of the website and configurations.
These use cases underscore the need for a seamless, global crowdfunding experience enabled by Bitcoin on Lightning and empowered by the Bitcoin community.
More importantly, these examples show that the bitcoin community isn’t just about HODLing, it’s about GIVLing. Giving sats means sharing love. After all, many of us became bitcoiners because a friend or family member gave us some bitcoin as a gift.
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Bitcoin smile
Acknowledgments:
Thanks to Heidi Porter and Paula Magal for editing.
This is a guest post by Mick Morucci. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
