$ The New Reality of Crowdfunding $

We have heard great successes of crowdfunding platforms such as Kickstarter. You might remember the famous product called Pebble Time which raised $20,338,986, raising the first million within an hour. There now is a new kid on the block called an Initial Coin Offering (ICO) with a superior advantage: your donors are your investors. You may think of an ICO like you think of a hybrid IPO (initial public offering). In an ICO, investors are motivated by buying a specific cryptocurrency created for your ICO with hopes that the plan will become successful, which translates into an expectation that the token will provide some crypto value (through collecting fees on transactions that they validate or by being able to access a particular service). The popular Ethereum project was announced in 2014 as an ICO with an initial $0.40 per Ether. One Ether is now worth $339 (at the time of writing this) with a market capitalization of $32 billion.

Usually an Initial Coin Offering (ICO) has a Whitepaper Plan which:

1. Tells you what the project is about.

2. What the end goal is.

3. How much money is needed to undertake the venture.

4. How much of the virtual tokens the developers will keep for themselves (they use this for developing the project).

5. What type of money is accepted.

6. How long the ICO campaign will run for (if the money raised does not meet the minimum funds required, the money is returned)

To put this into perspective, let us use a hypothetical. Let’s say that we want to get into real estate development. We want to build a high-rise apartment building ranging around $20 million dollars. What steps do we take? The first vital step is to create your whitepaper as mentioned above. There are also several services that can offer back-end infrastructure to create your ICO and manage your future transactions. For example, there is Argon Group (https://argongroup.com) which is a strategic investment banking and financial advisory services firm. Or you can create your own team who specialize in Ethereum or blockchain coding to help you create your infrastructure.

Probably the most important question is what will determine the price of your coins? You have the option of deciding the amount you want to raise and the number of coins that will be emitted. This should decide the initial price of your coins. Later the price fluctuations are all left to supply and demand.

Many blockchain enthusiasts believe that this will also benefit non-profit foundations to raise capital, or financial development in the Less Economically Developed Countries (LEDCs). One start up worth mentioning is Topl (https://topl.co) which aims to use blockchain technology to fund impactful growth in underdeveloped regions of the world. Their approach is focused on the import and effective utilization of external resources (such as financial capital) to complement, nourish, and grow domestic capital stocks. To this end, Topl is developing a global investment protocol to increase the accessibility and decrease the risk of investing in LEDCs. Using Topl’s blockchain platform, investors can more easily identify investable opportunities in LEDCs and subsequently fund and track these investments all while incurring less cost and risk.

One of our projects, the Sustainable Village Initiative or SVI (sviafrica.org), hopes that it will be proof of the potential of Topl. The SVI requires around $15,000 for one of its projects to solar mechanize a well it has built in the Upper East Region of Ghana. The SVI first plans to employ Topl’s Divine Reputation System to assure potential investors of the their capability and their trustworthiness. It will then accept investments via Topl and subsequently enter into an auto-executing smart contract with its local partners. Finally, after deploying the funds raised to mechanize the well, SVI’s local partners will distribute a portion of their revenue back to SVI to be used to fund additional projects in Ghana and elsewhere.

This is an exciting era for crowdfunding. The benefit of these developments is straightforward: donations are altruistic and happily welcomed and perfect for dealing with crises, but it is investment that brings long-term change. Remember the ancient phrase: “Give a man a fish, he will go hungry. Teach a man how to fish, he will never go hungry again.” By investing in financial development projects (either in the MEDCs or the LEDCs), we are creating opportunity, and not just mere feeding for a day, while keeping your investors happy with their returns.