Ideas, even great ones, require effort and funding to be fully realized. You could approach a bank or lender or request donations, but all of these sources will be reluctant to provide it unless they understand your plan and trust that you can implement it. This is an obstacle that many entrepreneurs have faced for years, and it was often one that they could not overcome. The best idea in the world is meaningless unless there are resources available that can be allocated to it.
This is where crowd funding comes into play. It allows you to come up with an idea and then set a deadline and goal for realizing it. Should the deadline be missed, the funding will be returned to investors, which eliminates their risk, and because the code is auditable and transparent, centralized platforms or middlemen don’t have to be used, which cuts down on fees.
Crowd funding, though conceived of years ago, was not possible without the development of blockchain technology, especially DAOs and tokens. This is because this technology solves two key challenges, which is how the funds are utilized once they’ve been raised, and the manner in which the rewards are maintained and distributed. Most rewards from traditional crowd funding are processed through a centralized database which monitors each contributor, and those individuals who miss campaign deadlines are denied access. Furthermore, those who have contributed funds can’t remove them should they change their mind.
However, newer more advanced systems such as Ethereum are designed in such a way where they are decentralized, and use tokens as a mechanism for monitoring rewards. Through these, individuals who fund a project will receive a token in return that can be kept, traded or sold at a later time. When it is time for the developer to begin offering their product or service, they can do so in exchange for tokens. Even if the project turns out to be a failure, contributors will be allowed to keep them.
DAO, which is short for democratic organization, was a system designed to solve the problem of those providing funding not having a say in how the capital was spent, which often led to mismanagement which resulted in project failure. With DAO, any funds which are removed from the system must receive approval first, which is referred to as crowd equity, and is a critical part of crowd sales.
The crowd funding solutions provided by Blockchain developers will give token holders an exceptional level of influence. This ensures that no one entity controls the funds to the extent where they can abuse them, and encourages developers to honor their commitments and deadline. Special code can be created which will block hostile takeovers, and once your crowd sale has all the tokens it needs, making contributions will be simple and can be accomplished via a wallet for Etherum. All you would have to do is transfer the funds to it.