When it comes to crowdfunding, would you choose cryptocurrency or fiat money? With the rise of popularity of Bitcoin and other cryptocurrencies, many investors tend to keep a share of their assets in crypto wallets. Meanwhile, crowdfunding platforms tend to accommodate both cryptocurrencies and fiat money.
However, some platforms stick to fiat money options, leaving cryptocurrency out of the loop. The reason is the high volatility of such currency. If you are planning to create a crowdfunding project, you may be wondering which currency to consider.
Let’s take a closer look at the pros and cons of using cryptocurrency in crowdfunding.
Advantages of Using Cryptocurrency over Fiat Money in Crowdfunding
Let’s start with the benefits.
1. Opportunity for More Gains
Many investors tend to be careful about using their cryptocurrency. They keep coins in the wallet, waiting for a serious opportunity to come around. Participating in a crowdfunding project helps create an extra value for the existing crypto coins without spending too much time or effort multiplying the wealth.
Investors may be more likely to join your crowdfunding project if you offer a crypto option since they get an opportunity to do something with their money.
According to experts from Stokr, online investment platform, another way to bring in the crypto investors is to create an ICO. By working with reliable platforms, you can attract serious partners who want to put their cryptocurrency to work by supporting a promising project.
A crypto crowdfunding project can keep investors from going through the rounds of converting crypto into fiat money.
2. Attract VCs
Venture capitalists aren’t likely to be interested in small crowdfunding projects that opt for fiat money support. However, by choosing a platform that supports cryptocurrency investments, you could be getting a chance to appeal to VCs.
The reason is usually the same. VCs could be looking for an opportunity to multiply their cryptocurrency assets through promising projects regardless of their size. Crypto crowdfunding can also give a home to campaigns with little promise for significant returns, like non-profits.
3. Lack of Paperwork
Many projects never gain enough traction because they get caught up in paperwork. Fiat money crowdfunding requires developers to go through so much paperwork that they simply can’t find the right documents to collect funds for the project.
For cryptocurrency crowdfunding, all they need to do is create a high-quality white paper. The rest of the process is done on the platform without any red tape.
4. Building a Community
Cryptocurrency crowdfunding allows project makers to create a community around their projects. A big community can improve the project’s credibility and attract serious investors. Meanwhile, community members can participate in the project and have a say in the direction it’s taking.
In case project starters choose the right platform, cryptocurrency crowdfunding projects get maximum exposure. The more people find out about the project, the more chances it has of surviving.
Disadvantages of Using Cryptocurrency over Fiat Money in Crowdfunding
While cryptocurrency could be an excellent choice for many project starters, it comes with a few disadvantages.
Since cryptocurrency crowdfunding projects don’t require too much paperwork besides the white paper, they attract many scammers. This makes the competition for investors rather fierce. Many different scams have been created over time to fool investors and show the non-existent project in a better light than real opportunities.
Due to the rising number of scams cryptocurrency crowdfunding and ICO earned a bad reputation. Many investors try to avoid these projects and opt for traditional investment options,
When you choose to use cryptocurrency for crowdfunding, you need to consider the level of liquidity. Many tokens tend to be sold at decentralized exchanges that have little transparency unlike the most popular platforms.
Meanwhile, there is a lack of regulatory structure for such projects, which is a downside in case something doesn’t go as planned.
If you are choosing whether to create a cryptocurrency crowdfunding project or opt for a fiat money fundraiser, consider the pros and cons for your particular situation. While cryptocurrency projects make you visible to many different investors, their questionable liquidity and volatility could become an issue down the road.