The rise of Web3 will bring true “crowdfunding”

The missed opportunity for Web2 is about to be made up.

I believe everyone is familiar with the concept of crowdfunding, but compared to the Web2 era, Web3 has considerable advantages in promoting crowdfunding. If we can fully embrace the technological innovation of Web3 and the spirit of trust minimization, then “true crowdfunding” can be successfully realized.

Through Web2 platforms like Kickstarter, GoFundMe, and WeFunder, individuals, nonprofits, and startups can get donations from their communities, and even a certain amount of venture capital. This is a powerful innovation. But we all know that there are problems with these Web2 crowdfunding platforms.

The rise of Web3 will bring true "crowdfunding"

Problems with the Web2 crowdfunding platform

The first problem is the access problem, which limits the amount of funds that project parties or developers can get, and leads to some inequality. Many potential funders are prevented from participating in crowdfunding on these platforms, especially for those marginalized groups in society, including those under sanctions or in dictatorships, and the world’s largest Some people in areas lacking financial payment infrastructure, etc.

The second issue of crowdfunding in the Web2 era is the division of power and responsibility. The Web2 crowdfunding platform itself is a centralized large-scale Internet company, and the scale of the enterprise has become the support for their absolute right to speak in the crowdfunding process. The platform can extract fees in all aspects of crowdfunding, and this centralized The nature of the coin also makes it easy to facilitate rights holders, which naturally hinders the participation of some potential funders.

More subtly, projects crowdfunded on these platforms are mostly centralized organizations where funders are “forced” to trust that they will deliver on their promises. Projects on Kickstarter have been criticized for not advancing according to the delivery plan, and even some mature enough organizations may suffer losses due to the lack of integrity of crowdfunding projects.

One of the key attributes of Web3 – “low friction”

The Web3 crowdfunding platform is built in a globally available encrypted world, free from the access restrictions and other frictions inherent in the Web2 platform. This near-absolutely fair globality and low friction is one of the key drivers of the Web3 crowdfunding boom, and the Constitution DAO is a very successful example.

A typical Web3 crowdfunding, taking Juicebox and Mirror platforms as an example, the process is very simple, that is, accept the ETH of the funder and return the token as a receipt. Tokens can be used in many different scenarios, underpinned by the high composability of the Web3 world. Some crowdfunding projects use their tokens merely as tokens for contributions from backers, while others can use them as governance tokens. People love to acquire and own tokens, even though tokens don’t actually confer any rights. In other words, the Web3 platform directly addresses the issue of access and accountability for platform power.

Both Juicebox and Mirror follow the “ETH in, project token out” model, but each focuses on different aspects of the process. Juicebox offers project parties a variety of options to customize how funds are received and how project tokens are distributed. The platform also includes an option to reward early funders with a portion of endowment funds after the initial goal has been achieved. All of these configurations are encoded into Juicebox’s smart contracts, which are “natural” endorsements of trust.

By contrast, Mirror crowdfunding has limited customization. Instead, it provides a platform for projects to publish their information from. Embedding crowdfunding tools directly into published articles is a powerful way to attract potential funders to crowdfunding, which is a big reason why many projects use Mirror in this way.

Platforms like Juicebox and Mirror leverage Web3 technology to enable projects to raise funds from anyone in the world with minimal friction and relatively low fees, without worrying about centralized platforms manipulating the rules at will. However, the problem has not been solved 100% now, because the funds raised by most project crowdfunding are actually still in the multi-signature wallet controlled by the founder. How the funds are effectively used still depends on the project party. itself.

However, funders now own project tokens, and in some cases users with governance rights can make requests, such as voting through snapshots to change how the funds raised by the project are used. But the premise is still that the project founders will follow this vote. That said, before anyone decides to fund these projects, they have to decide whether they can trust the project’s founding team.

Trustless Web3 Crowdfunding

Trust isn’t always a bad thing. Many projects are started by founders who are credible enough that they often progress more efficiently because their gears are effectively lubricated by others’ trust in them.

It’s easy to think that a trusted founder is a prerequisite for any new project to go. However, we can’t just look at those projects that have already been launched, some ideas that have not been launched are often more potential, and these projects simply do not have enough support because they lack a sufficient trust base to realize the true nature of their good ideas. potential.

Such projects are typically initiated or founded by developers who are anonymous, have insufficient education, come from sanctioned regions, or are too young to establish a reputation in their nascent field. Many of these people have ideas for improving the world and the skills to put them into practice. These people may already have pretty good ideas, but lack the opportunity and support because they have a hard time gaining enough trust from strangers .

And Web3 gives us the tools to unlock the potential of these people by minimizing the demands placed on them to trust them.

Crowdfunding platforms like Juicebox and Mirror are well-positioned to help projects minimize trust requirements. These platforms can provide funders with tools that allow them to withdraw from projects at any time before funds are deployed, rather than transferring Ethereum directly to developers to spend freely. This would greatly reduce the risk that even anonymous founders could abscond with money, thereby reducing the trust of funders in them.

Taking the approach taken by the Yeeter crowdfunding platform that DAOhaus is designing as an example, the funds raised by crowdfunding projects on Yeeter will enter the DAO treasury, and funders will receive non-voting shares in DAO after making donations. Funds can be withdrawn at any time if the development direction of the project is not satisfactory.

When funders can hold the project team accountable without having to trust them, the founder’s reputation becomes less important, as long as they are competent and actionable enough, then they will be able to get enough support. And that’s the beauty of Web3.

Towards a trustless future

DAOs and Web3 can change the world and make it a better place. It is different from the Web2 era that relies too much on centralized platforms. Through the trustless crowdfunding and coordination mechanisms built in the Web3 era, we can empower a group of completely unfamiliar people to create and build and improve every aspect of our lives.

Everyone can play a part in this development, choosing crowdfunding tools that actively reduce the need for trust to support potential projects created by developers who cannot rely on their raw reputation buildup.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-rise-of-web3-will-bring-true-crowdfunding/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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