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Crypto Terms:  Letter C
Jun 19, 2023 |
updated Apr 02, 2024

What is Crowdfunding?

Crowdfunding Meaning:
Crowdfunding - a method of raising money via fundraisers on different online platforms.
2 minutes

Let's find out Crowdfunding meaning, definition in crypto, what is Crowdfunding, and all other detailed facts.

Crowdfunding is the process of raising money through fundraisers to finance projects or businesses. Crowdfunding is typically held online on different platforms to maximize the amount of money collected through the fundraisers.

In the digital world, crowdfunding functions as a technology-enabled financial service to raise money. Capital givers can donate funds on online crowdfunding platforms that act as intermediaries in the process. Rather than relying on banks, mutual funds, or business angels, entities raising the funds can collect money through so-called crowds.

Many crowdfunding campaigns offer rewards for donations. Crowdfunders can receive benefits like VIP access, insider looks into the projects, physical gifts, and others based on their donation amount and the conditions established in the crowdfunding campaign. The reward acts as compensation for taking the financial risk of investing in the project.

There are two general types of crowdfunding campaigns – investment crowdfunding and non-investment crowdfunding. It distinguishes between funders who serve as investors in the project aiming to receive economic returns and funders who support the campaign without a financial incentive as a reward.

There are different models for categorizing crowdfunding campaigns. The investment model can proceed as either debt-based crowdfunding or equity-based crowdfunding. Non-investment models can be reward-based or donation-based crowdfunding campaigns.

Many campaign funders come from the financial sector, particularly financial technology (FinTech). The use of online crowdfunding platforms can help maintain contact between those seeking funding and potential investors. Crowdfunding campaigns can also promote open calls for financial participation and cooperation.