Cryptocurrency
How blockchain is transforming fundraising for startups and entrepreneurs
The venture capital world has long been known for its traditional approach to funding and investing in startups. However, the emergence of blockchain technology can potentially disrupt this industry and revolutionize the way venture capital operates.
One significant aspect of this disruption is the tokenization of assets. Blockchain enables the creation of digital tokens representing ownership in assets or companies.
This tokenization allows for fractional ownership and liquidity of traditionally illiquid assets, such as real estate or early-stage startups. It expands investment opportunities, enabling a wider range of investors to participate in ventures by owning tokens, even with small amounts of capital.
Another key aspect is the use of smart contracts. These self-executing contracts with predefined rules and conditions are encoded on the blockchain. Smart contracts can eliminate the need for intermediaries, reducing costs and increasing efficiency.
Investors and entrepreneurs can create and execute investment agreements directly on the blockchain, streamlining the investment process and fostering participant trust.
By eliminating intermediaries, blockchain democratizes access to funding, empowering entrepreneurs globally and attracting investment from a wider pool of investors.
Blockchain technology’s global accessibility transcends geographical boundaries, connecting investors and entrepreneurs worldwide. Startups and investors in emerging markets, where traditional venture capital may be limited, now have greater opportunities.
Blockchain-based platforms also facilitate the creation of secondary markets, allowing investors to trade their tokens representing ownership in ventures.
Alex Strześniewski, founder and CEO of AngelBlock — a decentralized fundraising platform — told Cointelegraph, “With blockchain-based fundraising, tokens representing equity or debt can be traded on secondary markets, allowing investors to exit their investment at any time.” He added:
“This enhances the attractiveness of venture capital investments by providing liquidity and reducing the risk associated with long-term investments.”
Secondary markets provide liquidity to early-stage investors who traditionally had to wait for exit events, such as acquisitions or initial public offerings (IPOs), to realize their investment returns. The ability to trade tokens on a secondary market enhances the overall attractiveness of venture capital investments.
Rachid Ajaja, founder and CEO of decentralized finance (DeFi) platform AllianceBlock, told Cointelegraph, “Traditional venture capital investments involve a higher level of risk and longer lock-up periods for investments, making them less appealing to some investors. Secondary markets allow investors to have the option to exit their positions earlier if they desire, mitigating some of the traditional risks.”
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Ajaja continued, saying, “Investors are more likely to be interested in participating in the fundraising process when there is a possibility of trading their tokens on secondary markets. This liquidity factor creates a more active and dynamic investment ecosystem, attracting a broader range of investors, which can positively impact a project’s value and utility.”
Blockchain-based fundraising platforms
Blockchain-based fundraising platforms are decentralized platforms that enable users to invest in projects directly. The process usually works by investors depositing tokens into a smart contract that will send a project’s native token to each participating wallet.
For example, if Project A sells Project A tokens (PAT) for USD Coin (USDC) at a 3:1 ratio, an investor will receive 3 PAT tokens to their wallet if they deposit 1 USDC.
Although these platforms operate in a decentralized manner, certain platforms may still necessitate users to verify their identity to adhere to regulatory requirements and safeguard the interests of investors.
This verification process mitigates fraudulent activities and bolsters the platform’s overall credibility.
Some platforms also take additional measures to improve security and trust for users. For instance, noncustodial fundraising platform AngelBlock has a milestone-based compensation strategy with built-in governance measures. Investments are based on whether investors believe a startup has reached a set of predetermined goals.
When these requirements are satisfied, the funds will be released. The platform’s governance is made more democratic by this technique, which encourages user participation.
The protocol employs an on-chain vesting and token distribution method to ensure that tokens are not accidentally transmitted to the incorrect addresses.
Utilizing decentralized fundraising platforms can foster a sense of community and collective objective by enabling direct interaction between a project’s proprietors and its backers.
Several blockchain fundraising platforms integrate governance structures and voting mechanisms. Tokenholders can engage in decision-making procedures using voting, thereby exerting influence over project-related determinations such as the allocation of funds, the direction of the project or significant governance modifications.
Implementing decentralized decision-making processes empowers the community and fosters the alignment of interests among stakeholders.
Strześniewski told Cointelegraph, “Integrating governance structures and voting mechanisms in blockchain fundraising platforms brings a new level of community involvement and transparency to the process. It empowers the community by giving tokenholders a voice in key decision-making processes, such as project development milestones and budget allocations.”
Strześniewski continued, “This aligns stakeholder interests as everyone has a say in the project’s direction and success, creating a mutually beneficial environment where the project’s success directly translates to the success of its investors.”
Democratizing fundraising in the Web3 sector
Democratizing fundraising in the Web3 sector holds immense significance for various reasons. Firstly, it promotes inclusion and access by providing investment opportunities to individuals and communities previously excluded from traditional funding channels.
This democratization breaks down barriers, fostering diversity and innovation by enabling a broader range of projects to receive financial support.
Furthermore, democratized fundraising empowers entrepreneurs by granting them greater control over their fundraising efforts. Instead of relying solely on traditional venture capital firms or angel investors, entrepreneurs can directly engage with a global network of supporters who are genuinely interested in their projects.
This shift in power dynamics allows entrepreneurs to maintain ownership and independence while aligning their goals and values with the interests of their community of supporters.
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AllianceBlock’s Ajaja said, “Involving a broader community in the fundraising process has multiple advantages. First, it serves as a form of validation. If a large number of diverse investors show interest in a project, it is a strong indication of its potential.”
The CEO continued, “It also contributes to community engagement, as investors are more likely to promote a project they have invested in, creating a network effect that can significantly boost a project’s visibility and reach.”
“In this way, the fundraising process becomes a collaborative effort between the project and its community, driving mutual growth and success.”
Cryptocurrency
Here’s Why Bitcoin Could Rally Soon Despite the Negative Coinbase Premium: CryptoQuant
A key metric that indicates US investors’ interest in bitcoin turned negative on Friday.
Experts, however, believe that this flip could positively affect BTC’s price.
Coinbase Bitcoin Premium Records Negative Value
According to a report by a CryptoQuant analyst, the Coinbase Premium recently recorded a significant negative value. The Coinbase Premium Index is an indicator that measures the percentage difference between the price of bitcoin on Coinbase Pro and Binance.
Coinbase Pro is popular among crypto traders in the United States as well as several institutional investors while Binance, the largest crypto exchange by trading volume, caters to a more global audience. Thus, the index provides insight into the trading behaviors of users on both platforms.
Historically, positive Coinbase Premium values typically suggest strong buying pressure from U.S. investors. On the other hand, a negative shift in the index indicates a decline in demand for bitcoin from U.S. investors.
BTC Remains Stable as Buying Pressure on Binance Surges
Per the data, despite waning demand from US investors, bitcoin’s price has remained stable, indicating “that there is strong buying pressure occurring on Binance.”
The CryptoQuant analyst pointed out that bitcoin’s price could see a massive surge if demand for the digital assets increases across global markets. The present market movement hints that it might happen soon.
“For Bitcoin’s price to see a significant increase, buying pressure needs to expand beyond the U.S., driven by FOMO (Fear of Missing Out) across global markets. This movement is quite positive,” the analyst said.
Bitcoin has continued to rally following the US Fed interest rate cut on Wednesday. The leading cryptocurrency briefly crossed $64,000 earlier today for the first time since last month.
The crypto asset has briefly retracted and is now trading at $62,800 at press time. If the upward trend continues, bitcoin could retest its all-time highs, and there are several bullish factors going its way. You can find more of this here.
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There’s been no shortage of news over the past seven days. During this period, the total cryptocurrency market capitalization managed to add close to $140 billion. This happened on the back of significant gains charted by the majority of coins, so let’s take a closer look.
First things first, the long-anticipated rate cut is now a fact. The US Federal Reserve announced on Wednesday that it is decreasing interest rates by 0.5%, a considerable move that sent ripples across all financial markets, and crypto was no exception.
Bitcoin’s price exploded on the news and reached $64K on the day after. This brings its total gains for the weeks to 7.9%, at the time of this writing. It’s worth noting that the bulls were unable to sustain the positive momentum and the sellers are currently attempting to push the price back toward $62,000. It’s worth keeping an eye on the markets over the weekend when the liquidity is generally thinner and smaller sums can cause larger moves.
That said, one of Bitcoin’s most vocal proponents didn’t fail to surprise us.
Michael Saylor announced Friday another whopping Bitcoin buy. His company – MicroStrategy – bought $460 million worth of BTC priced at $61,750. The company is currently sitting on paper profits of almost $6 billion. That’s a 60% gain. Diamond hand Saylor, indeed.
Elsewhere, in unfortunate news, the popular Singapore-based crypto exchange BingX has apparently been hacked. One of its hot wallets was compromised, leading to a reported loss of around $52 million.
All in all, the week has been favorable for most of the altcoins as well. Ethereum has gained 6.3%, BNB – 3.5%, SOL – 10.%, and so forth. Of course, there are those which failed to capitalize on the move such as XRP, which is only up 1.8%, DOGE, which is actually losing 0.8% during the week and so forth.
With the US Federal Reserve staying true to its word and essentially reversing its fiscal approach, as well as the incoming presidential elections in November, we’re sure in for a wild ride in the next couple of months!
Market Data
Market Cap: $2.278T | 24H Vol: $107B | BTC Dominance: 54.4%
BTC: $62,629(+7.9%) | ETH: $2,522(+6.3%) | BNB: $565 (+3.5%)
This Week’s Crypto Headlines You Better Not Miss
Federal Reserve Announces 0.5% Interest Rate Cut, Bitcoin Soars Above $60K. The long-anticipated rate cut is finally here! The US Federal Reserve decreased the rates by 0.5% in the first reduction in more or less four years. The markets reacted positively to the news, with the BTC price surging to $64K after it.
MicroStrategy to Raise Another $700M, Might Buy More Bitcoin. The largest corporate Bitcoin HODLer, MicroStrategy, announced plans to raise another $700 million. Although $500 million of that will be used to pay off existing debt and redeem outstanding senior secured notes, the remaining might go for buying more BTC.
Singapore Crypto Exchange BingX Suffers Hot Wallet Exploit, Over $52M Reportedly Stolen. Popular Singapore-based cryptocurrency exchange BingX suffered a hot wallet exploit. The attack affected several blockchains. Experts are estimating the total loss to be over $52 million. Withdrawals and transfers have been suspended.
Solana Reveals Details of Its New Seeker Crypto Smartphone. After the success of its previous iteration, Solana has introduced a new smartphone called “Solana Seeker.” It’s designed as a Web3 device and combines interesting hardware decisions in conjunction with specialized software.
All These Central Banks May Cut Rates Soon: Bitcoin (BTC) Price to $100K? The US Federal Reserve has announced its decision to cut interest rates, and many other central banks are expected to follow suit. Many believe this will spell good news for Bitcoin and the rest of the cryptocurrency market.
3 Bullish Signals for Bitcoin’s Price as Uptober Approaches. October is traditionally a good month for Bitcoin. It’s no coincidence that many in the community are referring to it as “Uptober.” Here are three bullish signals that may provide for additional increases in Bitcoin’s price.
Charts
This week, we have a chart analysis of Ethereum, Ripple, Cardano, Binance Coin, and Solana – click here for the complete price analysis.
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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.
Cryptocurrency charts by TradingView.
The Open Network (TON) has continued to record outstanding growth as the protocol recently saw its active addresses outperform leading blockchains in the industry.
According to data from the market intelligence platform IntoTheBlock, the number of daily active TON addresses surged to 3 million in the first week of September.
Per the data, this figure exceeded the number of active addresses recorded on major Layer 1 networks, including Bitcoin and Ethereum. TON’s popularity over the past few months has attracted increasing attention from developers, investors, and users alike, further solidifying its position as a rising contender in the blockchain space.
USDT Trading Volume on TON Surges
In addition to the growing number of active addresses, TON has experienced an increase in on-chain trading volumes, especially in the stablecoins market.
The blockchain is currently among the top networks with the highest USDT trading volumes. According to IntoTheBlock, TON recorded an impressive $1.2 billion USDT trading volume, with 1.5 million unique holders on Sept. 9.
Tron, however, remains the biggest blockchain for USDT trading, with a trading volume of $98.1 billion recorded on Sept. 9. It was followed by Ethereum with $34.3 billion.
According to analysts, the surge in TON’s USDT trading highlights growing interest and adoption among TON users. Earlier in April, Tether, the issuer of USDT, launched the stablecoin on TON.
The Biggest Growth Opportunity
The rapid adoption of popular TON-based decentralized applications (dApps) like Hamster Kombat and Notcoin has contributed significantly to the network’s growth. These tap-to-earn projects have increased user activity on the TON blockchain over the past few months.
Consequently, TON received a $30 million investment from crypto exchange Bitget and Foresight Ventures yesterday to boost the development of tap-to-earn projects.
As the network’s popularity continues to soar, market experts believe that the TON ecosystem is “the biggest growth opportunity” in the crypto market this year.
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