How to raise money on a Blockchain with a token

Blockchain has been used to conduct numerous multi-million dollars crowdfund for various issues. People have raised money through the use of tokens but what is this token model of raising funds on the blockchain? This model of raising money include the sale or exchange of native tokens for tokens that correspond with the receiver’s network.

What are token models?

Token models are projects by individuals who raise money by creating and selling tokens through a crowdfunding source on a blockchain. This may sound like how companies sell their shares to raise capital but it's more than that.

The tokens are a currency that only works within the trading app and whoever contributes to the app get rewarded with tokens. The receiver can now convert their tokens to any currency of their choice.

With this system in place, selling token goes beyond raising funds as token creators can create projects where everyone has a shared contribution and every contributor is an owner.

Should the token model be considered?

You can give this system a thought because if you have a steady crypto network, you can run the token model. This model provides profitable incentives that can help your network get past the initial stages of running a blockchain network. Your users also own a part of your network because of their contribution which gives the network a higher chance of success.

 To get your network up and running, you need to find its ticking effects that will attract people’s interest to your project. You can check the Bitcoin Formula Trading Platform to get more knowledge about the network effect.

How to identify your network effect?

As earlier stated, network effects are those factors that enable your projects to run smoothly. A good example is Uber services. The network effect of Uber is for their network of drivers and riders to increase.

So, if Uber decides to run a blockchain network and the token for that network is Ubercoin, whoever signs up as a driver or rider at the early stage will be rewarded with the majority of the ubercoin for their patronage.

That way the driver and the rider feel like part of the business and they begin to invite more people to sign up leading the network to a path of success as it was able to attract the number of people it needed to start.

While building your network, you should take note of the networks within your network and what they represent because it’s very possible for networks to be a bundle of things. Each of these networks could even have their token or their tokens do not have all the necessary access to perform all actions on an app.

How does the crowdfunding process occur?

People crowdfund cash in exchange for their tokens in two ways;

Pre-release sales

This system has been commonly used by people and can occur through the use of fiat or electronic currency or a combination of both. People who use this method do when their project needs to develop and test a protocol before launching into public space.

Post-release sales

This system is about to become common as many people are giving it a shot these days. This system can be performed using an escrow agent or it can be done through the use of smart contracts on the Ethereum blockchain which collects crypto coins and pays out in protocol tokens.

Using the above-listed systems, you can successfully raise money on a blockchain using a token. Like a startup, any potential network owner would need funding to push a blockchain network so using any of these systems to achieve that goal would help you achieve success a bit faster.