Assessing the Impact of Tokenized Financial Assets on Blockchain for Start-Up Fundraising and the Significance of Decentralized Governance

Abstract

This research investigates the potential impact of blockchain based start-up crowdfunding. The emergence of blockchain and cryptocurrencies paved the way for a more decentralized finance system which offers alternative funding opportunities for start-ups. The scope of the research is to analyze the benefits and drawbacks of blockchain based crowdfunding for start-ups, and how it could impact the traditional financing models. The study adopts a qualitative research approach in which the Institutional Analyses and Development framework was consulted to find the key research concepts for the case studies. The research was conducted by analyzing data from blockchain protocols that consult their communities for important the decision making within its ecosystem. The findings suggest that blockchain based crowdfunding allows to raise funds for start-ups from a broader pool of investors, without the necessity to tap into the ecosystem that Silicon Valley offers, and a potential faster funding method than traditional methods. However, there are some concerns regarding trust and transparency with crowdfunding. The research found that adopting dequity, which is a new financial asset that combines both properties of debt and equity, can increase transparency and trust for the investors, while granting the crowd investors more control. The proposed solution is a dequity token with a governance that has quadratic voting, a voting multiplier and locking a large portion of the raised funds during the crowdfund. Overall, the research suggests that blockchain based crowdfunding can offer new opportunities for entrepreneurs to raise capital, in an inclusive manner, without the need of venture capitals or banks.