Developing Smart Contracts for Crowdfunding

You may have heard about smart contracts, especially if you have considered creating or investing into an ICO. What is a smart contract, and how are they used for Crowdfunding and cryptocurrencies?

First, a smart contract as defined on wikipedia “is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract”. When you sign a contract, you are essentially promising to follow through with an action that will take place. This action is facilitated digitally to verify if the promise follows through. Smart contracts allow those involved to create certain parameters that need to be met for an action to take place.

Crowdfunding campaigns offer many promises, and those that invest are backing the promises being offered. This same concept can be applied to ICO’s as well. The only difference is what can be offered in return for backing the campaign, and what avenue the investor is willing to take. Smart contracts have the ability to eliminate a third party. If there are set parameters that need to be met, who will be facilitating and regulating whether or not the actions are executed when the right conditions are met? This is where the smart contract comes into play. The smart contract is a set of code that can be initialized when particular conditions are met. In other words, the smart contract is the third party regulating the actions for the two parties in the contract.

Utilizing smart contracts

Now that you get the gist of what smart contracts are, we can first see how they can be used for Crowdfunding projects. If you are considering to create a Crowdfunding campaign, you need to be aware of what your backers are looking for. First, you need to have a prototype of your product that you intend to sell, next, you need to insure the backers that they are getting their money’s worth by investing into the project. And lastly, there needs to be safety measures in place so that the backers money, and the work that the campaign creator does will be secured. Here is where the smart contract can be utilized. Although you can create an all or nothing campaign on most Crowdfunding platforms, there may be other scenarios where the all or nothing funding mode will not be applicable. Here is a good example to use a smart contract.

What if a Crowdfunding campaign wanted to offer special tokens as a reward for donating to the campaign? These tokens can be purchased for a particular amount of money, and are limited in supply. If all of the tokens are not purchased before the campaign end date, than the campaign does not receive any funds. In addition, the campaign will take donations of any sort. This can be quite an issue for the Crowdfunding platform if these conditions must be met for the campaign to receive the money earned from Crowdfunding. Here is where a smart contract can be used. You can set particular parameters for the campaign to receive the funds or not receive any funds if the conditions are not met.

Smart contracts are used in a similar way when it comes to ICO’s. Typically, most ICO’s today are using the ethereum ecosystem. It is an easy way to create the cryptocurrency component for your website. The smart contract however allows for the proper distribution of the funds. This is done through the ERC-20 contract. To conclude, there needs to be smart contracts developed for any ICO to launch. The only way to obtain such a contract is to hire an experienced coder to develop one for you. It is not easy to find such developers as much of this technology is quite new. So how are these contracts developed?

Smart contract technology

One good open source technology used to help secure the smart contract in solidity is Openzeppelin. The last thing you want is any type of security breach when you create a smart contract, so it may be useful to check out Openzeppelin. You have the ability to reference their code to make your smart contract more secure.

Another good technology to use when creating a Crowdfunding campaign would be Thrinacia’s subscription software called Atlas. This will allow you to customize your Crowdfunding campaign functionality in many different ways. It goes hand in hand with creating a smart contract, and can be implemented through code. Atlas will also allow you to host the campaign on your website of choice, and does not take any transaction fee. This means that Thrinacia only charges for the monthly subscription. It could be a great way to receive the flexibility needed for the creation of a specialized Crowdfunding campaign at a low cost.