CRWDNetwork — The building blocks of blockchain-based crowdfunding
CRWDNetwork is the newly-created backbone for crowdfunding from CONDA. The overall mission of CONDA is that everyone has a possibility to invest into companies starting from just EUR 100. CONDA has been operating since 2013 in the crowdfunding market with more than 100 financed companies from more than five different countries. When we talk about crowdfunding, we talk about equity-based crowdfunding, which means that investors take a stake in the company. In most cases it is based on a participation or subordinated loan agreement.
CONDA has been working since 2016 to build an infrastructure on the blockchain Ethereum to enable cross-country issue of security tokens. The reason why we started with the new network was that companies approached us and wanted to have a crowdfunding campaign running on several crowdfunding platforms at the same time. With the CRWDNetwork, a decentralised, self-organised and compliant network will be created. The first applications will be especially dedicated to Start-up and SME Financing.
The building blocks of a European-wide fundraising infrastructure
The CRWDNetwork consists of four building blocks: the smart contract infrastructure; the application layer; the governance model; and the CRWDToken.
The goal of the CRWDNetwork is to be self-organised and decentralised. In Europe, we live in an environment of a highly regulated financial market, which is fragmented in Europe. This means that there are not only different adaptations to EU legislation in each EU-member state, but also different requirements, which are changing over time. As a result, it is currently nearly impossible to make European-wide fundraising projects, which means that although Start-ups work European wide they can only allow investors from some dedicated regions. This might change in the future, especially with the “EU Crowdfunding law”, but only in some specific cases.
With the CRWDNetwork, a strong network of like-minded people should give a reliable solution to this problem.
Building block 1: Smart contracts — The trusted backbone of crowdfunding
The CRWDNetwork is based on the blockchain Ethereum. This means a smart contract ecosystem has been developed, which enables companies to setup their own security token offering. The first version of the smart contracts has been deployed with two projects. This was also the first time, that this infrastructure has been used in Austria. The smart contracts must fulfil the following functions:
- Representation of the stake in the company on the blockchain (asset token or security token)
- Implementation of a crowdsale solution, so that the company can enable fundraising on several platforms (crowdsale contract)
- Fulfilling regulatory compliance by implementing a KYC Solution (Controller contract)
Building block 2: User-friendly Interface — DApp as the door to your own funding page
The CRWDNetwork smart contract infrastructure can be used in several ways. As it has been with the first projects, they have been integrated directly into the applications of the company, which enables a user-friendly implementation within their own user base.
The aim is that crowdfunding platforms integrate the CRWDNetwork directly into their existing platforms. The crowdfunding platforms can build on the existing smart contract infrastructure, enable cross-platform fundraising projects and provide their user base a seamless integration into their existing user experience.
Additionally, a streamlined funding page will be prepared by the team of the CRWDNetwork. This should enable companies to easily setup their own projects and profit from cost-efficient implementation on the blockchain.
You can register now for the beta.
Building block 3: Governance — Working together to overcome the regulation barrier
It is very expensive for companies to setup a fundraising project, as a variety of different laws from different countries must be applied. The Governance system of the CRWDNetwork is designed to setup a network of like-minded providers that streamline and standardise their processes in such a way that the company can focus on fundraising and the administrative tasks are covered.
(Send us an email if you are interested to partner with us.)
The Governance building block consists the following parts:
- Network partners: Once established, the Network partners will decide on the further development of the CRWDNetwork. They will define the general strategy and the standards under which all partners are operating.
- Working Groups are dedicated to special topics, which are of main importance. At the beginning, there will be three working groups:
Working Group for Service Provider, which outlines the standards and contracts for setting up security tokens.
Working Group for KYC Provider, which outlines the standards for the identification of investors and the analysis of source of funds.
Working Group for Compliance provider, which sets the regional requirements to make an offer in a specific country.
Building block 4: CRWDToken — Enabling an aligned interest and sustainable development
The CRWDToken is an integrated part of the CRWDNetwork and will fulfil three core functions.
In order to start a new system, an initial investment is required. This initial investment is required in order to finance the development, legal and organisational base structure of the whole system. By issuing the CRWDToken, interested stake holders have the possibility to buy this token at the beginning, which can then be used in the system. With the initial issuing, the token is used to finance the development.
The second role is to become part of the governance system. Every participant in the system must stake part of the CRWDToken. This means that the tokens staked are on risk because of possible penalties. In the governance system the network partners together define the number of tokens which must be staked and what the penalties are. This means, by changing the staked amount they can reduce or increase the amount of tokens circulating. They can also adjust the access to the system. The higher the number of tokens which must be staked, the more it costs for new partners to enter the system. The higher the number of tokens staked the less tokens are circulating, which means that the price per token will increase. This means that for the governance of the whole system the token is used as the instrument in a decentralised way to enforce the changes to the system.
The third function of the CRWDToken is to establish a remuneration system for providers which can be deeply integrated into the logic of the smart contracts. The token will therefore be used to remunerate the partners who support the system. For every security token that is created, the token must be used to buy the service.
With the next blog we will go deeper into every building block of the CRWDNetwork.
Looking forward to your feedback team@crwdnetwork.com | www.crwdnetwork.com
