In early March, the fantasy author Brandon Sanderson launched a Kickstarter campaign to self-publish four novels he’d written during the COVID-19 pandemic. Aside from his enviable productivity, the campaign soon gave us something else to marvel at – Sanderson hit his $1million goal in thirty-five minutes. After three days, he’d raised $20.8m, making it the highest-funded project in Kickstarter history. By the time the campaign closed on April 1st, Sanderson had managed to raise over $41m from 185,341 backers, more than doubling the previous record.

There are many thought-provoking aspects to Sanderson’s unprecedented crowdfunding success. For instance, it clearly indicates a widespread appetite for long-form fiction – many of Sanderson’s previous novels approach or exceed 1000 pages. This runs counter to the apparent truism of declining attention spans and indifference to the written word. But it’s also an opportunity to reflect more generally on the transformative and ongoing impact of crowdfunding.

Since its launch in 2009, Kickstarter has seen over $6.5bn pledged and more than 218,000 projects successfully funded. And this is just one platform among many. Others have emerged to target specific niches – GoFundMe for charitable causes, for example, and Indiegogo for innovative tech and pioneering start-ups. The eye-opening numbers involved, both in terms of amounts raised and people pledging, are testament to the power of the web to connect people and support collective action. While “crowdfunding” in a broad sense dates back centuries, the possibility of hundreds of thousands of people worldwide pooling their resources to support a ground-breaking idea or good cause is entirely novel and worth celebrating.

Nevertheless, there are significant limitations to the current crowdfunding model – limitations tied to broader issues with the existing Web2 paradigm. In this post, we’ll examine how Web3’s shift toward a more open, decentralised future for our online lives has the potential to revolutionise crowdfunding.

Crowdfunding’s platform problem

Kickstarter itself exemplifies how the crowdfunding model, as it exists today, shares both the benefits and the problems of the wider web. Like many of the success stories of the Web2 era, Kickstarter is a platform. It serves as a means to connect diverse groups of people in order to match their interests – in this case, those looking for funding and those with money they’re willing to invest in a cool idea or a noble cause.

On the one hand, this is an important service whose benefits are obvious. Kickstarter, in particular, has helped to stimulate a creator economy in which artists, musicians and other creatives no longer need to appeal to the traditional industry gatekeepers to get their projects off the ground. By allowing for a direct connection with a potentially limitless audience, crowdfunding platforms can lower barriers to entry and support projects that are unlikely to attract funding from traditional sources.

The notoriously risk-averse film industry, for example, has driven ambitious directors to turn to crowdfund. Charlie Kaufman’s Anomalisa – a stop-motion animation film with an existential bent – received its initial funding from Kickstarter before Paramount Pictures stepped in. And though Kaufman was already a prominent name in the industry, Australian director Jennifer Kane was largely unknown when she successfully crowdfunded her debut feature, The Babadook, on Kickstarter in 2014. The film went on to win multiple awards internationally and was named one of Mark Kermode’s top ten films of the decade.

On the other hand, we can see Kickstarter struggling with many of the same drawbacks that have undermined the promise of the Web2 era. Platforms are, by definition, centralised entities. Their success relies on positioning themselves as the essential point of contact and exchange for those who use them. This allows them to exert significant control and influence.

Kickstarter, like most Web2 platforms, requires users to agree to terms of service that unilaterally set the conditions for what campaigns can be supported. These terms are open-ended and can be changed without notice, as the Kickstarter website clearly states: “We have the right to decide who’s eligible to use Kickstarter. […] We can change our eligibility criteria at any time.” Ultimately, Kickstarter reserves the right to determine who can or cannot use the platform and does not commit to any consistency or transparency for its decisions: “We have the right to reject, cancel, interrupt, remove, or suspend any project at any time and for any reason.”

GoFundMe makes similar moves to establish control over the projects and campaigns it facilitates. At the end of a long list of activities that the platform will not support, its terms of service state that it will also refuse to support “any other activity that GoFundMe may deem, in its sole discretion, to be unacceptable.” Of course, this type of centralised control is easy to accept when it leads to outcomes we support. That GoFundMe will not allow crowdfunding for the legal defence of those accused of violent crimes is unlikely to generate much opposition. But the fact that GoFundMe has the authority to make these decisions without recourse or oversight from the platform’s users is itself a problem. As we’ve discussed elsewhere, simply trusting powerful, highly centralised platforms to make decisions we support is a risky strategy.

The “donate and wait” model

Centralised moderation is not the only risk that users face in the Web2 model of crowdfunding. By acting as intermediaries, centralised platforms also tend to limit the degree of connection that is possible between users. Just as a YouTuber has only a certain limited number of ways to interact with their viewers, so the dominant crowdfunding platforms tend to offer a simplistic “donate and wait” model to connect backers with projects. Those who pledged $40-60 to Sanderson’s campaign, for instance, will receive the four novels in eBook format in 2023. Similarly, the almost 74,000 backers of the RPG Pillars of Eternity in October 2012 had to wait until March 2015 for their digital copies of the game – almost a year later than initially planned.

And this is a best-case scenario. Other cases, such as the long-delayed Star Citizen, stretch on indefinitely without an end in sight. The game’s Kickstarter project raised $2m in 2012, with backers promised a download of the finished game in 2014. Ten years on, the game remains in development, with backers having only received access to a substantially incomplete alpha release. Nevertheless, the developers have continued to raise money through crowdfunding and to expand the scope of the game. The project had raised $400m as of November 2021, but there is still no confirmed release schedule.

While many initial backers of Star Citizen have sought refunds, with varying levels of success, the overall lesson is clear. The dominant model of crowdfunding in the Web2 era provides backers with little to no actual influence over the projects they fund. If a project departs significantly from its initial plan, or simply never reaches fruition, those who donate have very little recourse.

This is, even more a problem in a charitable context. As a result of their underlying design, crowdfunding platforms are generally only effective at supporting single-issue causes. GoFundMe, for instance, has been instrumental in helping victims of the Pulse nightclub shooting or supporting the legal struggles of victims of sexual harassment in Hollywood. But this approach limits donors’ involvement in how the money is actually spent and results in people making isolated donations rather than offering sustained support. It also notoriously benefits the most attention-grabbing projects and reinforces existing biases over which causes deserve funding.

The question, then, is whether the undoubted benefits of mass-scale connectivity can be achieved beyond a centralised model. Can we imagine an alternative for crowdfunding in which a virtually limitless number of people can work together to fund initiatives without having to cede control over the outcome of a project?

The possibilities of crowdfunding in Web3

The transition to Web3 will involve returning to the decentralised vision that guided the web’s founders while retaining the mass-scale benefits of Web2. Nowhere could the benefits of this be clearer than in crowdfunding. While the crowdfunding platforms of the Web2 era have been enormously successful in connecting millions of people to fund a vast range of valuable projects, they have done so based on a highly centralised and fundamentally passive model that limits the active involvement of donors.

Blockchain-based solutions have already demonstrated their potential to revolutionise crowdfunding. In the simplest cases, the open and decentralised nature of transactions on the blockchain means that pooling funds for some specific purpose is easily done without the need to utilise a particular platform and agree to their oversight or accept their terms of service. While this is a positive step in some ways, it does not solve the core issue of leaving donors powerless.

A major development for crowdfunding in the creator economy can be seen in the adoption of NFTs. While NFTs have already provided a vital source of income for artists, musicians, and other creatives who found themselves disempowered by the Web2 paradigm, they also have significant potential as a means to fund future work. This may prove particularly compelling for filmmakers, whose projects often require significant advance funding to get off the ground. The actor Jennifer Esposito has raised money for her forthcoming directorial debut by auctioning off a range of NFTs. She noted that her decision to take the route was part of “an effort to upend the inequitable systems she experienced in the entertainment industry.” Holders of the tokens not only receive immediate rewards, including images and videos from the set and interviews with cast and crew members but will also have a financial stake in the success of the film thanks to their ability to resell the tokens at will.

However, the most exciting possibilities can be seen in the growing use of decentralised autonomous organisations (DAOs) for charitable and philanthropic purposes. DAOs typically raise funds by selling tokens that operate both as investment vehicles and for governance purposes. Thus, those looking to donate to a charitable DAO would see potential financial rewards and be allowed to vote on key decisions such as how the money is disbursed or which causes should be prioritised. Far from the “donate and wait” model that prioritises single-issue fundraising, charitable DAOs would encourage active and ongoing participation by donors – surely to the benefit of efforts to support positive social change and a vibrant creative economy.

Help support a truly decentralised infrastructure for Web3

The benefits of a decentralised model for crowdfunding are becoming increasingly obvious – to the degree that Kickstarter itself has made an initial commitment to move in this direction. However, such ambitious projects remain in their early stages, in part because of the technical and logistical challenges involved. Kickstarter’s own proposal inevitably lacks clarity and detail over how it will be implemented, though their commitment to “develop[ing] governance resources for the commons” should be commended.

As the possibilities of charitable DAOs and other forms of decentralised crowdfunding begin to take shape, there must be a vibrant ecosystem of decentralised applications and platforms to support them. As the UK and other countries start to take steps toward regulating DAOs, it’s vital to ensure that the foundations are in place to demonstrate the validity and vibrancy of blockchain-based solutions.

And that’s where Cudos comes in. The Cudos network offers a scalable, efficient, and highly interoperable infrastructure that can support a wide range of use-cases, from NFTs and DApps to data oracles and metaverse-ready virtual spaces. Most importantly, the network will offer decentralised cloud computing, ensuring that the intensive demands of more complex crypto projects – including charitable DAOs – will not need to rely on centralised providers.

How to get involved

The Cudos network is currently in phase four of its incentivised testnet, Project Artemis. If you’d like to help us ensure the reliability and security of the network prior to the mainnet launch, you can take on some of our outstanding development tasks and earn rewards.

The alpha version of our decentralised cloud platform Cudo Compute launched recently, and we’re looking to gather information from potential users to understand their needs and expectations. You can help us by filling out our survey – and you’ll also be in the running to win a £1000 Cudo Compute voucher and a £150 Amazon voucher.

About Cudos

Cudos is powering the metaverse bringing together DeFi, NFTs, and gaming experiences to realise the vision of a decentralised Web3, enabling all users to benefit from the growth of the network. We’re an interoperable, open platform launchpad that will provide the infrastructure required to meet the 1000x higher computing needs for the creation of fully immersive, gamified digital realities. Cudos is a Layer 1 blockchain and Layer 2 community-governed compute network, designed to ensure decentralised, permissionless access to high-performance computing at scale. Our native utility token CUDOS is the lifeblood of our network and offers an attractive annual yield and liquidity for stakers and holders.

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