Crowdfunding is the practice of funding projects with the money of a large number of people. If a project in development has a big potential audience, many small contributions made by each person can add up to very substantial sums. The appearance of Bitcoin and other cryptocurrencies has allowed for 2 significant improvements in crowdfunding:
- Very low transaction fees mean that even smaller contributions can be collected, potentially significantly increasing the sheer number of contributors.
- A project can release cryptocurrency tokens for crodwsale, working in a similar way to company shares during IPO. The contributors then make their donations in exchange for those tokens, making it worth their while.