With the current value of Bitcoin sitting above $60,000 (up 228% on its closing price 12 months ago on May 11 2023), there are increasing signs of its wider acceptance, easier ways to buy and sell it, and a growing ecosystem for people to actively use it rather than simply acquire it as an asset. The Lightning Network enables easy Bitcoin micropayments, and offers several other advantages for crypto crowdfunding compared to traditional platforms and methods.
Crowdfunding benefits of Lightning Network
Faster Transactions
Regular Bitcoin transactions can take upwards of 10 minutes to confirm. Lightning Network transactions, on the other hand, happen nearly instantly, making it ideal for smaller, frequent donations that crowdfunding campaigns often rely on.
Lower Fees
Bitcoin transaction fees can fluctuate but can sometimes be quite expensive. The Lightning Network operates on a different layer, and fees are significantly lower, making it more cost-effective for both crypto crowdfunding project creators and project backers.
Global Reach
Traditional crowdfunding platforms may have limitations on where funds can be sent or received. Bitcoin, by its nature, is borderless, and the Lightning Network facilitates these frictionless, international transactions.
Transparency and Censorship Resistance
Since Bitcoin transactions are recorded on a public ledger, there’s inherent transparency in how funds are used. Additionally, Bitcoin and the Lightning Network are censorship-resistant, meaning funds raised through Bitcoin crowdfunding cannot be frozen or withheld by third parties.
Crowdfunding censorship
Here are three examples that illustrate how government censorship can impact crowdfunding.
Social or Political Causes
In countries with restrictions on free speech or assembly, crowdfunding campaigns supporting social or political causes critical of the government could be shut down. This might include campaigns for independent journalism, human rights organizations, or opposition political parties.
After months of riots in Hong Kong in 2019-20, many people who had been arrested and fined were helped by money raised through crowdfunding to pay their fines. The authorities responded by ruling that plans for future crowdfunding campaigns had to be submitted to a new Crowdfunding Affairs Office for approval before they could go ahead. They also arrested activists who had set up the crowdfunding campaigns on charges of “money laundering.” China describes the new crowdfunding rules as required to protect national security.
During the COVID, Canadian authorities ruled that truck drivers would have to be compulsory vaccinated in order to continue working. Media speculation at the time questioned the speed at which the vaccines had been produced, and some people had reported harmful side effects, and in some cases even deaths.
The Freedom Convoy drove across Canada. Photo by Naomi McKinney on Unsplash
Many Canadians sided with the truckers against heavy-handed action by their government, and a crowdfunding campaign for the truckers had reached several million dollars to fund a legal campaign against the government edict. However, under government pressure, the crowdfunding platform GoFundMe ended the campaign and returned money to the donors.
Authorities were unable to stop subsequent crypto-led donations through Tallycoin, a bitcoin-based fundraising platform. The platform offers Lightning Network donations for fundraisers that use Bitcoin payment processors. In Canada, activists handed truck drivers written instructions on how to access and use values of Bitcoin that had been raised through crypto crowdfunding on Tallycoin.
Controversial Art or Media
Governments might censor crowdfunding for art projects, films, or music deemed offensive or against their ideology. This could be anything from a documentary critical of government policies to a satirical art installation.
Scientific Research
In rare cases, governments could restrict crowdfunding for scientific research, particularly in fields with ethical considerations or national security implications. This could be research on gene editing, advanced weaponry, or controversial medical treatments.
Geyser Fund’s Crypto Crowdfunding
The idea of Geyser Fund came to its founders during the COVID. During what seemed to be enforced idleness, their intention was to harness the potential of Bitcoiners to make a difference and do some good, through Lightning Network making it possible to channel direct micropayments to various social enterprise projects.
Decentralized payments through a cryptocurrency also adds a layer of censorship-resistance to crowdfunding.
A platform such as Geyser Fund can host crowdfunding projects, though unlike established platforms including Kickstarter, Wefunder and Crowdcube, it does not process transactions. The projects that are raising funds have their own Lightning Network wallet, and backers transfer their funds directly to each project. Lightning allows immediate and direct payments to each project. This means all projects are based on the “Keep What You Raise” model, rather than having to meet a pre-set minimum target to receive “All Or Nothing” funding.
A project backer doesn’t even need to log in to the Geyser crowdfunding platform to make a donation. A Lightning address or QR code can be included on social media and in blog posts, though project pages are updated as soon as funds are received by any route.
Three main types of Geyser fundraisers using Bitcoin crowdfunding, as recognized by the platform itself, are:
- Social educators
- People building communities and organizing small conferences
- Creators
Project supporters and donors can be anywhere in the world, rather than restricted to territories where they can access Stripe or some other payment method tied-in to the crowdfunding platform being used. The transactional processes on the GoFundMe platform, however, is reckoned to exclude about 85% of the world’s population.
Since it began operating in November 2022, Geyser has supported over 1,000 projects, and 64,000 contributors have donated 33.2 Bitcoin.
Key Takeaways
Overall, the Lightning Network streamlines the crowdfunding process by offering faster, cheaper, and more globally accessible microtransactions. Payments can be made through multiple routes, and this added flexibility of crypto crowdfunding can be particularly beneficial for smaller projects or those targeting a wider international audience. It is also a payment system that is also beyond the reach of government interference.
