While the era of NFT’s exchanging hands for expensive fees seems like a different time now, the NFT technology has always been attractive for more than one reason.
NFTs are cryptographic assets that hold metadata and identification codes hosted on a blockchain. Unlike fungible tokens, NFTs cannot be exchanged or used for commercial transactions, and cannot be replicated.
As such, NFTs can represent anything from the physical world on the blockchain, with examples such as individual identity, property rights, artwork, and real estate.
However, besides trading and speculation, the NFT sector remains a promising sector experiencing a wave of innovation from all corners of the world.
The idea lends itself to many interesting use cases:
NFTs in Equity Fundraising
One of the major innovations when it comes to Non-Fungible tokens (NFTs) is the use of purchasing stocks at companies, or in the same way venture capitalists acquire equity and invest in startups.
An example of this in action is by Orbeon Protocol which has built a kind of blockchain investment platform. This lets startups raise capital from investors rapidly whilst also connecting with the Web3 world where users can access other services, including a decentralized exchange.
Startups seeking to raise funds can use such protocols to mint fractionalized, equity-backed NFTs as a form of investment and these NFTs can be purchased from as low as $1.
For the start-up companies in question, using NFTs in this way significantly reduces fundraising costs and it allows them to be in direct contact with their backers.
How it Works
Let’s say a start-up company wants to raise $100K.
They will use a service that offers NFT fundraising which will then mint 10,000 equity-backed fractionalized NFTs, each representing a $10 investment in the start-up. These NFTs can then be bought, sold, and even staked on decentralized platforms by other crypto users and on exchanges.
In the case that a start-up does not meet its funding goals within a pre-agreed timeframe, investors can get a full refund, depending on the platform they are using This practice is devised to take guesswork out of the equation and enables investors to only invest in solid companies that receive sufficient backing.
The application of NFTs in startup investing is a relatively novel idea that has yet to pick up pace.
However, after the decline in sales of traded NFTs in 2022, people may begin to take more interest in the other ways to apply NFTs besides just purchasing art pics.
Using NFTs in startup investing is therefore one of the more interesting applications with the potential to truly democratize and revolutionize how we invest in companies.
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