The cryptocurrency industry has gotten the attention of a lot of investors due to its promise of generating fabulous returns in a very short space of time. Stories of "Bitcoin millionaires" abound, and adding to the allure of such tales is the fact that crypto offers different ways for participants to grow their wealth.
Getting rich with crypto doesn't mean identifying the next 'hot' token before its value rockets. Rather, some of the most tantalizing opportunities in crypto are to be found in investing in new startups and projects.
Many crypto startups these days are funded by their communities of users. They use "launchpads" as a vehicle to raise funds from the community, offering backers early access to their native cryptocurrency tokens. Similar to an IPO, Investors get early-stage access to the projects with the main advantage being the bargain on the price of investing just before the public sale. Assuming the project takes off and becomes successful, the value of those tokens should increase enormously, providing solid returns to those who believed in them from the start.
Some investors have made immense riches. When the initial coin offering market first took off during the 2017 crypto bull run, it wasn't uncommon for people to make 10-, 20- or even 30-times returns on their investments. Unfortunately, the market has since become flooded with new startups and projects, and many of them are destined to fail. Add to that, crypto launchpads are routinely used by scammers who launch dubious projects, only to take the money and run - the so-called "rugpull", which leaves investors holding worthless tokens.
Rugpulls are no small risk. According to Solidus Labs, 117,629 token scams were carried out in 2022, affecting more than two million unfortunate investors. That amounts to an average of 350 scam tokens created each day. It's a truly staggering number that highlights just how risky crypto investing can be. One of the biggest scams so far was the Squid Game token, which raised $3.3 million from investors. It turned out to be a "honeypot scam", where investors are prevented from selling on their tokens by smart contracts.
It's not only rugpulls that investors have to look out for though, as the crypto launchpads themselves can also be fraught with risk. Last October, for instance, the Team Finance launchpad announced it had lost $14.5 million of investor's money after a hacker exploited a vulnerability in its smart contract code to steal those funds. Adding to the risk is that not all launchpads are the same. While some of the more reputable platforms perform due diligence to ascertain the viability of the projects they promote, others perform less vigorous vetting.
Finally, there's the danger of manipulation by the launchpads themselves. Many will try to maximize the value they can extract from projects for themselves. To do this, they may inflate the price of tokens during their sale, which is done by long vesting periods and extended lockups that prevent investors from selling. However, this inevitably leads to rapid depreciation once the initial excitement over the project dies down, leaving both investors and the project's founders short-changed. If you've ever seen a token price chart like this, now you understand why:
A Safer Funding Environment
Investing in crypto projects will always be a bit of a gamble because even the most well-intentioned projects can fail to succeed. But AngelBlock believes it's possible to minimize the risks to investors through the use of a decentralized, community-governed funding protocol that's focused on transparency, accountability and engagement.
AngelBlock's stated goal is to democratize fundraising in Web3 while ensuring the safety of investors through innovations such as on-chain vesting, cap table management and token distribution systems. It's aiming to build a decentralized network for safer and more secure forms of fundraising, vesting and token distribution.
By keeping the fundraising process entirely on-chain and governed by its community, AngelBlock's protocol provides investors with greater security over how their capital is used. It has created a unique, post-raise governance system based on the idea of milestone-based funding, which ensures projects must consistently deliver on their goals to access the money pledged to them. Projects that raise capital on AngelBlock must create a series of milestones with specified deliverables that must be met to unlock the funds pledged to them, step-by-step. As each goal is reached, the project's investors will be able to vote on whether or not the next chunk of funds is unlocked. In this way, if a project attempts a rugpull, investors can simply vote for the remaining funds to be returned to themselves.
To enable users to assess whether a project is meeting its deliverables, AngelBlock provides comprehensive reporting tools for startups to report their finances in an open way that can easily be verified by investors.
Another key advantage of AngelBlock's protocol is the concept of on-chain vesting, which ensures that the project's founders can't just "dump" locked up tokens onto the marketplace at once, crashing its value. AngelBlock uses smart contracts to verify vesting periods, improving transparency and creating greater trust. To eliminate manual transaction errors, smart contracts are also used to automate token distribution with greater accuracy.
Meanwhile, AngelBlock's validators are incentivized through its tokenomics structure to perform due diligence on all startups seeking to raise capital with its protocol, helping to weed out weaker projects. Because AngelBlock is fully decentralized, its community of investors can participate in its governance to ensure the system remains secure and democratic. The protocol also adheres to KYC and AML standards, and proactively adopts the EU's MiCA regulation guidelines to enable complaint fundraising. Its credibility is boosted even further by its zero-fee fundraising model, with no fees charged on the funds raised by each project. This means projects can use the full amount pledged to them to invest in their growth.
Finally, AngelBlock provides leveraged community-building services for all of its startups, with tools for building up their infrastructure, creating DAO-based governance structures and more.
Worth A Bet?
AngelBlock's founders will be the first to concede that investing in crypto startups will never be 100% safe. Investing is, by its very definition, a risky undertaking. That said, it's possible to keep those risks to a minimum, and AngelBlock has introduced some genuinely novel features and mechanisms to do just that.
By preventing projects from grabbing all of the capital pledged to them until they meet their investor's expectations, the danger of falling victim to a rugpull is reduced significantly. Moreover, AngelBlock's post-raise governance has the effect of enhancing collaboration between project founders and their backers. Investors become more involved in the development of the projects as they grow, and their interests are naturally aligned for the greater good.
Overall, AngelBlock is striving to create a much safer environment for investors. Its journey has just begun, but with its reduced risks and some promising projects just about to launch, it's one that crypto investors will be following with interest.
