In recent decades, crowdfunding has become one of the most popular and effective methods for raising financial resources for social and economic projects. This financing model enables individuals and organizations to collectively pool their financial resources in small and distributed amounts for social projects that have a positive impact on society. With the growth of new technologies and changes in economic structures, new crowdfunding models can provide more opportunities for social projects. This article explores new crowdfunding models and how they can be applied to social projects.

What is Crowdfunding?

Crowdfunding, which is typically conducted online through internet platforms, is a process in which a large number of individuals (often online) contribute funds to support specific projects or ideas. This model is particularly useful for projects that require substantial financial resources but are unable to attract large investors. In this process, various individuals or entities contribute part of the project's cost in exchange for social or economic benefits derived from the project.

New Crowdfunding Models

In recent years, with the advancement of technology and increased public awareness, new crowdfunding models have been introduced for social projects. These models, especially in areas such as social innovation, the environment, and sustainable development, can play a crucial role in achieving social goals.

  1. Blockchain-Based CrowdfundingOne significant advancement in crowdfunding models is the use of blockchain technology. Blockchain enables crowdfunding projects to be managed in a completely transparent and secure manner without the need for centralized intermediaries. These models are particularly beneficial for projects that require financial transparency. With blockchain, individuals can be confident that the financial resources are being used correctly and without manipulation for the project's objectives.
  2. Cryptocurrency-Based CrowdfundingCryptocurrencies and tokens have also emerged as new tools in crowdfunding. Social projects can issue their own digital tokens and use them as a means of raising capital. These tokens can serve as certificates of participation or even as rewards or specific benefits in the projects. This crowdfunding model is especially popular in digital communities and among blockchain enthusiasts.
  3. Social Rewards-Based CrowdfundingIn this model, contributors receive social benefits instead of financial returns, such as access to special services, educational experiences, or membership in social groups. This type of crowdfunding is ideal for projects aimed at creating social or environmental change. For instance, participation in projects that help preserve natural resources or reduce poverty can provide contributors with significant social benefits.
  4. Smart Contract-Based CrowdfundingAnother innovative model of crowdfunding uses smart contracts. Smart contracts can automatically execute specific conditions when prerequisites are met. In social projects, these contracts can ensure that financial resources are correctly allocated to the projects. For example, if the goal of a project is to fund a school in a specific area, the smart contract will ensure that funds are allocated to the project, and once the project criteria are met, the financial resources will be released.
  5. Social Impact Investment-Based CrowdfundingThis crowdfunding model focuses more on social returns rather than financial returns. In this model, individuals can invest in projects that directly contribute to improving social or economic conditions and, in return, benefit from social rewards (not necessarily financial). This model is particularly beneficial for social projects designed for specific communities, such as education or healthcare projects.

Benefits of New Crowdfunding Models for Social Projects

These new crowdfunding models bring numerous benefits that can have a significant positive impact on social projects:

  1. Transparency and Increased TrustOne of the greatest advantages of using blockchain and smart contracts in crowdfunding is increased transparency. This feature can help build public trust in social projects and ensure that financial resources are allocated correctly and promptly.
  2. Access to More Financial ResourcesNew crowdfunding models provide broader access to financial resources. Particularly in social projects that require collective participation, these models help raise funds from a large number of individuals, even if each person contributes only a small amount.
  3. Increased Community ParticipationThese models, especially in projects that require social change and improved living conditions, can increase public participation. Instead of simply contributing financially, individuals can participate in social projects motivated by various incentives, including social, cultural, or educational rewards.
  4. Reduced Dependence on Traditional Financial ResourcesNew crowdfunding models can reduce reliance on traditional financial resources like banks and large financial institutions. These models can provide an opportunity for projects that historically had limited access to financial resources.

Challenges and Limitations

Despite all the advantages, new crowdfunding models also face challenges that must be addressed:

  1. Need for Awareness and EducationMany individuals are still unfamiliar with the concepts of blockchain, digital currencies, and smart contracts. For these models to succeed, public education and awareness campaigns are needed to help people effectively participate in the projects.
  2. Legal and Regulatory IssuesThe use of cryptocurrencies and blockchain in crowdfunding is still subject to legal restrictions in many countries. To fully utilize these models, changes in policies and regulations are required.
  3. Security RisksSome crowdfunding models, especially those based on blockchain, face security risks and cyberattacks, which could pose a serious threat. Therefore, building appropriate security infrastructures to protect financial resources and user information is critical.

Conclusion

New crowdfunding models, especially those based on innovative technologies like blockchain, digital currencies, and smart contracts, can play a crucial role in raising financial resources for social projects. These models are particularly beneficial for enhancing transparency, increasing public participation, and reducing reliance on traditional financial resources. However, to fully leverage these models, there is a need for education, awareness, and the establishment of appropriate legal frameworks. The Innovation and Social Economy Research Institute at the University of Tehran can play a key role in advancing these approaches by conducting research and development in this field and creating an environment conducive to the implementation of innovative social projects.