Demystifying Cryptocurrency and the reasons for its growing popularity
17 May 2018
In modern times where change is the only constant, there are some things that have proven to take substantial time to adapt to the world around it. One such activity is fundraising.
Fundraising, which might be relevant for a startup or for the expansion of an existing enterprise, is a very crucial determinant in measuring the success of a company. The concept and process of fundraising has seen many transitions over the years; from the traditional method of IPOs to fundraising through Venture Capitalists, Angel Investors and Crowd Funding to the most recent and debatable method which is slowly making its way to the table, Cryptocurrencies. The term ‘Cryptocurrency’ has different implications for the lay public. For some, it might sound like a scam; for others, it might sound like the next big opportunity to become a millionaire. This difference in thinking is mainly due to the lack of adequate knowledge about the concept in the first place. The first thing that the general public think of when they hear the term ‘Cryptocurrency’ is the speculative nature of Bitcoin and other existing crypto tokens in the economy. However, in reality it is a very broad and extensive concept which needs to be studied with focus, as it holds potential to be the way to raise funds in future years.
A Cryptocurrency is a digital currency which is encrypted in order to synchronize the inception of new units of currency and substantiate the transfer of funds. As of now it is free of any conventional regulations by Central Banks, which is the core reason behind the debates and speculations surrounding the crypto world. There are however some cryptocurrencies that are stable and well established in the market and then there are some new ones which have started to pave their way inwards. The well-established digital currencies facilitate Initial Coin Offerings (ICOs), i.e. the introduction of their newer digital currencies.
Initial Coin Offering is a fundraising mechanism wherein they offer investors units of a new cryptocurrency or a crypto-token which they have developed in exchange for the existing and established ones like Bitcoin, Etherium, Litecoin, Dash, Ripple etc. which are usually traded on various cryptocurrency exchange platforms.
There’s a very interesting concept in Marketing Management called the AIDA model which stands for “Awareness, Interest, Desire, Action”. Every enterprise before launching their product, should identify and place themselves in this model which is determined by the popularity of the product. According to where the enterprise is placed in this model, their promotional and marketing activities should vary. Coming to the Cryptocurrency industry, it still lies somewhere between Awareness and Interest majorly, because of which the crypto launches should be carried out in a way that caters to the masses, in order to make them aware of the very concept.
And interesting statistic in India, out of the universe of 2 million software developers, only about 5000 are equipped to work on blockchain platforms that are the backbone of crypto currencies. Hence it can be said that expecting the general public to know about this industry is not justified.
The first challenge for organizations who are looking to launch an ICO is to segregate the market into two groups;
The first group includes people who are in crypto communities or are already investing in cryptocurrencies, hence there’s a high probability that they would understand the advanced terminologies and nuances related to this field. This group might go to specific platforms to keep themselves updated, which is not the case with mainstream public. The second group is includes people who are just fascinated by terms like ‘cryptocurrency’ or ‘bitcoin’ but don’t have a substantial knowledge of these terms.
It’s extremely important for organizations to think about strategies which cater to both these groups in order to attract maximum investments.
With popular media platforms such as Facebook, Google and Twitter putting a ban on advertising cryptocurrencies and ICOs, organizations rely more on community-based platforms such as Slack, Telegram, and Reddit. These platforms facilitate debates on the topic rather than a mass outreach, and hence focusing on the group which already has a substantial knowledge of how blockchain platforms work.
For capturing the layman’s interest, Bounty Programs (pre and post) play a very important role. What this means is a company introducing a product or a service that offers some rewards to people in exchange for performing certain tasks. Apart from these programs, Media outreach through official blockchain forums like CoinDesk, Cointelegraph, and BitcoinTalk can work in the favor of companies as well. Also, thought leadership through guest posts, speaking opportunities, story-telling (on owned, earned or paid media) and a content-rich website are some ways that can be relied on. Nowadays, a key method deployed by startups is to portray the journey of the entrepreneur/spokesperson of the company in the form of a story which can motivate the general public.
The way forward for this industry is ripe and laden with possibilities, provided the organizations could collectively clear the air and avoid speculations related to the product that they offer. It’s crucial that they gain the trust of the general public. With growing popularity and investments in areas such as Artificial Intelligence, Machine Learning and Blockchain platforms, it’s high time that economists and investors learn more about Cryptocurrency and lay their trust in what is potentially the future of fundraising and the economy as a whole.
This article is written by Lakshit Jangid, a post graduate student at FLAME University, Pune. He is pursuing a career in Marketing Management and Client Relations with other interests in fine arts, humanities and public speaking.