Marc Serafino
The rise of cryptocurrencies was one of the most important news of 2017. In addition to the rapid growth in value of many digital assets, we have also seen a record number of Initial Coin Offerings (ICOs), some of which have failed to deliver, to say the least. Unfortunately, there were those situations when developers simply released a white paper and once collecting the proceeds, they literally “ran with the money.”
That being said, ICOs have helped companies raise whopping $4 billion, and obviously – they are here to stay.
But something could be improved, and so the idea of DAICO was born. It was suggested by the co-founder of Ethereum, Vitalik Buterin, in January 2018; and it aims to make ICOs more secure. How it intends to do that? You’ll have to read on to find out.
1. DAICO makes ICOs better for all parties
Even though it DAICO is primarily designed to protect investors, developers also get to benefit. The reason is simple: if investors know they can be involved in the process more intimately — and even vote for a refund — they would be more willing to support some project. This increased accountability should make it easier for developers to attract more investors.
2. DAICO starts as a Smart Contract
The DAICO contract includes a mechanism where contributors (investors) can send funds to the project in exchange for tokens (coins). The important difference takes place after the crowdsale period ends, when the same contract prohibits anyone from contributing any further. Also in this period, the so called “tap” variable kicks in.
3. “Tap” prevents developers from easily withdrawing money from the token sale funds
The tap feature can be programmed to predetermine the amount (per second) that allows developers to withdraw money from the token sale funds. Initially, the limit is set to zero, but contributors can vote on a resolution to increase the tap. This way, the money is not released in a lump sum, and is instead spread over time, keeping developers incentivized to keep working on their offerings.
4. DAICO enables refunds for investors
If investors are not happy with the progress developers are making, they can initiate a refund vote, and if they agree – get their money back. Depending when this refund call happens, investors could get the entire sum back or part of it, if some money has already been withdrawn by developers.
5. The main difference between DAICO and ICO is access to funds
As you may have figured it out – with an ICO, developers get all money after the token sale ends. With DAICO, they can set it up in such a way that a portion of the money is released every time they hit some preset milestone. For instance, they could be entitled for 20 percent of the sum after the minimum viable product is launched, then another 20 percent after they release the first beta, and so on until the final product is out.
6. DAICO pushes developers and investors to work together
With DAICO, raising funds in a token sale is turned into a collaboration, with investors being able to vote on resolutions during the development phase. At that time, they could also decide to — for instance — increase the tap or to return the remaining contributed funds (self-destructing the contract).
DAICO is the way forward!
From what we can tell, DAICO improves the ICO process in all the ways that matter — most importantly, it makes it safer for investors to participate in token sales — and in that sense we expect it to help bring token sales to the new heights. Also, the fact that DAICO was proposed by Vitalik Buterin will undoubtedly help it being adopted by startups around the world.
Nonetheless, we will still have to wait a few months for investors/contributors to learn about this “new kind of ICO,” though we wouldn’t be surprised that by the end of this year the majority of token sales follow the DAICO model. And that, as we said it before, is a win-win for both developers and contributors.
