Despite the buzz and benefits of ICO, the crypto community is aware of its flaws. That a lot of people have been making the calls for regulation in different guises is a pointer that something has to be done to have a dependable and trustworthy crypto crowdfunding space. Buterin, the co-founder of The Ethereum Network has made the latest proposition on a new ICO model that could in a sense, eliminate the abuse of trust in ICOs. The model, referred to as DAICO is Decentralized Autonomous Initial Coin Offering.
One of the features of blockchain upon which successful tokens such as Bitcoin was built upon is the elimination of trust or the so-called ‘trustlessness’. This is why anyone who uses Bitcoin does not continue to worry about the integrity of the other party. The same cannot be said about ICO, which experience has shown is conducted by all shades of people. This is why we have had even scammers launch crowdfundings and make away with investors’ money.
These are some of the reasons why there have been calls for internal and government regulations that we have started witnessing. Buterin who has been one of the vocal leaders in the blockchain community has been in the forefront of activism to ensure that the digital token space adds real value to the society.
The new model incorporates the features of DAO and ICO to create DAICO. DAO, which is Decentralized Autonomous Organization is an entity that doesn’t have a centralized command and control which ensures that trust is not needed for a transaction or operation. We, however, have seen that with ICO, trust has been a critical factor which many times have been betrayed. This, to a large extent, negates the essence of the decentralized network of the blockchain.
The new model which a hybrid of the decentralized autonomous organization and the initial coin offering creates the DAICO which could be described as a semi-decentralized platform that ensures that trust doesn’t completely skew towards one party as in the case of ICO, in which the company offering the token is solely in control of token process and project execution, and may even decide to walk away with investors’ money.
The DAICO ensures that there is a form of oversight powers conferred on the investors over fund disbursement after the crowdsale. In other words, with the DAICO, the proposition is saying that if the crowd (investors) are the ones bringing the money, they ought to have a say on how the money is expended. DAICO empowers the investors with voting rights with which they control how ICO funds are disbursed thereby putting limited checks on frivolous spending or outright scams.
With the new model, after the ICO the smart contract release funds based on milestones of project accomplishment. The keys to the vaults are held by the investors who vote either for the funds be released or not depending on their assessment that the funds released for the previous phase of the project were judiciously put to use.
This model calls for informed and involved investor community that would not just invest and go away waiting to cash out at a point. Rather, the smart contract allocates project funds in smaller manageable fractions that the investors vote to allocate to the team in phased project execution.
The team demonstrates their capability through completion of the phase the fund was voted for before more are approved by the vote of investors. If the voters are dissatisfied with the performance of the team, they could vote to have the project terminated and funds returned to investors.