Vitalik Buterin the Ethereum blockchain’s main protagonist, recently made proposals about a new decentralized model to raise funds on the Ethereum network called a DAICO.
This suggestion comes on the back of recent calls for some guidelines and framework within which Initial Coin Offering (ICO) campaigns and projects are to be run. The DAICO framework is meant to democratize the current ICO process. Vitalik proposes that this new system of fund raising on the Ethereum network will combine the old ICO concept with a Decentralized Autonomous Organization (DAO) i.e an organization that is guided by coded laid down rules and regulations that cannot be breached.
The inception of the ICO concept has given entrepreneurs and team of developers the ability to raise funds by getting investors to directly buy into their proposed ideas. ICO allows blockchain-centered enterprises to bypass traditional systems of fundraising such as Venture Capitals (VCs) and Initial Public Offerings (IPOs) which are plagued by stringent rules and requirements.
A sizeable number of ICO investors have had astronomical gains thus far as ICO campaigns have raised a cumulative figure of about $4 Billion in recent years. These huge figures have encouraged many to make a foray into the ICO space and this has created the term ‘ICO craze.’
Vitalik Buterin’s new DAICO is an upgrade of the ICO system as we currently have it. The DAICO concept will give new levels of controls to investors as a safeguard measure for their investments and also help guard against fraudulent projects.
The DAICO just like the normal ICO starts out in a fundraising and contribution mode where investors will be able to send Ether and receive corresponding amount of project tokens in exchange. The usual dynamic of hard and soft cap, presale, mainsale, uncapped sale, whitelist, KYC et al can be applicable. Tokens are also tradable once the fundraising is over just like ICO 1.0
The Difference however comes into play where after contributions have been made, a control mechanism called ‘tap’ kicks in. With tap, token holders are able to control the amount of funds the project team can have access to.
Unlike the existing model where teams have the leeway to use funds as they please, DAICO will use the tap mechanism to help enhance accountability and corporate governance of projects. This way, stakeholders can ensure that funds are being spent wisely.
Token holders also have the option to vote to cancel a DAICO project entirely if the project team begins to deviate from their core mandate and/or engage in ventures that are detrimental to the project.
The tap will inadvertently serve as a reward system for development teams since the tap limit can be increased if the teams consistently meet their goals. And if a project and its team turn out to be outright frauds, token holders can vote to cancel the DAICO which helps to minimize their losses.
In as much as there are the possibilities for votes on decentralized networks to be susceptible to malicious attacks, the DAICO system will be built to minimize such risks in multiple ways.
The team has the ability to correct voting in the event of manipulations. Also, if malicious groups conspire to cancel a project, investors will have the safety of getting their investments back automatically.
2017 was a huge year for the ICO industry with projects raising significant sums and this spurred remarkable developments and innovations on the blockchain. 2018 ushers in DAICO which gives added layers of security and insurance to ICO investors. This will consequently inspire more innovation in the space. DAICO has the inherent ability to sieve out fake projects from the genuine ones.