Last week, Vitalik Buterin, one of the founders of the crypto-currency Etherum has announced a new and improved way of raising capital. In particular, the investors who invest in a ICO, more control and security than the previous approach in the alignment of the ICO.
Many ICOs Initial Coin Offerings, running on the Ehtereum-the Blockchain, so there is almost a monopoly position in the crypto market. An ICO can be compared with an IPO, a newly developed crypto-currencies to collect financial resources to the development of the project.
Because ICOs is no generally valid legal regulations, there was in the past, some of the “SCAM-ICOs”, in which the supporters are gone after a successful end simply with the money raised and the project has gone up in smoke. To prevent this, Vitalik Buterin presented a new model for ICOs, which is the abbreviation DAICO. In his Post he explains:
A DAICO contract is published by a single development team that wishes to raise funds for a project. The DAICO contract starts off in ‘contribution to fashion,’ specifying a mechanism by which anyone can contribute ETH to the contract, and get tokens in exchange. This could be a capped sale at left uncapped sale, a Dutch auction, interactive coin offering, a KYC’d sale with dynamic per-person caps, or whatever other mechanism the team chooses. Once the contribution period ends, the ability to contribute ETH stops and the initial token balances are set; from there on the token, can become tradable.
DAICO (Decentralized autonomous Inital Coin Offering) is a democratic solution to raise money for a project to collect. DAICOs not give potential investors more control and security over their invested capital, to abuse so that it or Scam. Here, the procedure is similar to that of a normal running ICOs.
First of all, the developers provide the investors their ideas and explain in detail the concept and the objectives set. Once you have found investors who have money to invest, and the project trust can provide financial resources for the further work.
Now, the crucial difference is, however: In a normal ICO, the developers will immediately receive the complete money and can have this free. A DAICO, however, to ask the developers in a first step, only a fraction of the money available so that they can start their work. The progress of the project can be followed on the platform and on the successful achievement of a specified milestone is reached, further funds will be released.
Within a DAICO’s the developer of the project may have to ask investors for more money. It is then voted on democratically, whether the claim is granted. Can be achieved a majority, is released the flow of money. Through this mechanism, only a limited amount will be made to capital for the developer, without the greater risks of total loss incurred and the money is used for other purposes.
Due to the accumulation of so-called “SCAM-ICOs” in the past, it had become for investors is sometimes difficult to distinguish genuine projects from fraudulent. This new approach could help to back the more negative term of the ICO’s in a right light. Potential fraudsters may be discouraged to start a ICO.