What To Do If You Regret Making an Investment in an Initial Coin Offering?
According to Tokendata, 46% of the Initial Coin Offerings (ICOs) launched in 2017 have already failed. As reported by this company, ICOs failed during the funding stage because they took the money and escaped or because they just couldn’t continue their projects.
Once investors discover that an ICO is not doing what it promised during the funding period, they want to exit and have their funds back. The only way to do it is by selling undervalued tokens and accepting heavy losses.
In order for the ICO market to work in the long-term and have investors that are sure that their money will not be lost, on-chain governance mechanisms could play an important role to mitigate these losses.
A company located in Spain was able to develop an on-chain governance system that allows token buyers to be protected against scams and projects without future. The company is known as Coin Governance System (CGS) and, with it, investors can recover their contributed funds.
CGS is works by holding the funds raised during an ICO in an escrow smart contract that will be releasing it gradually in order to complete the project. If during the building process of the project, investors do not feel satisfied about the project’s progress, they can go to the CGS and open a claim.
In order for the claim to work, it needs to receive important support, which will be handled by a decentralized community of arbiters. Those individuals will vote on whether they think the project is working properly or not.
If the claim is approved, then the smart contract will enter in a ‘temporary withdraw mode’ where unsatisfied ICO Token Holders are able to redeem the tokens and recover the remaining part of their funds.
In order to keep a transparent system, Arbiters are incentivized to be impartial working through a clever reward programme system. It is important to mention that the MVP of the CGS is working on the Kovan Etheruem Network and will move the the mainnet in September. There are several ICOs that have shown interest in implementing the CGS. Some of these platforms are Gotaki, Skyllz and Staxe.