DAICO

In what’s likely to make ICOs more responsible and democratized, Vitalik Buterin has suggested a new decentralized crowdfunding model referred to as the DAICO. The idea is to leverage “some of the benefits” that come with Decentralized Autonomous Organizations or DAOs and enforce democracy and openness in the way Initial Coin Offering are conducted.

Buterin recently shared a post titled “Explanation of DAICOs” on an Ethereum Research forum. Through the post, he suggested uniting characteristics of ICOs and DAOs to come up with what he terms “DAICO.”

Like Ethereum, DAO is a decentralized organization with rules governed by smart contracts. And by incorporating features of DAOs with those of ICOs, the young Russian-Canadian programmer hopes to ease funding ETH-based projects by ensuring they are reasonable and possible upon developers’ results.

Features of DAO Vis-a-Vis Those of ICOs

DAO:

  • Leverages wisdom of a crowd
  • Cannot trust a single centralized team
  • Funding spreads over time

ICOs:

  • Founded around one mega project
  • No 51% risk of attack

Going Through His Idea In-Depth

First, a DAICO contract is created and published by a development team that hopes to raise funds for a project. It is at that moment when its first custodians launch the ‘contribution mode’ to specify a methodology through which anyone will contribute ETH coins to the contract, in exchange for tokens. It can be a capped sale or uncapped, a dutch auction, a KYC-like sale that has a dynamic per-person cap, an interactive coin offering or just anything decided and approved by the team.

Once the period of contribution elapses, the founder proposes that offering of ETH coins stops and thus starts the second stage – setting initial token balances. The phase also ends with the tokens becoming legally tradeable.

Buterin says the model places more power and authority in the hands of the crowdfund’s contributors by granting them the ability to build community consensus on how much funds a project may go through in a given period like monthly. It is possible since DAICO is an “idea through which token holders democratically vote on major resolutions, and they can do it by either obliviating a smart contract, or raising a “tap.”

Bestowing the power to control the team on the hands of the voters is a great move. They will offer the development team a reasonable monthly budget and later raise it as the developers exhibit competence in the way they are using the funds. If the team starts to mismanage the money and forces the votes to halt their progress, they will be ready to initiate a total shut down and get their funds back.

While explaining the DAICOs are secured, he accepted that votes of any kind could be manipulated. But better yet, he argued that the union of ICOs and DAOs may eliminate many of these manipulations, provided some honest developers will simply lover the tap.

If the 51% attack causes the DAICO to self-destruct “maliciously,” developers may merely come up with a new one. In the long run, the main benefit of this fundraising system is the convenience of simultaneously compromising the 51% of the votes while keeping the development team in check.

It is because of the greed-driven mania is the current ICO craze that prompted Ethereum founder to look for an answer that would create safe crowdfunding projects that aren’t prone to scammers. To this end, though, DAICOs will hopefully make the ecosystem a safe space for all.

[FREE] Get Our Best Crypto Trading, Mining & Investing Hacks:

*Action Required* Enter Your Email To Get Insight For Trending Coin News & Reviews

I will never give away, trade or sell your email address. You can unsubscribe at any time.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

5 × 2 =