Developers for Ethereum are constantly encouraged to create new improvements on the platform. In a recent turn of events at Devcon4, the annual developer conference for Ethereum, developer Fabian Vogelsteller proposed a way to allow investors to take back their funding from an initial coin offering.
This type of funding round would be called a “reversible ICO” or RICO.
Vogelsteller is credited with formalizing the code of Ethereum’s ERC-20 token standard, so it is to be expected that he would want to improve upon it. However, this new option would make ICOs much safer than they are right now, considering all of the frauds and schemes in the media lately.
The update would ensure that investors have the choice to withdraw their contribution at any time of the lifespan of the project, using a smart contract. Vogelstelller broke it down, saying,
“You are able to withdraw the funds you committed at any point of time and you do this by simply sending back your tokens.”
As the ether is returned to the investor, others have the option to buy into the opportunity. Ultimately, this change could make the value fluctuate for the project, so it will be important for startups to have “base funding” established with private investors that exist outside of the ICO.
However, it is a small price to pay to render scams “unlikely,” considering that it challenges ICO startups to keep the promises they make to the public. The risk of losing funds in the event of a project failure is reduced as well.
Over the last two years, ICOs have become extremely popular, bringing in over $20 billion collectively, based on data from the CoinDesk ICO tracker. On Tuesday, Fabian Vogelsteller commented that many of the projects that end up using token sales do not stick with the decentralization that Ethereum promotes.
As they receive plenty of capital and funding through the beginning, he believes that “companies end up focusing on their buying power for lambos rather than doing something useful.”
Vogelsteller’s role within the ICO boom as the author of the ERC-20 standard makes him feel responsible to improve upon it, which is the entire point of RICO.
The first step towards this improvement will be to test it out, which the developer plans to do in his own startup called Lukso, a blockchain focused within the fashion and design industry. At Devcon4, Vogelsteller said,
“It brings the balance back between the community and the project and I think this is really important.”