Vitalik Buterin, Russian-Canadian programmer and co-founder of Ethereum and Bitcoin Magazine, has announced the launch of Decentralized Autonomous Initial Coin Offering (DAICO) — a new fundraising model, that may probably trigger a whole new stage of the fundraising systems’ evolution.
The main principles of DAICO and its operating mechanism were briefly outlined in a 15-page white paper, written by Vitalik Buterin in co-authorship with Jason Tetsch, the founder of blockchain verification project TrueBit, and published in September 2017. Essentially, the main idea of DAICO model is to bring fundamental principles of market value to ICOs, which have so far suffered from lack of rational free-market economics, allowing hype and promotion to wield outsized influence.
While benefiting from the original characteristics of the ICO’s fundraising process, DAICO also incorporates a Decentralized Autonomous Organization (DAO) protocol, giving investors greater control over the use of funds by companies and development teams through the lifetime of the project or company in question.
In an ICO, it ultimately is in the hands of the project or company to use the raised funds as and when they see fit, with no oversight or control given to the investors. In contrast, the Decentralized Autonomous Initial Coin Offering Platform, through a mechanism referred to as ‘taps,’ gives the control of project or company funding to the investor.
A DAICO essentially has two criteria, the frequency of funding and the amount of funding released through each ‘tap.’ When a company or project requires access to additional funds that had been raised during the DAICO, the management team will need to make a request for an increase in ‘tap’ value. The decentralized nature enables token holders to then vote on the request and ultimately decide whether the tap can be increased.
Buterin believes that the incorporation of the DAO protocol into the ICO platform reduces the risk of votes of any kind being subjected to 51% attacks, bribe attack, and other game–theoretic vulnerabilities, in order to manipulate outcomes.