Over the past year and a half, the initial coin offering has become the go to option for blockchain related startups that are looking to raise funds for their operations. This meant that they would not have to deal with the somewhat murky water that is the venture capital sector.
Instead, they could release their own digital tokens to the general public and receive funds in return for the issuance of them. It was in January of last year that the founder of Ethereum Vitalik Buterin published a paper in which he proposed a new structure to the way in which ICOs are conducted. This is called the DAICO and it is now being pushed as being the era of the ICO 2.0, with the acronym standing for decentralized autonomous initial coin offering
What are the details about this new type of ICO?
The idea of the DAO has been around the industry for some time now. This is basically the concept that a company can be created through the use of decentralised voting. There is no hierarchy compared to what would be seen with a typical organisation. It is entirely based upon smart contacts which will be the basis for the decisions made in the organisation after the votes have been submitted by their members.
Buterin claimed that DAO could be used to improve upon the way ICOs are conducted. The DAICO begins in the form of a smart contract by a team that are looking to fund a given project. Ethereum is able to be exchanged for these new tokens in order to fund the project. The team is able to set out the terms of these investments and there can be certain caps put in place if they wish to do so.
As soon as the window for contributions has been concluded, no more investment is able to be made. When the period of funding has been completed, the smart contracts will be changed into a structure called tap. This drips out the funds for the team in a certain period of time.
These will usually be based upon the team hitting certain milestones. This prevents a team from having access to all of the raised funds at one time and not having an incentive to continue hitting the milestones they had outlined in their initial whitepaper.
Investors have control over when and how these funds are released to the team which means that the risk of their investment is going to be somewhat lowered compared to the traditional ICO model. It makes the members of the team a lot more transparent and investors are able to closely keep up to date with the progress of the given project.