Before getting on to how DAICO can help prevent the misuse of Investor's funds, it makes more sense to understand little bit on how an ICO works and what are the current problems we face in ICOs. Idea here is to provide a basic understanding on ICOs and DAICO, so i will not be getting into in-depth information.
ICO (
Initial Coin Offering) is simply, a means to get the funding for a product or the technology, which the team wants to work on. Investors who like the idea/technology contribute in the form of digital currencies ETH, BTC, LTC etc... Once the Pre-determined funding amount is collected in the fund raising event, the Team begins their work based on their milestones (In a ideal scenario).
Main problem with ICOs is that the Actual Investors do not get a say in the Project since there is no binding contract where the Team is liable to Investors. So we end up seeing the below problems
- Developers run away with the Funds
- Funds getting spend liberally
- Team leisurely working on the project since the funds are in their hands
DAICO Stands for
Decentralized Autonomous Initial Coin Offering. DAICO is a solution which is similar to ICO but gives more control to the Investors on how much funds flows into the hands of the Developing Team. The Key feature in DAICO is called aTap Mechanismwhich set the limit on how much funds should flow to Developers. This Tap can also be increased by conducting a voting system where only the investors get to vote and the majority vote will determine whether the tap needs to be increased or not. I have put together a comparison below for a easier understanding.
We have seen enough Scam ICOs so I truly believe that DAICO is a very good solution to prevent such scams and fraudulent fundraising event.
Reference:
http://ethresear.ch/t/explanation-of-daicos/465
https://cointelegraph.com/explained/what-is-a-daico-explained
Image source:
Vitalik - DAICO
You can check my other posts below if interested
Disclaimer: Please do your own research before investing in cryptocurrency
