Understanding DYCO (Dynamic Coin Offering)
DYCO (Dynamic Coin Offering) is an innovative crowdfunding model introduced by DAO Maker. This model utilizes utility tokens that are backed by USD for the initial 16 months of their existence. The purpose of this backing is to ensure accountability from project developers.
One of the main advantages of DYCO is that it allows investors to refund their tokens if the project fails to deliver a viable product. This refund option provides investors with a safety net in case the project deviates from its intended path. When tokens are refunded, they are permanently removed from circulation through a burning process. This reduction in token supply increases the value of each remaining token.
The USD backing also acts as a hedge against downward price movements of the token, while still allowing for unlimited upward momentum.
In addition to targeting the primary market, DYCO has a second iteration known as DYCO v2. This version focuses on building trust in the secondary market.
In DYCO v2, tokens are distributed to investors through a smart contract in the form of a toll bridge. This caters to original buyers who do not intend to stay with the project for the long term. It allows them to refund their allocations and exit during the initial days of the project.
Importantly, the refund dates set in a DYCO cannot be altered by the project team. DYCO v2 addresses this by considering a project’s early growth without inconveniencing early exiters and negatively impacting the confidence of the secondary market.
The first blockchain project to implement this model was Orion Protocol.
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