Decentralized Autonomous Initial Coin Offerings (DAICO)

Understanding the Concept of Decentralized Autonomous Initial Coin Offerings (DAICO)

The concept of Decentralized Autonomous Initial Coin Offerings (DAICO) was initially introduced in 2018 by Vitalik Buterin, the creator of Ethereum (ETH). The primary objective of DAICO is to combine the principles of Decentralized Autonomous Organizations (DAOs) and initial coin offerings (ICOs) to enhance investor trust in ICOs and grant them greater control over the allocation of raised funds.

ICOs are widely used in the cryptocurrency industry as a means to raise funds for the development and marketing of new cryptoassets. During an ICO, developers seeking funding sell a portion of the total supply of their cryptoasset to the general public. Typically, there is a soft cap, which represents the funding target that needs to be achieved. If the soft cap is not reached, the campaign is considered a failure, and all collected funds are returned to the contributors.

However, if the soft cap is reached, the developers gain access to the funds, including any amount raised beyond the target, once the ICO period ends. This centralized control over the funds can sometimes lead to negative outcomes, such as delayed product development or even fraudulent activities.

One of the key advantages of the DAICO concept is that it proposes to lock all the proceeds of an ICO into a decentralized autonomous organization (DAO) smart contract, with governance over the DAO given to the investors. This means that the funds are not released all at once after the fundraising campaign, but instead, they are unlocked at a specific per-second rate known as the tap variable, which is voted upon by the investors. Additionally, if the development team fails to deliver on the project, the contributors have the power to vote for a refund of the remaining resources.

Although DAICO is a relatively new and unproven concept, it is expected to bring more democracy to the governance of ICO funds and provide investors with a certain level of protection against fraud.