What is DAICO?
The acronym DAICO stands for Decentralized Autonomous Initial Coin Offering – a decentralized autonomous public offering of tokens. As during the ICO, the project team sells tokens for cryptocurrency. Subsequently, tokens can be used both within the framework of the project itself and sold or exchanged on exchanges.
So it was in the ICO, wasn’t it?
Not certainly in that way. DAICO is a new fundraising model. The creator of the Ethereum blockchain, Vitalik Buterin, proposed this model by combining the benefits of decentralized autonomous organizations (DAO) with a classic ICO. The idea to create DAICO was the answer to the problems and challenges faced by both developers and contributors. This model allows you to make the process of collecting and spending money as transparent and safe as possible.
How is DAICO arranged?
DAICO is based on a smart contract that governs all actions to attract and work with deposits. From DAO, the concept takes extended control from token holders. For example, after the public sale of tokens is completed, the contract temporarily blocks their free sale in order to avoid manipulation by the project team, and also determines how much money developers can receive monthly. On the other hand, as in the classic ICO, the development team is working on the project, and not everyone, unlike the traditional DAO.
What are the advantages of DAICO over ICO?
DAICO gives token holders control over the spending of collected funds and a guarantee of the security of their own investments. Payments to developers are not made once, but gradually, for example, once a month. If they require a larger amount than what is prescribed in the smart contract, then this issue is put to the vote. And token holders can either approve this proposal or not. If the token holders are dissatisfied with the progress of the project, they can vote for the return of the funds remaining on the smart contract. Moreover, this synergy between DAO and ICO reduces the risk of attack by 51%.
DAICO has two collection goals – Soft Cap and Hard Cap. Hard Cap determines the final goal, the greatest desired result. Soft Cap – the minimum amount of funds required for development. If it is not achieved within the specified period, the contract is closed and automatically returns all collected funds to depositors. If Hard Cap is reached, then the sale of tokens stops. The important point is that during a public sale, developers do not have access to funds.
How can contributors manage project development?
This is not project management. This is control over the amount that can be allocated to the project team in excess of the established budget. That is, the developer may ask to increase the size of the monthly payment, and the decision remains with the token holders who vote for or against. Secondly, as mentioned above, a developer cannot take and hide with money. The contract excludes this. Funds cannot be debited at one time. Token holders can initiate a return of the remaining funds if they think that the developers are not coping with the tasks.
What are the risks and disadvantages of DAICO?
Decentralized management has its own characteristics. No one can guarantee that all 100% of token holders will actively vote, which reduces the decentralization of management.
Not all token holders have an understanding of the development process and often cannot correctly assess the situation. This can lead to emotional decisions that can harm the project if developers do not have adequate protection from them.
What should I look for before investing in DAICO?
As in the case of traditional ICOs, before buying tokens, you need to carefully prepare and study all available information. The more of the following items the project has, the higher its reliability:
- the developers provide agreements, sales rules, detail all the procedures and steps during the DAICO;
- The smart contract is freely available on GitHub for study;
- an audit of the contract was carried out, moreover, by well-known audit companies, and it is better if there were several; Report texts should also be available for study;
- competently composed and concise whitepaper with a detailed description of the product and its development plan;
- the availability of a finished product prototype;
- The registration data of the company that conducts DAICO are indicated;
- The crowdsale procedure meets the requirements of the regulators of the countries in which the token sale is carried out;
- The project team has the appropriate competencies and experience.
What are some examples of DAICO projects?
At the moment, the DAICO model has not yet become a unified standard for the industry, but some projects have already announced the adaptation of DAICO or have already begun to implement it. The Abyss team, which announced the launch of the world’s first DAICO, is now about leads a token sale, and has already raised more than $ 10 million. YouToken, using the DAICO model, successfully completed the first round of fundraising. According to forecasts, more and more projects will use the DAICO model instead of ICO in the near future.