A DAICO is a new fundraising method that combines the best features of Decentralized Autonomous Organization (DAO) and the Initial Coin Offering (ICO). DAICO model allows to make the fundraising and spending processes as transparent and safe as possible.
When an investor decides to put money into an ICO, they usually do not have any control over how the money is used or the direction the project will take. As a result, investing in ICOs is a highly speculative action with a large amount of risk. The combination of DAOs and ICOs seek to balance out these shortcomings.
A DAICO is a model whereby investors have control over the funds collected once the fundraising is over. The investors could influence how developers have access to the funds and at what frequency. In addition, investors can also vote to do away with the project and have the investor funds returned.
How DAICO works?
At the heart of DAICO is a smart contract that regulates all actions related to deposit operations, including it's taking. From DAO, the DAICO concept takes an extended control from the side of token holders. For example, after the completion of the Public Token Sail, the contract temporarily blocks their free sale in order to avoid manipulation by the project team, and also determines a monthly income of developers. On the other hand, as in the classical ICO, a team of developers works on the project, unlike the traditional DAO where anyone can take part in this process.
What are the advantages of DAICO compared to ICO?
DAICO gives tokens holders expenses control and guarantee the security of their investments. Payments to developers are made not once, but gradually, for example, once a month. If they need a larger amount than the smart contract specified, then this issue is put to the vote — the holders of the tokens can either approve this offer, or not. If the holders of the tokens are dissatisfied with the progress of the project, they can vote for refunding remaining balances. Moreover, this synergy between DAO and ICO reduces the risk of attack by 51%.
DAICO's fundraising has two goals — Soft Cap and Hard Cap. Hard Cap determines the final goal, the greatest desired result. Soft Cap is the minimum amount needed for development. If it is not reached within the specified period, the contract is closed and automatically returns all raised funds to depositors. If Hard Cap is reached, then the sale of tokens is stopped. The important point is that during a public sale, developers do not have access to funds.
How can depositors manage the project?
Investors do not manage the project. But, first of all, they control all expenses for the project, not stipulated by the budget — the developer can ask to increase the size of the monthly payment, and the holders of the tokens can agree or refuse the request. Secondly, as already mentioned above, the developer can not hide with money. The smart contract excludes this. The funds can not be withdraw at one time. Tokens holders can initiate the return of the remaining funds if they presume that the developers' team does not cope with the task.
What are the risks and disadvantages of DAICO?
Decentralized management has its own features. No one can guarantee that all 100% of tokens holders will actively vote, which reduces the decentralization of management. Not all the holders of tokens have an understanding of the development process and often can not correctly assess the current situation. This can lead to emotional decisions that can harm the project if the developers do not have adequate protection against them.
What should we pay attention before investing in DAICO’s?
As in the case of traditional ICO, before buying tokens, you must carefully prepare and examine all available information. The more of the following items are present in the project, the higher its reliability:
developers provide agreements, sales rules, a detailed description of all steps for DAICO;
a smart contract is available for study on GitHub;
smart Contract was audited by several well-known auditing companies; the texts of the reports should also be available for study;
competently compiled and clear White Paper with a detailed description of the product and a plan for its development;
availability of a ready-made product prototype;
availability of the registration data of the company that conducts DAICO;
the Crowdsale process meets the requirements of the regulators of countries where the sale of tokens is being conducted;
the project team has relevant competencies and experience.
What are the examples of DAICO’s?
In our time, the DAICO model has not yet become a common for the industry, but some projects have already begun to implement it. The Abyss' team, which announced the launch of the world's first DAICO, is now conducting a token sale, and has collected 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.