Decentralized Autonomous Initial Coin Offering (DAICO) is an accountability tool; the brainchild of Vitalik Buterin, put forward in January 2018 as an improvement to the Initial Coin Offerings (ICO). It is built upon the foundations laid in the DAO blockchain; DAICO enhances security on the chain by offering features such as:

Never having complete trust in a centralized team at any point

Allowing for platform participants a voice on the utilization of funds

The ability for funds contributed to being refunded

Trials for this new technology are already underway and the gaming platform, Abyss is the first to apply this system.

What does Daico Solve?

ICOs come with a myriad of challenges. Scams are a common concern. Some cryptocurrency products fail to deliver once the ICO is over, and they hit the market. However, safety and security developments aimed mainly in transaction verifications; recently, also in know your customer (KYC) technologies. Therefore, there has been a need for better models; Daico and the Coin Governance System help mitigate against ICO related risks and bring more public confidence; especially in the early stages of the digital coin ecosystem. This can be the most fragile period for any new project. Such efforts will be instrumental in accelerating the adoption of this relatively new transaction and payment ecosystem.

How does Daico work?

This is how Daico works; it begins when a company offers its smart contracts for sale to the public. The issuer first decides between capping contributions or if they will be in the form of a Dutch auction where the price reduces until a buyer is identified. Another consideration made at this point is the method for know your customer (KYC) among others. The DAICO is then open to the public who can now exchange ethereum for their preferable tokens. This period is normally short, and once it ends, each investor can set a tap; this is the amount per second that the issuer of the tokens requires to complete the project planned for.

This limits developers’ access to funds thus reducing the risk of misuse during projects. A token holder can then monitor the project’s progress and either increase the tap to provide more funds or withdraw their remaining funds depending on their judgment of the use of the funds.

The Benefits of Daico

Decentralized systems offer great safety features in comparison to centralized systems. However, the crypto industry has focused decentralization in the initiation of transactions, verification and record keeping on the consumer side while maintaining control and oversite of ICO raised funds centralized within the company offering the tokens. The new developments place more oversight capabilities to users who will be able to vote in decisions regarding the performance of developers and the use of funds collected by the company. This aims at enhancing security in the digital currency market by keeping developers on toes to deliver quality platforms and products that are in line with the needs of the users, as can vote for the refund of their contributions if they feel the services are subpar.

Alternative Technology

The coin governance system works in the following manner; when an individual reports an issue on the platform, other participants can vote for it. Once it gathers adequate support, it then moves to the community of coin governance system arbiters who then make a decision based on the votes to either allow or disallow for the redemption of funds from the ecosystem.