The man often dubbed “the godfather of Ethereum”, Fabian Vogelsteller has proposed adapting the ICO model to allow investors to withdraw their funds at any time, in an attempt to destroy the incentive for creating scam ICOs.

Scams have been part and parcel of the crypto world since ICOs really took off in 2017 – the word “BitConnect” has basically become a byword for cryptoscamming. The figures that exit scammers have disappeared with, seemingly scot-free, in the past, are sometimes breath-taking. Vietnamese start-up Modern Tech raised $660 million in April 2018 through their Pincoin and iFan token and platform, before disappearing without trace, and Plexcoin and Centratech raised similar high amounts.

Tackling Scams

Many feel that as regulation creeps in, the risk posed by exit scams will diminish however, now a more bottom up approach has been proposed by “the godfather of Ethereum”, Fabian Vogelsteller. Speaking in Prague on Tuesday (October 30th) at the annual Ethereum developer conference, Devcon 4, Vogelsteller, who was central to bringing the ERC-20 model to the Ethereum network, proposed an adapted version of the ICO model which would allow investors to withdraw funding at any time during project development. This RICO (Reversible Initial Coin Offering) model would use Ethereum smart contract programming to allow investors to “reverse their funding commitment.”

Vogelsteller explained:

“You are able to withdraw the funds you committed at any point of time and you do this by simply sending back your tokens.”

He further explained that at any point when tokens were returned, other investors would be able to buy into the project but conceded that some form of base capital would need to be secured from investors outside of the ICO in order to maintain stability in funding.

Anti-Scam Model

Vogelsteller states that adoption of this model would “make scams unlikely” because investors could recoup their investment at any time, removing the risk of relying on the word of start-ups to make good on their promises after money has been handed over.

Further to this it would force the bar to be set much higher with projects as they would be forced to deliver on their promises or face failure. Vogelsteller described this as projects “failing naturally” without the pain of investors looking on helplessly as their investments are wiped out.

More Work, Fewer Lambos

Vogelsteller made it clear he sees something in need of repair with the current ICO model and that, as a key architect in the development of the ERC-20 model, he feels “obligated to come up with something better.” Much like a child which is born into extreme wealth, projects which are flooded with capital, in the beginning, are often just incentivized to “[buy] lambos rather than doing something useful.”

Testing for the RICO model will begin on Vogelsteller’s own start-up, a fashion and design blockchain called Lukso. If successful, Vogelsteller hopes it will be rolled out with a wider scope and bring “the balance back between the [Ethereum] community and the project”.

Image Source: “Youtube”