The term ICO or Initial Coin Offering, has been the subject of debate by a lot of regulatory authorities in the sense that these crowd funding campaigns on the blockchain, resemble traditional securities offering. This is due to the fact that participants are usually issued a token with a unique name that is related to the project. This then has led a few ICOs carried out on the Ethereum platform, to be investigated by regulatory authorities such as the SEC, for issuing unregistered securities offering. One such incident involved the latter authority, suing the Blockvest ICO for making false accusations that it had got its clearance to start its crowdfunding campaign.

Other countries such as China, have decided to ban cryptocurrency and ICO activities completely within their borders

IOTA’s Plan to Crowdfund Projects that Plan to Utilize the Tangle

Therefore, what do you do when you have great proposals to build projects on your network, and you do not want to issue ICOs to fund them?

This question has popped up at the IOTA camp as they attempt to figure out the funding of projects that wish to build on the tangle network. The team at IOTA has proposed a unique way of avoiding tokenizing the process by having the IOTA native token as its basis for the funding.

In a recent medium.com post, IOTA’s TomTom gave a glimpse of how it could all work. He identified the need to fund projects aiming to utilize the tangle through the following statement:

As the technology evolves it has become apparent that it can be used for a large number of other things as well. With the IOTA Foundation funding some types of projects, we saw the need for an alternative funding option for the many projects which are expected to be built on top of the Tangle (IOTA).

The IOTA-ISO: A Hybrid between ICO and Kickstarter

TomTom was optimistic about the future given the growing interest to build on the IOTA tangle, as well as a new functional computer language known as Abra. With the ICO frenzy of 2017/2018 tarnishing the crowdfunding process, the team wants to create a hybrid between ICO and Kickstarter. This new process will be known as the IOTA-ISO.

The IOTA native token will be the ‘fuel’ for the entire process, thus avoiding situations of tokenizing that might result in regulatory scrutiny as seen with many ICOs.

TomTom goes on to state the following with regards to how it could all work:

The people and companies who wish to utilize our funding platform will commit to build systems and services using the IOTA technology, and using the native IOTA token as ‘fuel’ for their future services or other functions where there is a need for a value token in the system… We suggest that the funders only use IOTA tokens for the funding as this secures this system and we can control the release of funds… The early funders buy a future service by participating in the funding rounds and they are entitled to receive services or other IOTA based products when the systems start to make money.

Smart Contracts

TomTom goes on to explain how the entire project can be controlled using smart contracts. Firstly, the project owners and participants of the funding will need to create IOTA wallets where they can send and receive the IOTA token.

Secondly, the participants will need to have receipt wallets where they hold their receipt tokens as proof of rights according to the projects description.

For the smart contracts configuration, the following explanation is given:

We are able to set up a smart contract like system where these receipts are only sent from one wallet to another when an agreed amount of IOTA tokens is received as payment. We would not be part of such transactions whatsoever, only facilitating for this secure transaction and taking a small fee for facilitating with our technology.

More on the intricacies of the proposed crowdfunding process on the IOTA network can be found on the earlier mentioned medium post by TomTom.

What are your thoughts on how TomTom proposes crowdfunding on the IOTA network? Is it plausible? Please let us know in the comment section below.

Disclaimer: This article is not meant to give financial advice. Any opinion herein is purely the author’s and does not represent the opinion of Ethereum World News or any of its other writers. Please carry out your own research before investing in any of the numerous cryptocurrencies available. Thank you