A Gnosis Dutch Auction for All? Coming to the WINGS Smart Contract Library

Bringing best in class funding models to the ecosystem

The last several months have brought to us many innovative funding models,(particularly with the use of Ethereum smart contracts), which vastly expand the realm of what is possible to do far beyond what was achievable just a few years ago using Bitcoin. At the WINGS Foundation one of our goals is to make funding new DAOs easily accessible for projects that are raising capital and on-boarding their first users or customers.

The crypto-based crowdfunding sector is still young and many who are conducting Initial Coin Offerings (ICOs), the current parlance for crowdfunding using cryptocurrency, are experimenting with various models which all have their disadvantages and advantages. As the sector starts to mature we believe that several “best in class” funding models will emerge as dominant designs. To push forward this standardization which we believe will make it easier for people to participate and understand the consequences we plan to develop a crowdfunding smart contracts library for anyone who wishes to launch an ICO on the Ethereum network and utilize the WINGS DAO for feedback, valuation and funding.

Let’s review some of the more innovative ICO’s of this year.

Dfinity “seed” funding

The Dfinity seed funding intended to raise roughly 1 Million CHF where a trigger was set when the 1 million threshold was reached that would then close the pre-ICO funding within 24 hours. The funding event resulted in about 3.9 Million CHFin funding arriving prior to closing of the funding period in the contract; that’s about 3 million CHF in the span of 24 hours.

Additionally, the funding contract enabled Dfinity to account for Bitcoin and Fiat funds via an oracle coded into the crowdfunding smart contract. While the accounting was based on fiat value.

Lastly, the contract had defined the conditions for the main funding even allows the Dfinity Foundation to time the start of their ICO.

Key innovative take-aways:

Funding threshold triggers countdown to close of funding.

Fiat based conversion of crypto funds for accounting.

Inserting BTC and fiat donations using oracle directly into the crowdfund smart contract (participants must trust the project leads, but if one cannot do that one shouldn’t be giving them money anyway, right?)

Conditions for a further round of funding which can be initiated by the project team

Cosmos ICO

The much anticipated Cosmos (Tendermint protocol) raised $16.8 million USD in 28 minutes, going well beyond the $10 Million which the terms contract noted as the minimum raise. The terms of the crowdfunding set the the maximum time for the crowdfund at 2 weeks, however it could be terminated earlier either when $10,000,000 was reached if that amount had not been reached within the initial 6 hours, or at any point in the first 6 hours with no maximum. The Cosmos team pulled the trigger within the first hour to bring the funding to a close, having reached 70% above their minimum funding.

Furthermore, in addition to minimum and maximum sole contributor amounts, which has already been done before, Cosmos gave a 15% ~ 25% discount to “Strategic Contributors” and “Early Contributors”; strategic contributors in the context of Cosmos would mean exchanges, who are required as trusted federates in the Cosmos system (similar to the RSK federation).

Key innovative take-aways:

Very short funding time frame by allowing team to close the ICO and limited to 2 weeks maximum.

Bonuses (or discounts) for special contributors.

A cap that was only triggered if the ICO failed to reach $10 million in 6 hours of less, which was not triggered

Gnosis ICO

An even more anticipated project has been Gnosis. With it’s main rival Augur having raised a sizable sum some years ago, and even as our own WINGS taking advantage of the predictive power of crowds we knew instantly that this one going to be flooded with crypto-cash.

The Gnosis auction ran a modified Dutch auction. In the Gnosis case all of the inventory of coins was not sold out instead when the total bids reached $12.5 Million the price was determined and the funding event was closed. Interestingly, there were reports that many millions were still en route when the auction closed, leading to the conclusion that the valuation could have been even higher — indeed trading the last few days has implied a $1 Billion valuation.

More importantly, and somewhat counter-intuitive to the nature of Dutch auctions, the Gnosis team created book building contracts which allowed ICO participants to commit funds at the highest possible valuation.

The remaining coins are locked up for 12 months.

Key innovative take-aways:

Use book building smart contracts to build and lock in demand prior to the start of an ICO

Use a dutch auction model to maximize funding without give up many coins.

Lock up remaining coins and keep them for future funding events.

Towards a Standard ICO Crowdfunding Smart Contract Library

Using these ICOs and many others that will occur over the course of the next year WINGS intends to build upon these successes and allow anyone to launch similar ICOs, which the flexibility to tune and mix and match many of these innovative features.

If your group is developing an ICO or crowdfunding contract and wish to engage the WINGS DAO for evaluation, forecasting and promotion, please get in touch with one of the Foundation’s staff (support@wings.ai). For select opportunities, we will cover the cost of auditing your ICO contract code by one of our auditing partners.