What is a DAICO?
It’s an improvement on the ICO fundraising model that incorporates certain aspects of DAO’s.
The idea was suggested by Vitalik Buterin in January 2018 and is aimed at making ICO’s more secure by involving investors in the initial project development process.
It will further enable token holders to vote for the refund of the contributed funds if they are not happy with the progress being made by developers.
For projects that implement the DAICO concept, it will force a level of accountability on developers and give token holders additional peace of mind that they are guaranteed to either see at least a minimum viable product or get their money back.
How does a DAICO work?
It starts off as a Smart Contract in contribution mode.
The DAICO contract will have a mechanism where contributors can send funds to the project in exchange for network specific tokens. When the crowdsale period ends, the contract will prohibit anyone from contributing any further, i.e., normal token sale.
There is one variable that comes into effect after the contribution period has ended called the tap variable. This tap in the contract can be programmed to predetermine the amount (per second) that developers can withdraw from the token sale funds.
Initially, the limit will be set to zero, but contributors can then vote on a resolution to increase the tap.
What elements from a DAO are incorporated?
There are three main elements taken from DAO’s.
First, at no point is complete trust placed entirely on a centralized team. Decisions on funds from the get-go are decided by a democratic voting system.
Second, funding is not released in a lump sum, but a mechanism is implemented to spread it over time.
And finally, there is an opportunity to refund the contributed money. This decision is based on the ‘wisdom of the crowds,’ i.e., the contributors can vote for a refund of