Decentralized Autonomous Initial Coin Offering (DAICO)

Intermediate
March 29, 2023
Read time:
4m

Decentralized Autonomous Initial Coin Offering (DAICO) combines two terms you're already familiar with: DAO (Decentralized Autonomous Organization) and ICO (Initial Coin Offering).

The term was coined by Vitalik Buterin, creator of Ethereum, in response to the problem of security and transparency in coin offerings.

How does DAICO work?

DAICO is an innovative model for raising funds from investors for blockchain projects. Essentially, it's an Ethereum-based smart contract that combines characteristics of both DAOs and ICOs to create a more transparent and secure space for investors. This allows investors to have more control over how projects use the raised funds, while DAO members oversee spendings.


The process of initiating a DAICO usually consists of several actions. First, the project sets its goals and determines the minimum amount of funds it wants to raise. It also sets the terms of the token sale, such as the initial price, limit of tokens to be sold, and the period of sale. Then, the project creates a corresponding DAICO smart contract that regulates the flow of all funds and manages investors' votes.


After creating the contract, the project begins token offering according to the set rules. Investors make purchases, and their funds flow into the DAICO smart contract.

DAICO and ICO

There are some essential differences between the models for raising funds for development. In DAICO, funds are raised at different stages of development, in contrast to ICO, where funds are transferred to the project's account at the beginning.


Investors in DAICO can vote on how to allocate these funds at different stages of project expansion. They may also decide to withhold funds for a set period if they believe the project is not executing the roadmap correctly. This advantage of DAICO provides greater investment security and minimizes the risk of allocating funds to a scam project.


DAICO uses DAO, meaning that the project is managed by actual investors rather than individuals or teams. This improvement in transparency makes it possible to decentralize the financial structure.

Summary

DAICO is an innovative financing model for blockchain projects that provides greater transparency, security, and investor control over the project. As a result, DAICO may become the preferred fundraising model for many blockchain projects in the future.

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