The need of a post-ICO governance – Icofunding
The need of a post-ICO governance
Imagine a startup promising a future where everything is decentralized (or just an investment fund). Link that idea to the usage of a token (or not, just mention the existence of a token). Woo a duo of people to join you in the venture. Give away some of those tokens to well-known members of the community aiming them to join as advisors. Launch a landing page. Write a not-so-formal definition of your idea with a duo of formulas and call it “THE” Whitepaper.
Now, draw a elementary pie chart, launch a duo of brainy contracts to the Ethereum blockchain and ask for a few millions of dollars. For a few I mean Trio, 6, 12, 22, thirty or even 170. The more you ask for, the more it seems you trust your crazy idea. If you are ashamed of asking for such amounts with such little justification, hide the cap and say that you do it for the community.
This is how many of the last ICOs are being launched, but what happens with the raised capital by the ICO launchers? How will it be managed?
How are those raised funds managed?
Nowadays, when a project raises millions of dollars by selling part of its tokens, in the best script, those funds are sent to a multisignature wallet. These wallets are collective by numerous parties, and it’s required that at least part of the owners of the wallet agree before moving the funds. This method is useful to avoid one of the developers running away with the money, or to minimize the possibility of losing the access to the wallet. However, in order to implement it decently, some technical expertise and transparency is needed, and that’s not always the case.
At this point, the investors only hold a token that most of the time is still not linked with the promised app. Being able to trade it on exchanges is fine, and if you go after some groups of investors, this seems to be the final objective of the investment in the ICO. But let’s be fair, this is not how ICOs should work. We are presently in a tremendous hype around ICOs and everything seems to be permitted.
If we ever want ICOs to become the blockchain killer app, or just a usefull app in the mid-long term, we have to provide the token holders with more than just a bunch of tokens and a promise. ICO tokens must be usefull and not just valuable because of speculation. To achieve that, we need to align the interests of the ICO launchers with those of the investors.
There are different ways to achieve that. As Vitalik Buterin discussed recently, launching numerous ICOs separated in time would give the team the possibility to prove their capability to launch the project. This way, ICO launchers would have an actual incentive to develop the project following their pre-ICO promise. ICOs are being launched as big events, because an investment in time, marketing and travels can’t be repeated many times while developing the project at the same time.
At Icofunding we are working hard to solve this issue, through what we’ve called Coin Governance System (CGS). With the Coin Governance System we go after a different treatment. Instead of launching numerous ICOs, the funds raised are locked. The ICO launchers will be able to access part of the funds once they meet different milestones. If they don’t go after the roadmap without explanation, the investors will be able to have their money back. Actually, the solution is much more complicated than that, and there are still some problems to be solved, but if we want to have a safe ICO ecosystem in the future, we have to embark establishing some boundaries in the current wild west script.
For more information about Icofunding, visit our website or join us on Telegram.