Less than a day ago, Vitalik Buterin proposed a new way of funding blockchain-based projects, placing it at the intersection of DAO (Decentralized Autonomous Organization) and ICO (Initial Coin Offering). Here's the diagram Vitalik posted on the Ethereum Research forum post where he proposed this idea:

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How Does This Work?

First, the ICO part:

• backers can contribute to the raise of tokens, using whatever structural model they want: capped, non-capped, etc.
• once the time limit (or the cap) is reached, the funding stops, and the tokens become tradeable

Second, the DAO part:

• from the moment the funding ends, a new contract comes into play: a tap contract, by which members of the team can withdraw a certain amount of funds
• the tap amount can be increased only by vote, and decreased individually. In other words, if members of the team want to withdraw more, they need consensus, but if each user wants to decrease the amount, they can do that individually
• if the voters are very unhappy with the development team’s progress, they can always vote to shut the DAICO down entirely and get their money back.

Advantages

• contributors can control, to a certain extent, the amount of tokens which are taken by the development team
• under certain conditions, the team can increase the amount they use, and this must be done by consensus
• better understanding of the dynamics of the project
• mitigating the risks of "hit and run" pseudo-ICOs

Caveats

• although Vitalik states this model is resistant to 51% attacks, in practice this can be easily hijacked, in certain circumstances. The hijack can come from members of the team which can mislead backers, or it may come from backers, which may take inappropriate control of the development.
• since the token is tradeable from the moment the ICO ends, it may still create irrelevant "pump and dump" value in the markets, leading to unrealistic expectations from bakers

Conclusion

Although it's not a 100% fool proof model, I think this approach is way better than the ICOs we're seeing these days.

On this note, I'd be really happy if some parts of this could be implemented in the upcoming Smart Media Tokens implementation on Steemit.

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I'm a programmer, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.

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