When it comes to investing in cryptocurrency projects, the traditional ICO model proves to be a flawed one. ICOs come with many risks to investors, so the emergence of a dynamic coin offering system is necessary. That’s exactly what DYCO stands for. It is an alternative to ICO crowdfunding and e means to eliminate risk for investors.
Despite ICOs being the most popular form of crowdfunding in the crypto space, it is estimated that 80% of all ICOs are scams. ICO scams are commonplace due to several reasons. Investors that invest in ICOs have no way to protect their assets from shady developers. The developer can pull the rug at any point and leave with everyone’s investments. DYCO looks to solve this problem by offering a dynamic system of token security.
What Is Dynamic Coin Offering (DYCO)?
Whenever a project launches on the blockchain, investors need to do their due diligence and invest at their own risk. A dynamic coin offering grants the opportunity to invest in a blockchain project in the early stages. Whenever the project hits the second stage, the investors get some profit in the form of a minimum price guarantee. A dynamic coin offering is characterized by a few things. Those are:
- Token buyback is guaranteed regardless of whether the project hits the desired development roadmap.
- Token refunds if the project doesn’t succeed.
- Trustless blocking.
These four core principles make DYCO projects more secure for investors. In every dynamic coin offering, participants are responsible for providing liquidity to the project. Without liquidity, a project will struggle to maintain the protocol and ultimately, fail. Liquidity is everything in cryptocurrency, hence why we’re seeing an emergence of other methods of funding such as DAICOs and IDOs.
The need for participants to earn passive income through investing gave rise to a model of mining called liquidity mining. In dynamic coin offerings, development teams have a responsibility to be transparent and successful. Anything but that results in refunds, which is not something that developers want.
Developers have the following responsibility in dynamic coin offering projects:
- Guarantee success and be 100% transparent for the good of the project. If investors feel cheated or misled, they can exit at any time. If enough investors leave, the project gets taken down or eliminated.
- Comply with the lockup terms.
In addition to that, the developer’s tokens are locked until the final round. Only then can the developers use the tokens. The price of the tokens solely depends on how many participants have invested, asked for refunds, or burned their tokens.
Benefits Of Dynamic Coin Offering
A DYCO project offers participants a few benefits. Apart from the obvious one, which is the ability to refund at any stage, participants get an additional layer of security. This model of cryptocurrency crowdfunding looks to replace traditional ICOs, IEOs, and STOs.
Since we’re entering into a new era of smart contracts and utility tokens, the need for a stable and secure crowdfunding model is what the dynamic coin offering systems hope to achieve. With DYCO, unwanted tokens are burned permanently out of supply. This ensures price growth and organic volume.
Liquidity is another benefit of DYCO. Participants provide liquidity to projects, which in turn keeps them alive. But probably the biggest benefit of a dynamic coin offering is that the community and secondary investors get their money back. Whether through refunds of an arbitrage opportunity, tokens can be sold below the price floor.
Dynamic Coin Offerings Encourage Good Projects
Ultimately, a dynamic coin offering hopes to root out bad projects on the blockchain. If we go back to the statistic that 80% of all ICOs are scams, we can assume ICOs create a huge risk for investors. No one wins in this situation but the scammers. Even if a team has a good project, no one is held responsible if the developers create a bad token.
Investors participate in crowdfunding for the token sale. Many don’t care about the project but the price of the tokens they receive when participating. So a refund policy creates fear in the eyes of developers. They have to put in the effort to launch a successful project and a token with utility. What we’re left with are only good projects that investors can invest their money in.
If they’re not happy about it, they can always refund.
Partner at Vega Capital Management - a private funds management company.
An experienced portfolio manager with 10+ years of proven and reputable track record in investment management and financial analysis. Currently, a partner at one of the fastest-growing private fund management companies in southeast Europe, Kiril has been tending to a loyal international base of client-investors and partners. When he is not crunching numbers and increasing his client’s wealth, he reminisces about his Michelin-star restaurant cheffing years and fondness of the culinary arts.