Hi Steemians! Today I am going to talk about the concept of DAICO (Decentralized Autonomous Initial Coin Offering) and a project which is launching its ICO soon in the DAICO format.
What is DAICO?
DAICO marries the concept of a DAO (Decentralized Autonomous Organization) and the usual process of an ICO. To understand DAICO, we first have to understand what is a DAO. Let's first look at the definition provided on Wikipedia,
A DAO is an organization that is run through rules encoded as computer programs called smart contracts. A DAO's financial transaction record and program rules are maintained on a blockchain.
It seems a bit cryptic at first, so let me help you to understand the concept. Any organization consists of its members, a set of rules/boundaries, and resources/assets owned by the organization. In organizations that we know of and see everyday, there is usually a hierarchy among the members. Decisions are usually made by a selected few which we placed our trust in. Rules are written but not always enforced. The state of resources may not be transparent and known to all members. If you think about it, it is not ideal. But we are all used to this kind of organizations. Be it a family, a company or a country, the concept of traditional organization is proven to be working.
A DAO aims to enforce rules via computer programs. By doing so, no one will ever be able to bend the rules. It allows members to vote for actions on the organization. This will allow true democracy. It is also transparent as the available resources and transactions are always made known to all members. Sounds good? Unfortunately, this is only possible in the digital world and probably will not work in the physical world we are in. Below is a comparison between traditional organizations and DAOs:
| Traditional Organization | DAO |
|---|---|
| Hierarchical | Flat |
| Rules are not always enforced | Rules are always enforced |
| Decisions usually made by a trusted individual or a small group of people | Decisions are made collectively by all members |
| State of assets/resources may not be made known to all members | State of assets/resources is always made known to all members |
| Proven model in real-world | Not feasible in real-world (Unless we can somehow digitalize everything we have) |
| Examples: Any companies, countries and even your own family | Examples: Dash governance and Digix.io |
I hope I have explained the concept of a DAO clear enough. Now let's move on to DAICO. In a typical ICO, investors contribute funds and all the contributed funds will immediately be available to the project team. On the other hand, in a DAICO, a certain amount of power is granted to the investors. Having a predefined set of rules, the following can usually be achieved:
- Project team do not get access to the funds immediately
- Investors can vote for each incremental funds release to the project team
- Investors can vote for a refund of any remaining funds
As you can see, a DAICO gives investors the power to "grade" the progress of the project. If the investors are not happy with the progress, they will not vote for additional funds release. If the investors are really unhappy with the progress, they can even vote for a refund. Having an ICO done in this manner provides a certain level of assurance that the investors still have control over their investments. It also encourage investors to be active in the community and constantly keeping track on the progress of the project. This idea is proposed by Vitalik Buterin. Further information on DAICO can be found in this article. However, in the article, it stated that "The Abyss" project is going to be world's first DAICO. This is not factual as the project I am about to share is starting their ICO tomorrow and it will done using through a DAICO model. Hence, "The Abyss" project is one of the first, but certainly not the first 😉.
Ethearnal - No Limits. Just Business
What does Ethearnal aims to achieve? Based on their explanation, they aim to do the following:
Ethearnal is a peer-to-peer (P2P) freelance system, in which employers and freelancers meet, enter into trustless smart contracts with reputation and money in escrow, and take advantage of a decentralized system of moderators if needed. We collide reputation and economic initiatives into one by tokenizing reputation and giving it value. All parties, moderators included, have strong and aligned initiatives to act honestly, since everyone has something of value at stake and something to gain if the desired outcome is achieved.
So imagine a decentralized Fiver 😎. Below is a video from them to explain their value proposition:
With the understanding of their business. Let me run through my evaluation process of Ethearnal, just as I did for Sentinel Chain.
Product/Business case
As mentioned, Ethearnal aims to be a decentralized platform which will allow participants to provide and consume freelance services. There are 3 main roles that you can play on Ethearnal:
- Service provider
- Service consumer
- Moderator
Every participant can play any of the roles. Service providers are rewarded by service consumers for a job well done. Service consumers get what they want from the providers. In the case of a dispute, the moderators step in to mediate and get rewarded a token sum (pun intended) during the process. The entire platform build on the basis of users' reputation, and that is the reason for naming their tokens ERT (Ethearnal Repuation Tokens).
Tokens can be acquired in 2 main ways:
- Purchase from the open market.
- Earn from completing freelance jobs
It is important to note that payments for jobs are not made by ERT, contracts are paid via Ethereum (ETH). ERT represents "Reputation" on the platform. It serves as a symbol of willingness and commitment on either party to fulfill contract. ERT is also used to reward moderators when they settle disputes. A more detailed explanation of the use of the token can be found in their whitepaper, which I strongly encourage you to read. This applies to any ICOs that you are keen in investing.
The business model is based on the freelance market with emphasis on reputation on the platform. In America alone, the freelance/gig industry is estimated to generate $1.4 trillion annually to the US economy (https://www.upwork.com/press/2017/10/17/freelancing-in-america-2017/). Hence, this is certainly a market that is worth targeting. In addition, the team has already developed a minimum viable product. This further bolster the chance of success for this project.
My thoughts:
✔ Realistic business proposition which targets a huge market.
✔ Minimum viable product is ready.
✖ ERT is essential for the platform, but it is not being used as a payment method. This in my opinion reduces the value of the token. In a way, the platform can worked with very minimal amount of tokens.
✖ Lack of marketing at this point in time.
Team
The team is mainly consist of previous freelancers. They do not have fantastic educational qualifications. But they are knowledgeable in the freelance/gig industry and hence will be able to understand the problems faced by participants in the industry.
I have the opportunity to chat directly with one of the team members, Michael. He can be seen in the video below:
From what I gathered based on my observations on Telegram, they are a bunch of dedicated people who just want to focus on the project. The fact that they chose the DAICO method for their ICO, goes to show that they are not just here to grab money. They are genuinely interested in creating the platform and building the community.
My thoughts:
✔ Team members have experience and genuine interest in the related industry.
✔ Seem to me that they are passionate and wish for the success of the platform.
✖ Lack of advisors and management experience in corporate environments might hinder their success. The team might be too used to being freelancers (which usually function individually) and may not be able to work effectively as a team.
Valuation
The team is seeking to raise 30,000 ETH which represents 75% of their total token supply. This translate to a total valuation of 40,000 ETH (or around $35 million USD based on ETH price at point of writing). A similar project, CanYa is current valuated at $31 million market cap which is calculated based on 40% of total supply. Which means CanYa is really valuated at $77.5 million. If we are to benchmark Ethearnal with CanYa, we can see that Ethearnal still have much room to grow from its ICO price.
In addition, the use of DAICO provides more assurance to investors on the long-term prospect of this project.
My thoughts:
✔ I think this is a reasonable valuation based on the scale of the project. In fact, comparing to many other ICOs, the team is raising a relatively small amount of money. This is certainly a positive.
✔ The use of DAICO is also a positive as it allows more power on the investors on the funds invested.
Conclusion
Overall, I think the Ethearnal is a project with good potential and reasonable initial valuation. They have a MVP ready and the use of DAICO brings down the risk of the investments substantially. It will be great if the team can bring in an experienced advisor with strong corporate experience. In my opinion, this project is one of the most underhyped project and this is mainly because the team is very focused on the product and not keen in creating unnecessary hype. I hope that this project will be a successful one.