Recently, Ethereum founder and blockchain prophet Vitalik Buterin, proposed that by incorporating aspects from the DAO (Decentralized Autonomous Organization) one could improve the traditional ICO (Initial Coin Offering). He called this a DAICO, for Decentralized Autonomous Initial Coin Offering.
DAICO aspects from an ICO:
(1) based around a single project, and
(2) no risk of a 51% attack.
DAICO aspects from the DAO:
(1) wisdom of the crowd (democratic, as opposed to “wisdom of the crown” traditionally very undemocratic),
(2) no risk of central team abusing investor trust, and
(3) funding can be spread over time.
This seems to be a very effective way to organize the fundraising of a new project. However, there will likely be a higher legal bar for a DAICO to pass, than many ICOs. Many ICOs can reasonably claim that they are merely a “utility token” and not a security, thereby avoiding SEC regulations. However, because (1) a DAICO needs input (voting) from the people who invested, (2) the success of the project is largely dependent the input of the group (and not just the vagaries of the market, or the improvements made by the central team), it is very likely that the tokens issued by a DAICO will be considered a security.
This should not scare off would-be DAICO-ers. The yet-untested DAICO model seems to be superior to the ICO, and it should be used. Do not worry that having to register with the SEC will sink your operation. There are a variety of ways to do so that are not overly invasive, do not take too long, and will allow you to raise funds from many people. Right now, most of this would be limited to “Accredited Investors” in the U.S.
Additionally, as each ICO is a little different, each DAICO and their token will be different. Have someone experienced in securities/blockchain law go over your whitepaper to let you know what, if anything, about your potential token could raise red flags at the SEC. [Visit: http://www.blockchainlegal.us]