Scrum-style investing – implementation of DAICO
How crowd investors can participate in the life of start-ups or how to live after the bubble bursts!
ICOs are changing the world as we know it! Touted as the next Big Thing, it is as real as can be. Small teams who want to make their projects from scratch, can now make their dream into reality without having to look for VCs. But...
Traded - fun had, counted - tears shed (Russian proverb)
But as usual, after idealists - explorers, guys in black hats come first. They establish “Wild West rules” and don’t respect interests of partners. At present, this scenario has replicated itself in the crypto world as well.
DARFChain talks about it right from the start, in August 2017 we put on T-shirts with “Anti-scam” written on it and published a funny scribing video about it:
Moreover, we, with our advisor Pavel Vrublevsky, executed the research about this subject - and Roger Atkin wrote about it in his column in Forbes: 'Sci-Fi' Crypto ICOs Versus 'Real-Business' ICOs & Breaking Down The Hype.
Initially, no one paid any heed to our warnings about the scam. Everyone believed that all the tokens would grow infinitely, every single ICO team is good and responsible and pony craps with rainbow.
But come December, this particular bubble burst and everyone understood, not every coin is destined to stay on top and not everyone is going to make away with huge profits at the end of it!
Not only crowd investors, most masses of ICO projects are in the same situation: they promised that tokens would grow, but something went wrong…Bitcoin’s price fell, and the team can't carry those obligations anymore. Maybe they didn’t plan a fat life on a seashore by scamming everyone, but they rented luxury offices, hunted overpriced specialists and did the whole shebang! Now firing most of them means slowing or maybe stopping development of projects. A really bad situation!
So the reputation of ICO mechanism failed, and we can come to the conclusion that now only two types of start-ups can raise funds via ICO.
The first kind are people who are “born with a diploma from Stanford or MIT in their mouth” - star & dream teams with colossal reputation credits. They can take the money anywhere and anyway, the ICO for them is just a light walk and reducing of boring from VC investors.
Second are pure scammers, who don't worry about project’s future and plan to stall money immediately after first pumping. No ethical estimations, a lot of crypto investors like this game too. They hope that they don't become a 'last fools.’ So, it is their decision, they can try to hope. A turkey also thinks that farmer feeds her all year only for her enjoying. But Christmas comes, Christmas comes...
All other projects seem to have no chances. Or, more mercifully: all, who haven’t the excellent reputation background have a microscopic chance to collect money using ICO. It isn’t a good news, really. They are not scammers, it is a massive amount of teams and projects, which probably have genuine ideas and can become unicorns… They may be goodwill guys and powerful professionals... But nobody will give them money :(. Sad but true.
To recover trust that ICOs have lost, we need to change the strategy of work. We’d stop comparing XX-cks and number of notches in millions of dollars and start works on projects.
The DAICO: A new hope
Vitalik Buterin brings a great new idea again- DAICO. And right after the New Year holidays too, (does this guy never rest?!) Vitalik outlined the new model in a post on the Ethereum Research Forum entitled “Explanation of DAICOs”. Buterin’s proposed model could greatly improve the traditional structure of an ICO and eliminate the risk of resources being used in an inappropriate manner by ICO creators for personal gain. The “DAO” in “DAOICO” refers to a Decentralized Autonomous Organization that is governed by a smart contract.
A DAICO contract is published by a single development team that wishes to raise funds for a project. The DAICO contract starts off in ‘contribution mode,’ specifying a mechanism by which anyone can contribute ETH to the contract, and get tokens in exchange. This could be a capped sale, an uncapped sale, a Dutch auction, an interactive coin offering, a KYC’d sale with dynamic per-person caps, or whatever other mechanism the team chooses. Once the contribution period ends, the ability to contribute ETH stops and the initial token balances are set; from there on the tokens can become tradeable.
"Anti-venture" or "Post-investing"
We carefully thought Vitalik's idea and expanded it up to the new-way investing schema, and call it ‘Anti-venture’ or 'post-investing'.
It can provide a full avoid of in-project risks for investors. It is a combination of the Agile Kanban development process with the release funding mechanism based on the actual deliverables/completed user stories.
The proposal looks at the high level as the following steps:
- Investors transfer tokens to escrow fund;
- The project team issues their ERC20 token on the Ethereum platform (or same):
- The team starts their implementation project using the Agile software development methodology in our DARFChain system. On a daily basis, they write every step into the system: from finance accounting to Kanbans cards movement and lead’s movement in the sales funnel.
- After the month finished, investors look project's traction and if the team shows good performance, all goals achieved, investors approve to buy a one-month proportion of the offered tokens and team continues to work on the next portion of user stories.
And we saw that it was good, and showed it to investors and their brokers, and they also said it was good.
Yeah! No risks for investing! But we didn’t stop on this level. Ta-da-am!
We continued working on the environment for safe investment. How can we give investors more control over projects? How can we involve them in development, to they didn't only speculate with tokens and enjoin XXes? Maybe this guys (or girls) have good ideas for the product that can add value and extend the market?
This approach provides investor not only with a safe way of investing but direct influence to the ICO-projects development and growth.
- The ICO team has issued tokens and started work on the project.
- Investor writes his own ideas, wishes or offer with desired business-functions in format of user story.
Why "scrum?" (If you don’t know, what mean “scrum” here, you can see in Wiki: Scrum). The main idea of “scrum” methodology is to deliver working product every “sprint” – 1-4 week work iteration. So investors can see new valuable result every month and team get investments every month to!
- Investor remits the sum in system’s tokens to the escrow smart-contract. System commits the money, but investor does not get the project’s tokens for a while.
- Other investors can see the offer, accept it and also join to the story.
- The project team starts to negotiate the investors’ offers and assign the story terms and conditions - the job objective, scope and criteria of acceptance. The progress of negotiations is fixed in the trusted distributed storage system DARFChain.
- In case of team reject the user story or doesn’t accept or consider it during the time limit, investors get their money back.
- If investor and team have got a deal and team has accepted user story, then money cannot back to the investor but the team will not get them, until job is accepted by investor’s side.
- If team count that the job has been fulfilled, they request the smart-contract close, and investors can get this message at their wallets.
- If a majority of investors (according to the sum) is agree that work is done, then smart-contract remit sum to the team and tokens - to investors. Then the team can exchange DARFs to Ether via smart-contract with a fixed price.
- If the story is not accepted by investors within 3 months after the end of the period indicated by the team ("estimated implementation period"), investors return their money.
So, the benefits in total:
- Investors can directly influence the progress of the project,
- They risk only small amount of money,
- The team gets new ideas product development,
- Investors can monitor project's traction online.
We do believe that ICOs are not only speculations, but the technology to change the world!