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A DAICO is a composite between an Initial Coin Offering (ICO) and Decentralized Autonomous Organization (DAO).
ICO, an Initial Coin Offering, is seen as a kind of crowdfunding when launching a new crypto project. In this way, the makers try to create interest among potential investors who also believe in their project and the objectives they want to achieve. This investment is based on trust you have in the project, if the project does not succeed, you will lose your investment. Besides the investment you make, you also have no control. As a result, there are risks associated with an ICO.
A DAO stands for Decentralized Autonomous Organization and is an organization built on the basis of smart contracts with an open-source nature. The rules that a DAO applies are recorded and monitored on the Blockchain.
An ICO is often a project that is interesting for investors if they believe in the project. Why? Simply because a project can be very well received and this translates into an exponential rate. Similarly, Ethereum (ETH) was launched in 2014 through an Initial Coin Offering, with a market value of USD 0.31.
We now know that Ethereum (ETH) is a valid project and that the return we get from our investment now depends on the fluctuations in the market. However, this is not always the case. An Initial Coin Offering (ICO) can be chosen at the launch of a young, new and relatively unknown project. The growing possibilities in the world of crypto are accompanied by the development and launch of ever new crypto. An ICO is to some extent a paradox in the world of crypto. Blockchain technology and smart contracts exist to exclude third parties from your decisions and manage your various assets, but above all to keep the power of your investments in your own hands.
Ironically, this is not the case with an ICO. You invest in a new project, based purely on trust. Confidence that you have in the project, but also confidence that you have in the makers of the new crypto. Unfortunately, this trust is sometimes unjustified. Where scams happen in the traditional markets, more and more scammers are also trying to make their mark in the crypto market. How? After the ICO, a project can run off with the investments that have been made before, so that you lose everything, or an ICO can even be done for a crypto coin that does not exist. Therefore, always do thorough research into the coin before making an investment.
A DAICO follows the principle of an ICO, but on a decentralized level. It gives investors more say and right over what happens with the money. They are given more responsibility and therefore run less risk that certain ICOs are scams.
The crowdfunding is done in the same way as with an ICO. A team presents their new project and what goal they want to achieve. This is always further explained on the basis of their whitepaper and roadmap. Based on this documentation, they try to get publicity and warm potential investors who believe in their project.
When the period of a DAICO ends, all investors will get some native tokens for it. The amount is determined on the basis of variable components in the smart contract. Here, investors of a DAICO have more say and can help make decisions. They have, as it were, a large part of the project in their own hands. Decisions about the project are made by the investors on the basis of a democratic majority.
In the model of a DAO, the token holders vote for or against a proposal. This vote is done democratically on the basis of a certain majority. This, implements a DAICO in the 2nd part of the smart contracts. This part of the contract has a variable name ‘Tap’.
This variable is set to zero at the start of a project, so the project team has no access to the money. So money has been raised through a traditional ICO, but the team does not have this available during the first part, the ICO period. This part of the contract is called the tap mode. When the ICO ends, the investors choose how much money will be made available to the development team. They do this by increasing the tap value.
When investors are dissatisfied with the progress of the project, or no longer believe they can achieve their goals, investors can leave the project and claim back the money invested. The project is therefore always dependent on the investor, and not only on their investments.
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