Due to huge scams perpetrated in the cryptocurrency industry via Initial Coin Offerings(ICOs) and Initial Exchange Offerings(IEOs), MakerDAO proposed a new crowd funding mechanism for cryptocurrency investors called Dynamic Coin Offering(DYCO).
DYCOs are for the few real cryptocurrency projects that are out to create real valuable products and tokens as the refundable nature of the crowd funding makes them compatible for only those few cryptocurrency projects that aim to make something viable and lasting. At the same point, it allows long-term holders to retain their tokens at the benefit of supply being reduced by others.
Problem with ICO & IEO Model
Lets imagine a situation where you buy a token during an Initial Coin Offering or Initial Exchange Offering and after the crowd funding the value of the token keeps falling and you are losing money in the process with no guarantee of making profits subsequently. This is where a Dynamic Coin Offering comes to the rescue. If you invested in a token during DYCO and the value of the token keeps dropping after the DYCO has been completed you are eligible to get refunds for the money you invested in the token, spread over a 16 months period. Isn’t this nice?
Look back and remember all those funds you lost after investing in fraudulent ICOs like Helbiz, Gold Reward, Bitconnect, etc you would have gotten refunds if it was a DYCO.
Why Dynamic Coin Offering(DYCO)?
In the current standard of token sales, even if a team is creating a good product, they are not held accountable for creating a valuable token. By giving token sale participants the ability to refund their tokens through a DYCO, cryptocurrency projects would have no choice but to create a valuable token.
You hear teams behind projects come up with excuses like we can’t determine the market value of the token after an ICO or IEO has been completed and the token value is falling. If the team could set a price for the token during the ICO or IEO, they should be able to give investors a token that is worth that valuation after the IEO or ICO has been completed in the market. With a mechanism like DYCO in place, teams offering their tokens to investors during a Dynamic Coin Offering will make sure they are giving a valuable token or their investors will get refunds.
How Does DYCO Work?
Tokens sold during DYCOs are 80% backed with USDC of the invested price for a period of 16 months and during this period the circulating supply of the token does not increase. This means the team cannot sell tokens.
There are three refund rounds which will be open over the course of 16 months.
- 9 months after TGE, round 1 will refund up to 25% of sold tokens for 20% of the invested money.
- 12 months after TGE, round 2 will refund up to 37.5% of token supply for 30% of the invested money.
- 16 months after TGE, round 3 will refund up to 37.5 of the token supply for 30% of the invested money.
Collectively, the three rounds refund 100% of sold token (25% + 37.5% + 37.5% = 100%) for 80% of the invested money (20% + 30% + 30% = 80%).
Note: Only people who participate in the DYCO can claim token refunds and refundable funds will be held and secured by Gemini Custody.
Which Projects will use DYCO?
The first DYCO will be announced in May 2020.