The Abyss Becomes First Startup to Test “DAICO” Concept

An ICO by the name of The Abyss is looking to become the first project to test Vitalik Butrin’s “DAICO” concept. The founder of Ethereum outlined the new crowdfunding protocol in a post that appeared on the Ethereum Research Forum in January. If successful, The Abyss’ token raise could have profound implications on the budding world of ICOs.

The Abyss Token Sale

Next-generation gaming platform The Abyss is developing a token sale based on Butrin’s Decentralized Autonomous Organization Initial Coin Offering, or DAICO for short. The company will launch a month-long token sale on Mar. 7, with early participation giving investors a bonus of up to 25%. A hard cap of $60 million has been placed on the sale, with 1 ABYSS token valued at 24 U.S. cents. Minimum investment in the project is 0.1 ETH.

According to a post that appeared on the project’s Medium channel last month, The Abyss token raise “will represent an advanced and improved ICO mechanism, allowing token holders to control the fund withdrawal limit, also providing an option to vote for refund of the remaining contributed money in case the team fails to implement the project. With all this, The Abyss project is to become the world’s first Token Sale, pioneering and promoting the DAICO concept.”

The Abyss essentially serves as a multi-level referral platform allowing gamers to participate in in-game and social activities. It also allows developers to lower marketing expenses by directly engaging the gaming community.

As far as we can tell, no other company has adopted DAICO yet. As a member of the Ethereum Enterprise Alliance (EEA), The Abyss could provide a valuable case study into the system’s viability and reception among investors. As it turns out, The Abyss is very well received by the blockchain community, with several third parties giving the company a favorable review.

DAICO Model

At the core of Buterin’s DAICO model is the need to minimize investor risk during an ICO campaign. The solution is to combine the current ICO structure with the DAO, The resulting DAICO system utilizes smart contracts to encode certain rules into the token raise that startups must follow from the very beginning.

For example, DAICO could stipulate that management receive “approval” from investors each time it wants to utilize funds generated from a crowdsale. In this case, the company would “tap” investors for approval, and the investors themselves would decide whether to grant the firm access to the funds.

DAICO systems can also implement KYC/AML standards and structure a campaign more transparently than current methods. Widescale adoption of this system could have a lasting impact on the blockchain economy by weeding out scams and other companies looking to generate easy cash to finance their business operations. Hacked covered the development of DAICO in a Jan. 19 article, which provides greater insight into Buterin’s thought process.

ICOs generated billions of dollars for hundreds of startups last year, but the parade may soon end as regulators begin clamping down on token raises. The U.S. Securities and Exchange Commission (SEC) has taken special interest in ICOs, warning companies that their definition of a “utility token” will come under intense scrutiny by federal regulators.

Although ICOs aren’t illegal in the United States, there’s a good chance they will be categorized as securities. Such a designation would make them bound by federal securities laws, something most ICO projects want to avoid entirely. Against this backdrop, many ICOs are electing to avoid the U.S. market entirely.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi