Explanation of DAICOs


Hi guys. Here is the final version of my article “Designing the “fair token distribution model” pt.1 — ICO Approaches Analysis” -

Thanks for participation!


DAICO and Iterative Investment - different proposal to tackle the same problem


I think the most distant from reality phrase is “51% attack maliciously self-destructs - honest developer can just make another DAICO”. Looks like DAICO model enthusiasts does not take in to account how much it costs to run the ICO/DAICO or “honest developer explaining mailiciuos attack and asking for investors to comeback” campaign and how impatient the investors are.


If there is an actual 51% attack on the DAICO, then this will be highly obvious to the community. Furthermore, the users need to take an active step to withdraw their funds, so it would be easy to spread the message to join the new DAICO. I agree it’s not perfect, but it’s still a large improvement on what came before.


I’ve thought about this a ton and tried to simulate alternative scenarios to test the validity of my conclusions. The value of a DAO is difficult to overstate, its immensely needed to reduce fraud, and several other types of developed inefficiencies in the way we organize and govern to create and coordinate value.

Having said that, I find it difficult to identify perfectly fitting use cases or scenarios where an ICO is both needed AND legal/fair at the same time.

Needing and ICO - if your idea/vision is strong enough, you should be able to secure capital easily with securitized instruments such as shares, or convertible debt. Investors are often clamoring around good ideas.

Legality/fairness of an ICO - Lets leave legality aside, because it differs across sovereign lines. But from an investor perspective, I find it very difficult to reason why an investor would want a coin, over a share.

So while a DAICO is way better that the Lambo ICOs. I’d question whether vb and the referent leaders here should take a stand on whether ICOs are needed/legal/fair or not in the first place.



I think you cannot ignore the “legal” part of things. If free trade of securities was legal all around the world then then I think we would see it being used much more broadly rather than VC. However, in a lot of jurisdictions, the free trade of securities is not legal (the US being a prime example of this).

I would like to propose that there exists some set of projects where the following are true:

  1. The project idea is sound, it has a good team, etc. All the makings for a successful business.
  2. The project does not want to waste money on regulatory compliance (an incredibly expensive thing for those who haven’t tried it) or the project cannot achieve regulatory compliance because it is working in an area that has been regulated out of existence (e.g., prediction markets).

For such projects, an ICO is a way to work around the regulatory questions (though, some question if doing so is itself illegal) while still having access to capital for funding development. Now, one way these projects have figured out how to dodge regulatory compliance is with the “utility token” thing. While most (all?) of them would be better off selling a security, that would put them into a bucket that more obviously is subject to regulatory constraints, so they create a utility token, jam it into their project (sometimes ruining the project in the act) and sell that so they can raise capital for their project.

That being said, the vast majority of ICOs aren’t in this boat and instead are trying to acquire capital despite the fact that VCs wouldn’t give it to them for one reason or another.


Thinking about DAICOs and voting in polls, we are trying to figure out what would be the best way for a voting system to work.
The system should try to ensure the votes are legitimate as well as allow token holders to do with their tokens as they wish.

This is a hard question to do without writing a very long text with our research.

Simply put, we have thought of the following ideas, each with their own trade offs:

  • After a vote is made, freeze the account tokens until the poll is over
  • After a trade is made, freeze the account tokens for 7 days (poll duration).

These options will negatively affect users and their freedom.

Other options are:

  • Consider vote % when the poll is over. This means the voting power will depend on the amount of tokens the users have at the second the poll is over.

This option alone cannot prevent exchanges from voting.

  • Set a maximum vote power for each account

This last option should be used with other options, but alone cannot prevent exchanges for example to transfer their tokens to N numbers of different accounts and vote with them and then transfer them back.

Which option(s) would be the preferred way to go? Does anyone know of another method for handling votes?


Micah, you are spot on.

Could we transition to something I think we need to steer the regulators around?

What constitutes a “utility token?”

Based on how the aggregate practitioner perspectives are evolving, here are my six observations -> working conclusions -> draft suggestions, I humble propose that we should start to debate, ratify and syndicate these?

  1. A utility token should add to a fabric (not just five lines of code to “create a coin”)
  2. A utility token should be minable (some action that should be taken - not just tradable in post-primary markets)
  3. A utility token should [have the possibility] be widely held (not just held by a small subset of humanity)
  4. A utility token should lead to some socioeconomic outcome (meaning with every new mining action, should increase the probability of leading to some socioeconomic outcome [of utility])
  5. A utility token’s dilution should be managed transparently and responsibly (you just can’t mint it willy nilly)
  6. A utility token should have [at least the possibility] of other organizations to accept it in exchange for goods, services, or other benefits
  7. A utility token should not be marketed as a security

I believe leading regulators (somewhat globally) should be fed a framework of this type/shape.

How do we make this draft suggested framework better?



The main issue I see with the DAICO concept is that any party can prevent the self-destruct at relatively low cost- They just need to own yes - no - absent / 6 + epsilon tokens (likely a modest percentage) to keep the self destruct from ever taking effect, even if confidence in the developers is low.

In this situation, the party that is blocking votes would have significant leverage to extort funds from the developers or stakeholders. (this attack would be even more effective if the attackers are the developers themselves, basically saying to stakeholders “vote to open up the tap against your desires and we’ll refund you at least part of your original stake”)

…or am I missing something?


I’m not at all convinced that “just” owning yes - no - absent / 6 + epsilon is going to be a “low” cost. It’s millions of dollars for large ICOs. We could add an extra layer of defense by allowing the developers to self-destruct the DAICO and do a proportional refund, so if one does get captured by an outside attacker the developer can do that and then start another DAICO for everyone to put their funds back into with a higher initial tap.

I agree that DAICOs don’t prevent scenarios where the attacking voters are the developers themselves; that’s explicitly outside the security model and seems very hard to prevent in any model. The one thing that DAICOs do accomplish is ensuring that such attacks have a higher capital cost.


These guys are claiming to have the first DAICO: https://ethearnal.com.


Ugh, based on the whitepaper (which is just marketing) that project is sooo Sybil attackable. It is a money printing machine for Sybil attackers. :stuck_out_tongue:


Yeah you could create lots of moderator accounts with the minimum staked ETH.


Hello everyone we just post an update today on our roadmap to our DAICO protocol: https://medium.com/coincrowdofficial/coincrowd-me-the-new-website-is-here-c82e7194524a


We continue working on the environment for safe investment. We already made the first implementation of the DAICO by Vitalik’s Buterin concept through the integration of the ERP system, IPFS and Ethereum.

As one of the results of this work will be the creation of an escrow fund. Investors can put the money in it and take them back if the task set by the investor is not executed or accepted for execution by the team of the ICO project. The bulk of the fees will go to the endowment of this fund.


need way more variables than this, in fact is it possible to submit a config.sheet to a node to implement the variables that can be sent in, this way we can use ML to automatically adapt the model so the DAICO is smarter and more agile.


I also suggest a new model in the documentation which will be experimented in my own project, the idea is to set up a universal,dynamic standard that can adapt to situations instead of building functions that are hard to change. We need to catch up with adaptive algorithm and script generated functions instead of relying on fixed algorithm


We were working on something similar (but called Coin Governance System), so I have wrote an article analyzing the DAICO model with its weakness and the proposed solutions: https://medium.com/coin-governance-system/daico-and-coin-governance-system-differences-and-similarities-81ba6afc7b9b


How do investors / token holders vote to raise the tap or permanently self-destruct the contract?