Fundraising in crypto has a wild history. The segment was streamlined by Initial Coin Offerings (ICOs), which launched with incredible popularity and snowballed into a large scale boom in late 2017 and early 2018, a time when there were hundreds of ICOs happening each month.
Since then, investors have realized that ICOs have largely unsubstantiated risks and ate therefore unsustainable. Many tokenized projects raised huge sums of money but failed to deliver anything of value, perhaps because they were able to raise piles of cash upfront with just a plan, not even a proof of concept or working prototype.
Initial Exchange Offerings (IEOs) were the successor to ICOs. Exchanges hand-picked projects looking to fund raise and gave them a platform to host their sale. The general idea behind this was that the IEO tokens would be, at least to some degree, vetted before being presented to the public.
This method has also largely failed, as dozens of unreputable exchanges flooded the market with unqualified projects. Furthermore, as exchanges have no exposure to the success of a project and are largely concerned with listing the next token, even reputable exchanges quickly lowered qualification status. IEOs still happen today, but at a much rarer pace, often with months passing without any IEO taking place on an exchange. Even then, IEOs are not public offerings, which entirely misses the principle of crowdfunding.
Token sales are, at heart, a form of crowdfunding. Limiting access to margin-loving traders adds little value to a project and largely excludes the wider market.
In late 2019, DAO Maker, a blockchain SaaS provider and strategy company published a research that surprisingly highlighted that token sales have granted better returns than any other form of crowdfunding, despite all the scam and failed issuances. Based on the research’s conclusion, along with an assessment of driving factors of successful token issuances and the imminent need to grow credibility in tokens, the company created a new token issuance framework called the Dynamic Coin Offering (DYCO).
What is a Dynamic Coin Offering (DYCO)?
DYCO is a fundraising method powered by DAO Maker; it is designed to increase the efficacy of token fundraising events.
This model ensures that the team is transparent and successful, because if they aren’t, then the buyers can be refunded at just a small loss. Essentially, DYCO is a new model that includes a strong level of investor protection.
For the first 16 months after token distribution, the entire circulating supply is backed by USDC. 80% of the funds raised initially are set aside to be used to buy back tokens from dissatisfied holders.
There is no obligation for holders to sell their tokens, but it provides the option for holders to sell if the team isn’t delivering, which also can put pressure on the team to improve their rate of performance. In effect, this system means that if the project fails investors can receive 80% of their initial investment back.
The team asserts that 20% is one of the most common stop loss levels. This enables venture capital opportunities with a minimized level of risk. However, the DYCO provides a 20% bonus to buyers, making primary purchase far more appealing. The team explains this system makes early supporters valued; this principle is further strengthened as the DYCO ensures early supporters participation addresses are whitelisted for life-long privileges in the ecosystem they supported.
As for the buyback system, the buybacks happen in three phases which are 9 months, 12 months and 16 months after the fundraise. Any DYCO participant can refund tokens during the three buyback phases.
In fact, DYCO participants can even buy tokens on a secondary market and refund those. This is possible because every token in circulation, during the refund period, was purchased by a DYCO participant, and thus has money-backed status. When a DYCO participant sells a token, he/she also passes on the right to its refund.
Therefore, if the price drops below the refund value, the tokens can be refunded for a risk-free arbitrage profit. Refunded tokens are burned, which can reduce the circulating supply to even zero.
The USDC-backing is designed to provide token support during their nascent stage and as such, the support is gradually reduced over time. Another great feature is the trustless locks, which ensures that tokens for the team, marketing, advisors and more are kept locked until after the 16-month period.
Orion Protocol is the first DYCO. It’s a project that’s aiming to build a protocol that aggregates the liquidity of the entire crypto market in one platform that can be tapped by a private wallet.
DAO Maker’s team has publicly stated that Orion was selected after months of due diligence, which they claim is the level of consideration give to its past accelerated projects as-well, including LTO Network and Elrond Network.
The team stated they feel Orion Protocol is qualified for the task at hand as the project is led by the creator of the Waves DEX, which is regularly the highest volume DEX in the market. Additionally, as the team has largely self-funded the development since 2018, the level of commitment stands out from the norm of the crypto market.
DAO Maker’s first DYCO (Orion Protocol) has sold out its private offering, raising 3,410,000 USDC in less than two weeks, with a massive oversubscription led by strategic buyers.
A small public sale is coming soon.
A DYCO is a new token sale framework developed by DAO Maker. It greatly mitigates the risk in crowdfunding token purchases.
It’s designed to provide a level of investor protection by allowing buyers to refund their tokens if they aren’t happy at any point during 16 months after the fundraise.
This process pushes teams to meet their promises and also creates a reduced risk token investment opportunity. To encourage projects to adopt the framework and move the space to a higher bar for projects that qualify for tokenized fundraises, DAO Maker and its partners offer large grants.