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ERC20 Developer Proposes Reversible ICO Concept

Kristina Frunze | Oct. 31, 2018
ERC20 Developer Proposes Reversible ICO Concept

Fabian Vogelsteller, one of the ERC20 developers, suggested a new reversible initial coin offering concept during the Devcon4 in Prague. He stated that he feels 'obligated' to propose an ICO alternative.

31 October 2018 – The developer who helped create the code that supports Ethereum’s ERC20 token standard, Fabian Vogelsteller, proposed a new form of Initial Coin Offering (ICO). The innovative form of ICO aims to make funding safer for investors. 

What is a reversible initial coin offering (RICO)?

Fabian Vogelsteller spoke during the Devcon4 in Prague. He stated that he feels responsible for the ICO popularity craze. Since some of the reports stated that the failure rate of ICOs stands at 50 percent or more, the developer stressed that he feels “obligated” to create an alternative to ICOs. Following on this, he introduced a concept of a “reversible ICO.”

A reversible initial coin offering (RICO) would enable investors that purchase tokens in a sale to receive their investment back during the project via a special-purpose executable distributed code contract. 

The model would create volatility in the value of a project, as investors buy or withdraw funding. ICO project organizers would need to compensate for the potential volatility by securing private capital investment. 

Vogelsteller thinks that RICO would diminish the number of fraudulent firms in the market, thus safeguarding investors. RICO projects would also “fail naturally” in case market backing withdrew. 

For testing of the new RICO model, Vogelsteller plans to execute this concept with his own startup, Lukso. 

Buterin's Interactive Coin Offerings

According to Vogelsteller, the current ICO model encourages ICO creators to buy "lambos rather than doing something useful." 

In addition, other industry insiders, such as the Ethereum co-founder Vitalik Buterin, have called for safer ICOs. Back in December 2017, TrueBit founder Jason Teutsch, accompanied by Buterin and Modular CEO Christopher Brown, created a paper called "Interactive Coin Offerings." 

The proposal suggested a better assessment of tokens for investors as well as the option to withdraw funding. The concept was backed by the addition of smart contracts. In this model, the mechanism would automatically withdraw the investment in case the valuation drops below investors’ expectations. 

Think we missed something? Let us know in the comments section below. 

Tags ICO ERC20
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