The developers of the blockchain project NuCypher have criticized the existing approaches to ICO / IEO , suggesting an alternative model of tokensale called WorkLock.
Thinking about #token distribution models …
Ideal distributions should:
▪️ Filter for stakers likely to support the network
▪️ Disincentivize price speculation
▪️ Be permissionless and #decentralized?Proposing the #WorkLock ??
Send feedback: https://t.co/YJiyprr2yK
– NuCypher (@NuCypher) 27 March, 2019 p.
At the beginning of the article, the developers focus on the main problems and limitations inherent in many traditional ICOs and already familiar to IEO, as well as the mechanisms for distributing coins through airdrops. According to them, after the emergence of the ICO speculative bubble in 2017 and its deflation in 2018, it became clear to many that the tokensales had many problems.
For example, the initial offers of coins attract a huge number of retail investors, whose main goal is short-term earnings, not the use of a token. This negatively affects the product, while the ICO organizers themselves become, in effect, hostages of the market.
In addition, the industry is full of frankly fraudulent projects, often ICO start-ups do not adhere to the roadmap. It is also a common situation when startup participants receive huge rewards, while not offering anything meaningful to the market.
Among other things, NuCypher notes significant regulatory risks, particularly related to the activities of the US Securities and Exchange Commission (SEC). The latter often classifies ICO tokens as securities, imposing severe restrictions and penalties on their issuers.
The company believes that in an ideal token distribution model, speculative factors should be reduced, compliance with the requirements of regulators should be maximized, and opportunities for market manipulation should be limited. In addition, the mechanism should encourage participants using the token for its intended purpose, and, therefore, contribute to the growth of the cryptocurrency ecosystem.
The proposed NuCypher concept called WorkLock suggests the following algorithm:
– first, participants in the campaign to distribute tokens deposit Ethereum to the address of the smart contract;
– investors receive a corresponding number of tokens that they can use at their discretion;
– if the participants use the coins for their intended purpose (for example, for stacking), then the assets will be unlocked after performing a certain amount of work and returned to the original address as a reward;
– if the participants decide, for example, to sell coins on the stock exchange, then the ETH that is blocked on the smart contract burns.
WorkLock distribution mechanism
NuCypher is convinced that such a model creates incentives for participants to use assets for their original purpose. In addition, they believe that WorkLock increases the likelihood that projects meet the requirements of regulators, since the model does not imply the purchase of tokens for speculative profits.
The developers noted that WorkLock is so far only a concept that needs to be improved and which has yet to prove its viability.
Recall that last year Ethereum founder Vitaly Buterin proposed a decentralized fundraising model, which he called DAICO.
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