DAICO3 model improves DAICOs to incentivize DAO ICO sales

Problem with DAICOs and DAOs is that projects don’t actually use them, and they’re fundamentally flawed.

DAICO3 attempts to fix the following problems in DAICO1:

Problem 1: other people or project competitors can vote to refund your funds, even when you don’t want a refund. You have to rely on others to vote if you do want a refund.

Solution: Refund-by-vote is fundamentally flawed as inefficient, and a moral hazard ripe for abuse. DAICO3 participants can refund for themselves, only.

Problem 2: Raising insane amounts before the team proves anything, and requiring teams to “sell all 65% tokens now, or burn forever”, is a moral hazard, and inefficient.

Solution: DAICO3 freezes unsold tokens for years, in a DAO, to be burned or sold later, by vote. The old extreme model of raising all the funds a project will ever need, before proving anything is absurd. Imagine Amazon would try to raise $10B before selling its first book. Projects can instead sell whatever tokens they sell now, effectively freeze the rest, and sell more later at higher prices later, benefiting the project and DAO.

DAICO3 specification base options (+FTD+IR+MRF+SoV):

  1. +FTD: (“Freeze tokens in DAO”): Unsold tokens are locked in a DAO3, and later burned or sold, by vote.
  2. +IR: (“Individual Refunds”) instead of RBV (“Refund-By-Vote”) as in the original DAICO. 100% refund minus the % already released to the team as per item 3 below.
  3. +MRF (“Monthly Release of Funds”) e.g. 5% released to team per month, and can be increased by vote. Unreleased funds are available for refund.
  4. +SoV: “Store-of-Value” : to protect ICO funds, default 0–100% of ETH is auto-converted to DAI

DAICO3A contains all options.

DAICO3 default has just the FTD option (“Freeze tokens in a DAO3”).

(DAO3 by default just enables a 51% to reassign an owner that would collect future vested tokens. For more info about DAO3, see the spec here: https://medium.com/@cotrader.com/the-future-of-companies-onchain-dao3-will-exponentially-accelerate-the-creative-process-541337ce36ef)

DIACO3 additional options: Options provide variants to the specification that can be used+together. -FTD can remove this default option.

DAICO3+IR option: Individual Refund of 100%, minus e.g. 10% per month penalty, by sending tokens back.


FAQ1: Return tokens arbitrage. Someone can buy tokens cheap and return them at a higher rate.

Answer 1: Ok, and this is bad because? Investors have some protection, and teams are incentivized to price their tokens at a healthy below market rate.

DAICO3 is part of a larger DAO3 framework, which you can read more about here: https://medium.com/@cotrader.com/the-future-of-companies-will-be-neither-centralized-nor-controlled-by-government-e4566d5a5f8c

Here are additional DAICO3 options that provide variants to the specification:

+1 option: Like original DAICO, without point 4 (RBV option)

  1. Release raised funds at a particular rate, like water through a tap.
  2. Wallets vote on things, based on wallet’s token holdings relative to their total ETH contribution to the ICO tap fund.
  3. Can vote to increase the funds tap rate, call it rate Rfunds.
  4. // Removed: “Refund-by-Vote” (RBV). Participants can vote to recall a portion of the ICO funds for everyone. // This option is fundamentally flawed. Someone else should vote to refund on your behalf.

FAQ 1: how can a DAICO run a company?

Answer 1: It doesn’t. It only controls funds recall or rate of release to Team. It’s not “execution by committee” it is only “funding by committee”, similar to a traditional board of investors.

+DA option: Daily Auctions: don’t burn the tokens, sell them very slowly, later, at market prices. This solves the problem of ensuring that tokens get sold on some set schedule:

  1. Unsold tokens are still locked in a DAICO, and later sold in daily auctions
  2. Daily auction prices reflect market prices, with ICO as price floor
  3. DAICO releases tokens to daily auctions at a rate of Rtokens, e.g. 3%/year
  4. DAICO can vote to increase this rate (to e.g., 4, 6, 9% per year)

FAQ 2: EOS had an auction sale but they had massive hype. How will lower profile projects pull it off?

Answer 2: EOS base price was also $1B, and inflation was 400% per year. They dumped 80% tokens atop 20% in circulation in 1 year. Lower profile projects on DIACO3 will have ~40x less inflation and ICO floor prices suitable to them.


Say CoTrader sets a $10M hard-cap for 65% of the tokens in the normal smart-sale ICO. Any unsold tokens would go to a DAICO3, with a 3% default inflation tap rate. If 60% tokens are unsold, these tokens go to the DAICO, to be sold on daily auctions, after the ICO, at a minimum of the ICO price. The price will likely similar to the overall market. At 3% inflation per year, it’d take 20 years for all the 60% tokens to be sold, and that’s only if the price stays above the ICO price every single day, throughout those 20 years. Otherwise, the inflation would be even lower than 3%. The DAICO 3.0 can vote to increase the max COT auction tap rate

Surviving a major downturn after ICO:

There are cases when the price floor might become a problem, where an ICO raised a small amount in a bull market (because, e.g., the project wasn’t far along yet at that point, etc), and then a long bear market prevents the floor price from ever being reached to raise critical funds. DAICO3B is an option to deal with that.

+AA option: AssetAllocation. The raised funds portfolio can be controlled by a CoTrader smart-fund, controlled by DAO vote

  1. DAICO3A can vote to change the assets in the CoTrader smart fund

-PF option: Price-Floor can be removed from auction price in case of long downturn

  1. Auction can sell without price floor up to rate of Rfloor, starting 0%
  2. DAICO can vote to increase Rfloor to 1,2,3%


CoTrader a natural fit for DAICO3 Funds

CoTrader is the world’s first blockchain investments funds marketplace. DAICO3 is especially relevant to CoTrader, as the platform can support ICOs, especially those that use smart-sales, and preferably DAICOs, where fund managers (called traders) can take their investors (called cotraders) into ICOs, much more safely.

CoTrader is actually live on the Ethereum mainnet at https://mainnet.cotrader.com. You can also play with it on https://testnet.cotrader.com

Follow the project’s social news channels:

Twitter: https://twitter.com/cotrader.com

Facebook: https://fb.com/cotrader

Telegram news: https://t.me/cotraders

Telegram chat: https://t.me/cotrader

Linkedin.com: https://linkedin.com/company/cotrader

CoTrader site: https://cotrader.com