Germany’s ‘reversible ICO’ breathes life into the ICOs
After going through trying times, ICOs are poised to regain their glory after German regulators approved incorporating investor protections to the ICOs in a project they are terming as reversible Initial coin offerings (rICOs). This will certainly be a game-changer in the Fintech crowdfunding landscape since ICOs hold the record of being the cheapest among the currently available funding mechanisms.
ICOs’ dwindling popularity among blockchain and fintech developers and investors was due to the lack of an elaborate regulatory framework for the ICOs across the world. And the new ‘reversible ICO’ seeks to bring order to the way ICOs are regulated especially by protecting investors.
According to the German regulators, the approved reversible ICO’ shall allow investors to buy tokens gradually and be in a position to remove their support and funding at any time if they feel like doing so.
Reversible ICO developers
The rICO was developed by Fabian Vogelsteller, who was actively involved in the development of the ERC-20 Ethereum standard.
Fabian first floated rCIO idea in 2018 at Devcon. It has since taken about one year to bring the idea into reality.
How the reversible ICO will function
The main objective of rICO is to add a layer of investor protection to the largely unregulated ICOs. In so doing, it will give investors an upper hand and also shield them from scammers.
Reversible ICOs shall be carried out in two phases rather than the way they were ICOs were formally issued in one go. In the first phase, investors will first reserve the tokens they desire to purchase. Then in the second phase, they can buy the reserved tokens gradually over time. By doing this, investors will have time to watch over the project issuing the ICO.
Additionally, if the investor sees any reason not to continue supporting the project by buying the reserved tokens, they can release the reserved tokens and also have their ETH refunded. That way scammers will have no chance of getting away with investors’ money.
The two phases make it possible for investors to understand the project as they invest to avoid losing the opportunity as they try to figure out if a project is legit or not.
The reversible ICO holds close resemblance to Vitalik Buterin’s proposal to have ICOs that resemble the DAO. According to Buterin, the DAO like ICOs would permit DAO participants to vote on milestones while still funding the project behind the ICO.
It is needless to point out the other numerous proposals on ICOs that were floated in trying to combat the issue of ICO regulation.
The rICO has some advantages over Buterin’s proposal in that rICO is simple and it is fast compared to the DAO like ICOs that would experience stumpy voting participation by the DAOs.
The future of ‘reversible ICOs’
Germany is one of the largest economies in Europe and its regulatory authority Bafin has made great strides in the field of tokenized assets compared to countries like the USA.
Germany was actually among the first countries to approve the use of Security Token Offerings back in 2019.
Although it is not yet clear if investors in the other parts of Europe or the world would be eager to approve the rICO fundraising mechanism, rICOs represent a great step towards regulating ICOs.
The first use case for reversible ICO (rICO)
The first blockchain project that shall use rICO to raise funds shall be LUKSO, which is a sister to Ethereum when it comes to making mainstream decentralized applications
The LUKSO rICO is scheduled for some time next month if all things go as planned.