Right now, the founding leads for decentralized autonomous organizations (DAO) can raise hundreds of millions of dollars with nothing more than a white paper and a website. Generally, they can spend the money any way they wish, with few teeth to ensure the product they pitched is actually completed.
As a result, scammers sometimes use initial coin offerings to raise money for projects they have no intention of completing--they simply run off with the money to Thailand.
Other times, founders sincerely intend to complete the project at first, but get exhausted and lose heart when it proves more difficult than they expected. They realize that there is no one really forcing them to do what they said they would do, so they quit and disappear.
How can DAO contributors structure the payouts to avoid these problems?
In my opinion, instead of giving ICO teams all of the money upfront as a lump sum, DAO contributors should structure their payments in such a way that they have much more oversight over the DAO, and can redirect funds if the founding team fails. In particular, I think funds should be paid out in the form of seed money, completion bonds, and fee backed assts.
* Seed money fund. As envisioned, this money would be held in escrow "on-chain". Seed money would be intended to provide sufficient funds to the devs to begin work on the project, but at a spartan lifestyle. The donors to the DAO would vote (probably annually) for an ACcountability Team (ACT). The ACT would use the money to hire devs/marketing, and evaluate them on a monthly basis. If the ACT team doesn't think the devs are making good progress, then they can stop payment, and hire someone else.
* Completion bonds. Completion bonds pay only pay out upon meeting major milestones. They'd work something like social policy bonds:
http://socialgoals.com/spbs600words.html
The advantage of completion bonds is that the dev team only gets paid for results. If they fail to meet their milestones by the deadlines, then the bonds expire worthless, and the money is returned to the donor.
ICO money would be divided between seed money and completion bonds at a ratio set in the ICO documents. For example, 60% of the ICO might go to the seed money fund, the remaining 40% would go to back completion bonds.
* Fee Backed Assets. Fee backed assets are tradable assets that receive income from the fees generated from the new product or features. FBA's give devs ongoing encouragement to maintain existing features and make them easy to use. The STEALTH feature in Bitshares would be an example how this kind of asset can be used to develop new features:
https://steemit.com/bitshares/@chris4210/no-names-no-amounts-bitshares-stealth-transactions-proposal
In my view, structuring DAO payments in this way would provide greater protection to DAO contributors, and make it more likely that the projects would actually be completed.
As a result, scammers sometimes use initial coin offerings to raise money for projects they have no intention of completing--they simply run off with the money to Thailand.
Other times, founders sincerely intend to complete the project at first, but get exhausted and lose heart when it proves more difficult than they expected. They realize that there is no one really forcing them to do what they said they would do, so they quit and disappear.
How can DAO contributors structure the payouts to avoid these problems?
In my opinion, instead of giving ICO teams all of the money upfront as a lump sum, DAO contributors should structure their payments in such a way that they have much more oversight over the DAO, and can redirect funds if the founding team fails. In particular, I think funds should be paid out in the form of seed money, completion bonds, and fee backed assts.
* Seed money fund. As envisioned, this money would be held in escrow "on-chain". Seed money would be intended to provide sufficient funds to the devs to begin work on the project, but at a spartan lifestyle. The donors to the DAO would vote (probably annually) for an ACcountability Team (ACT). The ACT would use the money to hire devs/marketing, and evaluate them on a monthly basis. If the ACT team doesn't think the devs are making good progress, then they can stop payment, and hire someone else.
* Completion bonds. Completion bonds pay only pay out upon meeting major milestones. They'd work something like social policy bonds:
http://socialgoals.com/spbs600words.html
The advantage of completion bonds is that the dev team only gets paid for results. If they fail to meet their milestones by the deadlines, then the bonds expire worthless, and the money is returned to the donor.
ICO money would be divided between seed money and completion bonds at a ratio set in the ICO documents. For example, 60% of the ICO might go to the seed money fund, the remaining 40% would go to back completion bonds.
* Fee Backed Assets. Fee backed assets are tradable assets that receive income from the fees generated from the new product or features. FBA's give devs ongoing encouragement to maintain existing features and make them easy to use. The STEALTH feature in Bitshares would be an example how this kind of asset can be used to develop new features:
https://steemit.com/bitshares/@chris4210/no-names-no-amounts-bitshares-stealth-transactions-proposal
In my view, structuring DAO payments in this way would provide greater protection to DAO contributors, and make it more likely that the projects would actually be completed.