Understanding DYCO (Dynamic Coin Offering)
DYCO, short for dynamic coin offering, is an innovative crowdfunding model developed by DAO Maker.
It introduces utility tokens initially backed by USD for the first 16 months of their existence, ensuring accountability from project developers.
Token Burning and Adjusting Valuation
The USD backing allows DYCO investors to request a refund for their tokens if the project fails to deliver a viable product.
In cases where investors observe a deviation from the project’s original plan, they have the option to return their allocated tokens and receive a full refund.
Refunded tokens are permanently removed from circulation through burning, which reduces the token supply and increases the value of each remaining token, ultimately adjusting the project’s valuation.
Building Trust in the Secondary Market
Moreover, the USD backing acts as a safeguard against the downward price movements of the token while allowing for unlimited upward momentum.
In addition to targeting the primary market, DYCO has introduced a second iteration known as dynamic coin offering version two (DYCO v2), which focuses explicitly on building trust in the secondary market.
Allowing Early Investors to Refund Allocations
In DYCO v2, tokens are distributed to investors through a smart contract acting as a toll bridge, catering to original buyers who do not intend to remain invested in the project for the long term.
This mechanism enables them to refund their allocations and exit the project during its initial stages.
Notably, a team utilizing DYCO for fundraising cannot modify the set refund dates.
DYCO v2 refines this functionality by accounting for a project’s early growth without inconveniencing early exiters and negatively impacting confidence in the secondary market.
The first blockchain project to implement this model was Orion Protocol.