ERC-20 Creator Suggests To Return Investment From ICOs
Fabian Vogelsteller, the Ethereum network developer, who created the ERC-20 standard for coins, introduced the concept of reversible ICO (RICO) with the option of returning funds to investors, ForkLog reports.
Such transactions are based on a special smart contract, through which investors return the acquired tokens and get their funds back.
Vogelsteller clarified that the investment can be taken back at any stage of the ICO, after which other users can purchase available tokens. However, such actions can cause fluctuations in quotation and affect the success of the project.
The developer advised the startups who would like to raise funds with a reversible ICO, to find some other sources of seed funding, alongside with their token sale.
There is a worldwide boom in initial offerings of tokens created in accordance with the ERC-20 standard. As Vogelsteller said, he feels responsibility for this and a need to suggest a new, better model.
Vogelsteller stated that the RICO concept has every chance to reduce the number of scam projects. Also, the possibility to return funds will encourage the token sale initiators to fulfill their promises to investors.
A study by the research firm Stat Group found out that over 80% of all ICOs in 2017 were fraudulent. In total, all the token sales last year attracted almost $12 billion, $1.3 million of which went on funding of scam projects. This statistic means that although most ICOs were considered fraudulent, they received much less money than honest token sales.
Previously, Taiwan authorities adopted a law that will facilitate ICOs.