ERC-20 Co-Author Proposes New ICO Model to Protect Investors from Fraudulent Token Sales

 In Exchanges, Governments and Regulations

Ethereum developer and co-creator of the ERC-20 token standard has introduced a new concept for ICOs to better protect investors.

The Ethereum (ETH) developer that co-authored the ERC-20 token standard has introduced a new model for Initial Coin Offerings (ICO), Czech business news outlet Kurzy reports Oct. 31.

Speaking at Ethereum’s annual Devcon conference in Prague Oct. 30, Fabian Vogelsteller, also the main developer of decentralized application (DApp) browser Mist, proposed a new approach for running ICOs that he claims will better protect investors.

Vogelsteller described the concept, dubbed a “reversible ICO” (RICO), as a fundraising model that allows investors to return their tokens – and be reimbursed – at any stage of the project, via a special-purpose smart contract.

According to the developer, such a setup would decrease the risks for investors of facing a fraudulent ICO, while also making ICO issuers more motivated to fulfill their obligations:

“You are able to take your funds back at any point in time and do it simply by sending your tokens back.”

According to Vogelsteller’s proposed model, once tokens issued in a RICO were returned, they could be purchased by other investors. However, given such a model would make funding amounts less stable, startups would also need more “core funding” from private investors outside of a the public token sale, he suggested.

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Despite the persistent bear market in crypto this year, ICOs have reportedly amassed twice as much in funds between January and May 2018 alone, in comparison with the entire year of 2017.

On Oct. 28, Germany’s financial regulator urged the global community to regulate ICOs on a worldwide scale, citing “mostly minimal rights” of ICO investors.

Oct. 26, the Thai Securities and Exchange Commission (SEC) issued a warning about  investing in nine digital tokens and Initial Coin Offerings that had not been approved by the regulator.

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