Adshares ICO model
Adshares Token sale uses a novel approach with dynamic token price and elastic supply. We designed that scheme to alleviate common problems with existing ICOs. Main issues that we have targeted are incentives for developers and FOMO. To achieve our goals we use dynamic token pricing, continuous token buyback and withdrawals spread over time.
Token prices depend on a number of tokens in circulation. We do not limit the number of tokens that can be issued, but the price of sold tokens depends on circulating supply. We sell tokens for a flat price until we reach a minimum financing. From then on, each next token costs more, so there is a natural cap on issuance.
ICO contract will automatically buyback tokens to reduce the risk for token buyers and to give good incentives for the dev team. Price paid by the contract are calculated using the same formula (minus spread).
Funds gathered in the contract cannot be withdrawn at once. Dev team can request maximum 1% of funds each week, so they have an incentive to work hard or risk that tokens will be sold to contract and team funding will drop.
We think Adshares ICO model fulfills desirable ICO properties described in a recent post by Vitalik Butterin. He highlighted five important properties of good ICO design.
We think our model is striking good balance between conflicting properties, namely “the first token sale dilemma” and “the second token sale trilemma”. Let’s walk these points one by one.
The certainty of valuation (1) and certainty of participation (2) are in conflict(“the first token sale dilemma”) because you either run out of tokens to sell or you start to dilute holdings of initial investors. We think the best way to overcome this problem is to allow early investors to exit if they are not happy with final dilution. Adshares ICO achieves that goal.
Suppose early buyer acquired 10% of supply for $100k giving a $1M valuation. From then on we can consider two scenarios:
· Supply expands by 100% and his share drops to 5%. Under the first impression, it seems that early buyer is disadvantaged but token price simultaneously rises by 100%. This means his initial share is now worth $200k, so he can sell his tokens back to contract for 100% profit and exit if he thinks valuation is no longer fair.
· Supply contracts by 50%. The buyer now holds 20% of existing tokens and will receive 20% of the final allocation. He gets an even better deal for his money than initially.
“The second token sale trilemma” states that “capping amount raised” (3), “no central banking” (4) and “economic efficiency” (5) cannot be met simultaneously. We think that with a small compromise on point (3) we can achieve a good outcome. Adshares ICO does not cap sale of tokens, but funds are released under a schedule that limits risk for investors and alleviates allegations of greed. Our model has no need for us to hold an unexpectedly large amount of tokens (4). Tokens are liquid from the start and there is no need to lock any excess capital so economic efficiency is achieved (5).