Ethereum platform co-founder Vitalik Buterin says there will be no initial coin offering (ICO) attached to Plasma, the open-source infrastructure created to scale up transactions using the Ethereum blockchain. And while he says he’s not against ICOs per se, he thinks blockchain strategies can and should be effectively developed and run without them.
In the wake of blockchain’s emergence, the skyrocketing valuations for cryptocurrencies like Bitcoin, Ethereum and Ripple along with the explosion of ICOs has been truly remarkable. Literally thousands of currencies and tokens are now on offer — a good thing for new companies hoping to pull in fundraising dollars to help develop their product but also one which is adding a high degree of volatility to an already uncertain, still-emerging market.
But while many say that ICOs are necessary in order to encourage development in the industry, Buterin doesn’t think so, at least not always.
“Tokens have their place,” says Buterin in a written response to an article in Cryptocoins News. “What I am against is protocols that really do not need to have their own tokens for any technical reason shoving a token into their protocol in order to be able to ICO it,” he says.
The Russian-Canadian now living in Singapore says that collaboration rather than competition among currencies is more important at this stage.
“It’s trivial to just take a plasma chain, rip out the plasmoids or whatever name the tokens would be given, and run the chain without them,” says Buterin. “And if we somehow tried to make this hard, it would put plasma and [decentralized payment platform Omise Go] and future plasma-based projects in the future at odds with each other,” he says.
As of the end of July, ICOs originating on the Ethereum network (in other words, those that sell their token to buyers in exchange for Ether, the Ethereum cryptocurrency) have raised about $1.3 billion USD, according to crypto finance analysts Smith & Crown.
Last month, Buterin and TrueBit founder Jason Teutsch published a white paper announcing their vision of an alternative to the initial coin offering, called an “interactive coin offering.” In essence, Buterin and Teutsch want to see ICOs take place under less frenzied, more rational circumstances, by getting rid of the idea of capped sales and by allowing investors to withdraw their offers. “Potential buyers may enter and exit the crowdsale based on behaviours of other buyers, and in doing so tend the valuation towards a market equilibrium,” say Buterin and Teutsch.
Buterin also suggests that instead of ICOs, funds to pay for research and development could be raised on a fee per usage model, such as the one employed by the etherdelta trading platform.
“If developers have to be paid, then one model I do reasonably like is the etherdelta model – a simple transparent 0.3% fee charged inside the default interface,” says Buterin. “If they want to frontload the revenue, they could issue N tokens, sell N/2, and then use all fee proceeds to purchase tokens off the market and destroy them; this way regular users would never see the tokens.”