DEScrow aims to protect ICO investors with decentralized escrow service
- Your Guide to the Tax Rules Around Day Trading Crypto - March 23, 2020
- MyFX Markets Crypto Margin Trading - February 28, 2020
- Estonian Company ITEZ Enables BTC Trading Via Visa/MasterCard Credit Cards - January 24, 2020
DEScrow is a new decentralized escrow service which aims to protect investors in Initial Coin Offerings (ICOs) from loses due to scams and other projects which fail to deliver a product. In order to fully fund the development and promotion of this platform the team behind this service are conducting their own token sale, with bonuses of up to 70% for early participants.
The wild west ICO market
ICO crowdsales have become the hottest thing in cryptocurrency right now, with hundreds of millions of dollars being raised every week by a wide range of different start-up companies.
The use of ICOs has many advantages for everyone involved.
Start-up projects get access to an exciting new funding source which they can access early on in their endeavour, and without the need to travel around pitching to dozens of different angel investors when their time could be better spent elsewhere. They also get validation of their idea from the crowd, and build a base of supporters who often go on to be users and evangelists for the projects they invest in.
On the other side of the equation regular people get to invest in cutting edge start-ups: an opportunity usually only available to a small group of accredited investors with the right connections. With tokens often tradeable very soon after an a successful ICO, this is also a highly liquid investment; in fact, it is the only way to invest in such early stage companies without locking up your capital indefinitely (and usually for several years at least).
The unregulated nature of ICO fundraising can reduce friction and therefore costs, increasing profits for all involved. But when you combine this with the pseudonymous nature of cryptocurrency, and the large sums of money being thrown around by often naive investors, and the appeal for scammers is obvious.
It shouldn’t be suprising, therefore, that there have been many, many ICO scams in which investors have lost money. Even beyond the straight scams, the ease of raising money through an ICO has lead some honest but naive entrepreneurs to raise large amounts of money based on the promise of delivering a product that they were never going to be able to deliver.
Protecting investors with decentralized escrow
The DEScrow team believe that they have hit on the solution to this problem: a decentralized escrow system.
I have written about the importance of escrow myself in the past, as in the early days of fundraising using Bitcoin this was very common. An escrow agent would hold funds, and in some cases only release them in stages as development milestones where met. This prevents start-ups from raising money and then not delivering a product. But of course these centralized escrows can also run away with the money themselves, something which did unfortunately happen (perhaps most notably to the Syscoin team).
Decentralized escrow reduces the risks of the more modern style of Ethereum based ICO, which generally release funds straight to the company without any measures to ensure that they deliver. But it does so without re-introducing the risk associated with regular escrow agents.
The process used by DEScrow is fairly simple in principle, if not in regards to the software required:
- A project seeking to raise funds through an ICO provides a clear roadmap with development milestones, and the funds required to reach each stage.
- Funds are held in a smart contract where no individual can access them unilaterally.
- As each milestone is reached, investors themselves vote to release funds. If investors do not believe the milestone has been reached, they do not release the funds.
Through this process both investors and start-up projects are protected from the risks associated with other types of ICO. Companies using the service may also benefit from the increased confidence it will give to investors, potentially allowing them to raise more money.
In addition to a smart contract based decentralized escrow, DEScrow are also planning to establish an insurance fund to protect early investors in projects running an ICO through the platform from the loss of those funds distributed to a company prior to any milestones being reached. The fund will reimburse any losses of this kind by as much as 70%
The DEScrow ICO
DEScrow is currently running a pre-ICO fundraising campaign to raise capital for development a international expansion. Early investors who take part in this initial sale can enjoy a 70% bonus until the end of September.
For additional information and to participate in the sale go here: https://descrow.org/