Ethereum Developer Introduces ‘Reversible ICO’ Concept for Safer Investor Experience

ERC-20 co-creator Fabian Vogelstellar has come up with the idea of “reversible” initial coin offerings to prevent scams in the industry.

Fabian Vogelsteller, the Ethereum (ETH) developer who co-created the ERC-20 token standard, has proposed the concept of “reversible” initial coin offerings (ICOs), seeking to make the funding method safer for investors and destroy the incentive for creating scam projects, Czech business news outlet Kurzy reported.

The idea was presented at Ethereum’s annual Devcon conference held in Prague on Tuesday. Vogelsteller said the new model, dubbed a “reversible ICO” (RICO), involves a new smart contract which allows investors to pull their contributions at any stage of the project’s lifespan. Once refunded, the Ethereum tokens would then be available for purchase to other investors. Since this would likely lead to fluctuation in the project’s underlying value, start-ups would need to secure some core funding from private investors outside of the ICO, Vogelsteller added.

The proposed RICO model is designed to make fraud “unlikely” and motivate ICO issuers to comply with their obligations. It would also allow projects to “fail naturally” instead of collapsing and leaving investors empty-handed.

Vogelsteller also told the Devcon audience the new concept would be tested in practice with his own fashion and design blockchain start-up, Lukso. The developer did not provide any timeframe for the planned RICO implementation.

Earlier this year, Ethereum founder Vitalik Buterin also proposed an alternative fundraising model, seeking to improve protection against fraud and accountability from fundraising projects. Dubbed Decentralized Autonomous ICO (DAICO), the concept would allow token holders to slow the disbursement rate of funds or even refund themselves in case the ICO teams are not meeting expectations.

In September, Vogelsteller and fellow blockchain developers Stephane Gosselin, Adam Dossa, and Pablo Ruiz also proposed a new security token standard based on the Ethereum network. Called ERC-1400, it is meant to help entities organize security token offerings (STOs) and better comply with regulations.

Reading now