DigixDAO proposes a quarterly vote to decide the dissolution of the project or continue moving ahead. The price of DGD tokens has increased by 73% in less than two weeks.
The oldest Initial Coin Offerings (ICOs) have funds in their treasury that are worth more than the market capitalizations of their tokens. DigixDAO wondered whether these projects should return some of that money. At the same time, it offered its DGD token holders an all-or-nothing option: to completely dissolve its treasury or to continue granting subsidies to improve the ecosystem.
Kai Cheng Chng, CEO of Digix, noted on the DigixDAO blog that Digix has been receiving a lot of feedback since its ICO in early 2106. The executive said that there were recurring comments in favor of a DigixDAO dissolution mechanism by dissatisfied DGD token holders.
In the publication, the approach that the organization would adopt from now on is described: token holders can now vote to keep the ETH funds in the DAO intact. In response, the token price almost doubled since the announcement was published on November 29th. The price, which was around USD 13 before, now exceeds USD 19 since Chng’s publication.
The project Digix maintains physical gold and represents it with tokens in the Ethereum blockchain through its DGX token. However, the relevant governance token is DGD, and its current market capitalization of USD 39.1 million is significantly below the 386,000 ETH that DigixDAO has in its treasury.
DigixDAO raised 466,648 ETH in the sale of DGD tokens in March 2016, according to Smith + Crown. At that time, the amount collected was equivalent to a value between USD 6 million and USD 7 million. Since then, the value of ETH has increased significantly.
Wider Implications
The DigixDAO decision has triggered industry-wide discussion about whether more projects should do the same. Ryan Zurrer, investor and founder of the crypto asset firm Dialectic, stated that space needs someone like Carl Icahn to spread a culture in which it is not right to keep tens and even hundreds of millions of dollars in investment capital.
Zurrer said that many well-known ICOs making sales before the peak of the bullish market in 2017 now have vast resources since the value of the cryptocurrencies associated with the projects has significantly appreciated. The investor also notes that he would like to see a world with projects in which detailed roadmaps with clear budgets are drawn.
Nic Carter, a partner at Castle Island Ventures, said that he had long been waiting for ICOs with a big balance sheet to do this. He considers that this was quite a mature decision by Digix.
However, the co-founder of token trading firm Altonomy, Ricky Li, said that the ICOs are not really interested in repurchasing the tokens with their treasury holdings as they raise money to develop, not to speculate on the token price.
In fact, this matches the observations of Zurrer, who noted that it is not really an all-or-nothing option. He explained that a company could redistribute part of its treasury if it has more than it really needs, and still continue doing its job.
Others are not so sure that the DigixDAO movement is widely replicable. The CEO of Avantgarde Finance Mona El-Isa considers that it is difficult to generalize whether this would be a good or bad thing for space, since each situation has its own unique characteristics.
El-Isa’s previous company developed the Melonport protocol and then delivered it to their community in the form of DAO. She believes that some of those tokens would “become very interesting opportunities for token enthusiasts.”
By Willmen Blanco
