Good governance is a key point when we talk about decentralized networks in general, or blockchain in particular. Decentralized networks break with the traditional hierarchical models (vertical) and facilitates a model in which hierarchy does not exist (horizontal). In this sense, different groups of participants have different and common interests. Having a strong governance system to rule them is crucial. It is essential to maintain the incentives of those participants aligned. Therefore, the system needs mechanisms to coordinate those participants around their common incentives, and avoid imbalances in their powers. Governance could be exercised on-chain or off-chain. On one hand, on-chain governance mechanisms could both ensure that a process is properly followed and allows fast decision making. However, it will not be easy to change an on-chain governance mechanism once it is established. Furthermore, if it is not well designed, it is exposed to exploits and hacks. On the other hand, off-chain governance mechanisms (i.e. Bitcoin Improvements Proposals -BIPs - and mailing lists in the case of Bitcoin) could be modified easily but it makes the coordination of its participants more difficult. An Initial Coin Offering (ICO), a process by which a company issues a series of tokens in exchange for cryptocurrencies (in general) through smart contracts, has both decentralized and centralized components. On one side, the process by which the participants of an ICO send cryptocurrencies to a smart contract in exchange for tokens is managed autonomously by the referred smart contract in a decentralized way. On the other, the process of holding and spending the raised capital is fully controlled and centralized by the company itself. This makes it harder to align the incentives of the ICO launcher with those of the token buyers and to enforce a mechanism of coordination between them, given that there is animbalance of power. In this sense, once the ICO is complet ed, ICO token holders have no control over the management of the funds, and if they are unsatisfied they can only sell their tokens in a secondary market. This brings ICOs to the classic problem of agency costs which economists have tried to solve for years. To solve this issue, we have devised the “Coin Governance System”, which is an on-chain coordination mechanism that could strengthen and align the common interests of ICO launchers and token buyers, preventing that their individual interests create an imbalance of power between them.
The Coin Governance System (CGS) is an on-chain governance mechanism to protect ICO investors from scams and bad execution. The CGS holds the funds raised during an ICO in an escrow smart contract and releases it gradually to the ICO launcher. If ICO investors aren’t satisfied by the project’s progress, they can submit a claim to the Coin Governance System which could lead to the withdrawal of the remaining funds if the CGS arbiter community believes the claim is rightful.
Alpha Release: the publication of the first working version of the CGS platform, which users will be able to interact with.
Testing Phase: following the alpha release, a version of the platform will be open for the early adopters on Testnet. During the testing phase, users will receive testnet tokens to try the product and give feedback. Testers and users that help improve the platform will be incentivised with mainnet CGS tokens. Pre ICO: a private token sale will take place prior the public one for a limited amount of participants. ICO: an public token sale will take place towards the end of Q2 2018
V0.1 Beta Release: this milestone marks the publication of the first working version of the CGS platform on the Ethereum Mainnet. Pilot - Skyllz: the Skyllz platform is the first real life ICO project that will integrate the CGS. Investors will enjoy the protection of the CGS for the first time in a real ICO.
V0.5 - Limited Version: more projects will be included in the CGS. The projects will be manually added after a prior review to avoid spam and monitor the proper functioning of the platform. V1.0 - Open version: the CGS platform will be open for any ICO. The governance of the system will be delegated to the CGS community, that will decide through votings certain parameters of the platform, such as number of tokens needed to create a project, etc.