Reversible ICO (rICO)—the latest brainchild from Ethereum dapp developer and ERC 20 creator Fabian Vogelsteller—is a new model for ICOs (Initial Coin Offerings used to fundraise for start-ups) where investors reserve tokens instead of buying them outright.
This new fundraising mechanism allows investors to reserve and buy tokens over time, and “return” reserved tokens that haven’t yet been purchased in exchange for the ETH they initially put in.
The result is an ICO system that balances responsibility, honesty, and trust between investors and the projects they invest in. After all, with a rICO, if investors lose faith in the project they can always return any as-of-yet unpurchased tokens and back out with their ETH intact.
The LUKSO Test
In order to test the rICO concept, Vogelsteller used his own Blockchain infrastructure project, LUKSO, as the subject.
From June 2020 through the rICO’s end this month, investors could put up ETH to reserve LUKSO’s native cryptocurrency, LYX. LYX would then be proportionally “purchased” at set intervals. While purchased LYX couldn’t be traded back, backers maintained the ability to pull out from their reserved allotment at any point during the eight month period. Of note, for legal reasons, investors needed to KYC before participating.
LUKSO set aside 10M LYX for the rICO (10% of their intended 100M LYX ceiling). By the rICO’s close, nearly 5.5M LYX had been officially “bought,” valued at nearly 10k ETH or $18M USD.
Vogelsteller viewed the LUKSO rICO as a huge success, posting that the amount raised is the “same as Ethereum back in 2014.”
Beyond LUKSO, the potential for rICOs seems especially bright. With the sheer multitude of new projects in DeFi right now, ICOs are oftentimes a crapshoot for investors. FOMO can oftentimes lead to wasted money, or worse, regret. But rICOs would provide a chance for interested investors to feel out new projects as they continue to develop, and constantly reassess their positioning throughout.