Investment in cryptocurrency market mostly depends on VC and investment institutions. They have perfect reference checks and analytical abilities.
However, a small number of VC and investment institutions cannot meet the financing needs of many projects, especially small and medium-sized projects, which have the characteristics of high risk, large quantity and small amount. Small and medium-sized projects are important parts of the cryptocurrency market. Their development can bring more vitality and creativity to the cryptocurrency market, and will also become a new engine for the development of the cryptocurrency market. The financing problem of small and medium-sized projects is not particularly prominent when the market goes up, but when the market goes down, most small and medium-sized projects will be interrupted due to financing problems.
For most ordinary users, due to the small amount of investment, lack of anti-risk ability and investment channels, most of them can only buy and sell in the secondary market. Reducing the investment risks of ordinary users and enabling them to participate in primary market investment that will bring great development.
In 2018, Vitalik Buterin put forward the concept of DAICO in “Explanation of DAICOs”, but in the past three years, DAICO has performed poorly in practice. We improved the DAICO model by combining stream payment with DAICO and introducing Kleros Court, then Sundial was born.
First of all, we introduce the operation principle of Sundial.
1. Investors can invest in the project through the Sundial platform after the project is created. When the investment is successful, a two-way stream will be formed between the project and investors through stream payment.
a)During the period of the fund-raising project, the project and the investors will own XYZ Balance(XYZ: project sell token) and DAI Balance(DAI: investors invest token) respectively. Before the fund-raising project starts, the project’s DAI Balance is 0 and XYZ Balance equals its sales quantity. The investor’s XYZ Balance is 0 and DAI Balance equals the amount of his investment.
b)After the start of the fund-raising project, the project’s XYZ Balance will decrease and the DAI Balance will increase every second. The investor’s XYZ balance will increase and the DAI balance will decrease every second.
2. Project can withdraw DAI at any time that did not exceed the DAI balance.
3. Investors can withdraw XYZ at any time that did not exceed the XYZ balance, and can exit financing at any time, it will obtain DAI Balance and XYZ Balance after exiting.
4. In order to prevent fraud, voting manipulation and other behaviors of the project, Sundial has introduced Kleros Court. When the project is being created, it needs to upload an application for fund raising, which should specify the project commitment or project milestone. If the project violates the commitment, investors can submit arbitration to Kleros Court. If the investor wins the lawsuit, the whole financing project will end. In addition to the return of DAI Balance and XYZ Balance at this time, the DAI Balance of the Project will also be distributed to the investor according to the proportion.
Note: XYZ/DAI Balance: the number of XYZ/DAI owned by the project or investors at a certain time
What problems were solved by Sundial?
1. The commitment of the project cannot be supervised
Past: The commitment of the project could not be supervised, which led to the random promise of the project in the early stage of financing. After the success of financing, most of the commitments were lost.
Now: By introducing Kleros Court to achieve the supervision of the project, if the project does not fulfill its commitment, it will be punished.
2. Risk Controlling
Past: In Sundial, if investors want a refund, they need to launch a vote, and the whole project will be refunded after passing the vote.
Now: Sundial provides a personal refund channel. Investors can decide whether to exit from the project according to personal reasons and project conditions. After exit, they can get DAI Balance and XYZ Balance at that time. At the beginning of the project, the risk of the project is greater, and the cost that investors exit is smaller. As time goes on, the risk of the project gradually decreases, and the cost that investors need to pay becomes larger.
3. Game-theoretic Security
a) Past: when the secondary market price of the project token is higher than the primary market price, even if the project violates its promise and abuses its funds, the investor will not choose to refund.
Now: It is a market behavior that investors will not choose to refund. The key point is that the project violates its commitment and abuses the funds. Through the supervision of Kleros Court, if the project violates the regulations, the fund-raising project will be directly ended.
b)Past: when the secondary market price of the project token is lower than the primary market price, even if the project abides by its promise, investors will choose to refund.
Now: This will be a signal that investors can judge whether to exit from the investment. This is a personal behavior, not a refund for the whole project. Investors will be able to control risks through refunds, and the project can also develop through the amount already obtained. When the secondary market price become greater than the primary market price again, investors will continue to participate in the project investment.
c)Past: when the secondary market price of the project token was higher than the primary market price, some projects who attached importance to short-term benefits and wanted investors to refund, because the value of DAI tokens in the raised funds was lower than that of XYZ tokens.
Now: The unsold token of the project needs to go through a lock-up period, which will not be returned to the project until the lock-up period is completed. The lock-up period will be set by the project itself. We recommend at least another six more months.
Helping Long Tail Token and start-up project financing will be what Sundial will do. This is also one of the most important things for the development of the cryptocurrency market in the future, because it will bring new vitality, open up new racetracks, and be the future.