One of the most anticipated ICO, Status, raised just over $99 million in hours for an ethereum based WeChat like dapp that allows you to send peer to peer encrypted messages, send eth, turn your phone into a light node that connects to other dapps and even send smart contracts.
The sale was planned to last until 4th of July, but the cap of 300,000 eth was quickly reached during a frenzy period which broke down ethereum’s network, creating much congestion, backlog and some shenanigans.
F2Pool, which controls around 24% of ethereum’s network hardware and is literally just a pool with no hardware of its own as it belongs to dispersed small miners, was allegedly prioritizing their own transactions sent to the ICO.
It’s not clear whether that was a bought service, or whether perhaps F2Pool operators invested themselves in the ICO, but this somewhat underhanded behavior shows just how challenging it is to create a fair ICO sale.
Towards that end, the status ICO was another experiment. To ensure big pocket investors do not send $20 million in one go paying a fee of $10,000 like it happened with the BAT ICO, and to give the little guy a chance of getting in, status designed what can be called a curve ICO.
The sale occurred in stages, with each stage, or curve, having a limit on the number of eth that the ICO can receive, with the funds above the limit returned. These limits are now known, but they were not known during the sale, as Status’ blog explains in more detail.
This curve method may be what caused the increased level of congestion, but the ICO had a number of other experimental features. The gas (transaction fee) was limited to 50 gwei to prevent front running, so plenty of transactions may have been returned due to a higher gas level.
They also used whitelists, giving priority to a number of what can be called ICO pools by allowing them to pay a higher transaction fee. The stated reason was to ensure the highest level of decentralized participants.
That’s a difficult problem as ensuring the highest level of inclusivity does not have an easy answer because it is fairly easy to fake most measures. For example, limiting the sum by address can be easily circumvented by a big pocket investor through creating many small addresses.
Part of Status’ solution has been to partner with these ICO pools which AML/KYC investors ensuring they can not just fake addresses. These pools then bundled together investment by around 2,000 individuals in one transaction.
Much of this is new, so much of it caused controversy, something that has become a bit of a ritual now following major ICOs. Those that were unable to get through focused their complaint on the whitelisting, while others raised concerns about the ability of ethereum’s network to handle ICO traffic surges.
The complaints are not fully without merit, but nor are they without exaggeration as it appears some 15,000 addresses took part, making it one of the most decentralized ICO.
However, there is much that requires improvement. The curve method, while solving one problem, may create another – a higher level of congestion. Likewise for the gas limit, which F2Pool has allegedly circumvented in any event.
The whitelisting, although laudable in aim, amounts to admitting failure and in effect giving up, especially if the partnership came at a price for the pools.
It may well be the case eventually we conclude traditional identity is the best way, but that would be far too premature at this stage. There are many other methods proposed and being considered, including perhaps a completely uncapped sale, which we need to try first.
Finally, the regulators are most probably closely looking at this space, as are many others who observe and work on it daily. It would be too premature for them to be involved in a bringing the law down manner, but there is a difficult and complex debate going in, so contribution and insight by anyone, suggesting how some of these problems could be addressed, would be welcomed.
Because despite the criticisms of Status ICO, including the significant sum raised for a simple dapp, it does in many ways show they tried new methods to address the problems.
Some of it may have failed while some of it may have worked, with analysis and perhaps insights to follow as the experimentation continues.