DigixDAO, a blockchain project which tokenizes gold on the Ethereum platform with the DGD token, made headlines on the 29th of November when they addressed the community saying they would offer an option to its token holders to either completely liquidate the treasury or keep making grants unless the project sees some headway. Interestingly, right after the announcement, the price of the native token DGD has seen a significant bump. DGD was trading at around $10 mark on 29th and currently, it has reached $19.
The blog post was written by the firm’s CEO Kai Cheng Chng, who noted that the community from now on will be given the option to vote whether they want to keep DAO’s Ethereum treasury intact.
Digix conducted its ICO in 2016 and collected around 466,648 ETH in public sales which were worth the value of around $6 million to $7 million. Cheng mentioned that they had 386,000 ETH in their treasury but DGD token’s market cap is a mere $39 million while if we calculate the value of the ETH held in the treasury it comes to around $58 million.
Should All ICOs Offer a Token Buyback Option?
The decision by Digix has prompted a discussion in the decentralized space on whether more projects should offer a similar exit plan for unsatisfied investors. The discussion seems legit in the light of the fact that a significant majority of projects which raised 100s of millions of dollars have either turned out to be a Ponzi scheme or they are not able to make any headway in terms of development on the project.
Ryan Zurrer, an investor himself welcomed the idea and believed that more people should call out such projects who are sitting on millions of investors’ capital without doing much with it. Nic Carter from Castle Island Ventures agree with Zurrer and called the move from Digix quite mature.
Ricky Li from Autonomy, a token trading company, however, does not agree with Zurrer’s point of view and explained that most of the ICOs raise capital to develop their project and bring real-world value, so it’s highly unlikely they would be keen on buying back their token using the treasury holdings. He said,
“ICOs are not really keen on buying back the tokens with their treasury holdings since they raise money to develop, not speculate on the token price,”
Many others like Mona El-Isa, CEO of Avantgarde Finance were undecided whether it was a good move or not. El-Isa explained why the same parameter cannot be used for every project and said,
“It’s hard to generalize on whether this would be a good or bad thing for space as each situation has its own unique characteristics. Some of these tokens will become very interesting token-activist opportunities. It’s a little bit surprising that we haven’t seen much of that yet.”