Dfinity completed its seed ICO yesterday with a total amount raised at 3.9 million CHF. The project had a soft-cap for the ICO at 1 million CHF and an additional 24 hours from this time before close. This soft cap idea is a new one in crypto ICOs. At the end of the ICO, i.e. 24 hours after the soft cap was reached, the ICO closed with around 3.9 million CHF total raised. The soft cap of 1 million CHF was hit in only 75 minutes from the start of the Dfinity ICO.
An Interesting Way to ‘Cap’ the ICO
Dfinity tried an interesting way to cap the ICO. Instead of a hard cap, i.e. the ICO closes the moment the Ethereum contract receives the maximum amount of money defined in the contract, Dfinity opted for a ‘soft cap’. The soft cap was implemented as follows – the ICO closes 24 hours after the soft cap is reached. This has an advantage that investors don’t need to wake up at ungodly hours to meet a 15 minute ICO window, which happened with some hot tokens last year like the FirstBlood token. Such ‘insta-sale ICOs’ are bad for the project as they tend to concentrate the tokens in the hands of a few whales instead of distributing them widely to the community.
Of course, the flip side of this is that investors don’t really know the price of the token they are getting until the end of the ICO, which makes return calculations hard. For example, if investors place a risk-adjusted value of $2 million in this round, there is no way to know whether to invest or not, because the ICO might raise more or less than that amount. With a 24 hour window, it was at least mitigated though.
The team has promised up to 78% allocated to investors in this seed round, and a subsequent “main” round.
Blockchain Nervous System
Dfinity has created some interesting ideas, most notably the Blockchain Nervous System. This allows the token holders to vote and change important economic parameters. It also is a back-stop against bad behavior, or bad bugs, like preventing potential The DAO type situations. If the majority decide, they can pretty much do anything, although proposals come at a cost. This has a very different dynamic to the ‘code is law’ principle followed by Bitcoin and Ethereum Classic. It is a softer version of that.
Although Dfinity claims not to compete with Ethereum, it offers a Turing complete language to write smart contracts and applications in. The technology developed with mutually benefit Ethereum and Dfinity, but there is also definitely a competitive element. Dfinity will provide value to the token holders by bringing in projects and apps being built on it, which would otherwise have been built on Ethereum, likely. Dfinity also believes that some of the technology being developed by the team will help Ethereum. Collaboration among crypto projects is always welcome as it moves the whole ecosystem forward.
April 2021 Update
Dfinity has made tremendous progress since we first wrote about the fundraise above. VCs like A16Z have been all over leading several rounds of funding for the company and foundation. A lot has changed in the crypto landscape in the last 4 years, and the rise of Ethereum and the ecosystem around it has been a gamechanger for a lot of potential applications of blockchains.
Dfinity still wants to differentiate itself from the Ethereum ecosystem. It has moved its marketing messaging from “Blockchain Nervous System” to “The Internet Computer”. Although several apps seem to be being built on it behind the scenes, we don’t know too many details. The Dfinity team has now promised to launch the network on 7 May 2021. See the official tweet below:
One question we get asked a lot from early supporters of Dfinity is how the ICO/pre-sale investors will be treated.
Here’s the answer from the team:
This was posted by Dominic Williams in April 2018. The “ICO” investors (ICO in scare quotes because after the bad practices of many ICO projects in 2017, no respectable project wants to use that phrase) are the “Seed fundraise contributors” who would get 24.72% of the Dfinity network. Given the private valuation of Dfinity is already in the billions of dollars, the seed investors should see a healthy return on their early bet on the team and project, even in BTC or ETH terms (hopefully).
Back of the envelope calculation is as follows:
~$4 million raised for ~25% of the network, which means seed investors got in at a valuation of ~$16 million.
Assuming a fully diluted valuation (FDV) of $1 billion, that is a return of 62.5x in USD terms.
The price of BTC on Feb 12 2017 when the ICO/presale took place was just around $1000. This means that in Bitcoin terms, you would break even around an FDV of $16 million * 55,000 / 1000 = $880 million (current BTC price of $55,000).
The price of ETH on Feb 12 2017 when the ICO/presale took place was ~$11.40. This means that in Ether terms, you would break even around an FDV of $16 million * 2635 / 11.40 = $3.69 billion (current ETH price of $2635).
We always calculate returns in BTC/ETH terms since that’s what crypto investors index to. So if you put in Ether into the Dfinity presale, then at around $4 billion fully diluted valuation, you should break even.
If you want to trade Dfinity at launch, make sure you have your Coinbase and Binance accounts ready. Given the scale of launch, it is likely that the largest exchanges will start listing Dfinity right away.