WorkLock: an Alternative to ICO/IEO

It is hard to argue the fact that ICO, as the method of token distribution, has already run its course. The Initial Exchange Offering, which seems to have become the new talk of the town, also displays some flaws, for instance, the exceedingly fast realization of tokens, which sometimes takes less than a minute, which literally deprives the ‘average Joe’ investor of a chance to buy the tokens at his own speed.

In any case, the need for an alternative solution seems imperative, and NuCypher, a blockchain project for designing infrastructure for privacy-oriented dApps, might just have arrived at one.

The gist of WorkLock   

NuCypher published a proposal in their corporate blog describing a new concept for token sale and their further use, which they called WorkLock. The essence of the proposed distribution model is quite simple:

• The participant in the token sale sends Ether to the predesignated escrow account (smart contract) where the funds get frozen for a certain period of time;
• In return for the spent ETH, the investor receives some tokens to their digital wallets, which he can use at his own discretion;
• And here is what is interesting about WorkLock: should the partaker choose to utilize the received coins for their intended purpose, which could include purchasing services or operating nodes, the Ether, which he had placed in the escrow, will have been returned to his digital wallet right after a determined scope of work has been completed. It should be noted that the network member is also subject to other financial inducements, such as block rewards or compensation in the form of transaction fees.
• The timeframe within which the funds get released from escrow depends on the number of stacked tokens as well as on the volume of work completed for the benefit of the network. 
• In case the participant refrains from performing work that is beneficial for the project’s ecosystem and, instead, opts for selling the token on a crypto exchange or transfer the funds to another user, the escrowed funds become non-recoverable.

The theoretical advantages of WorkLock

It is inherent to human mentality to be more committed to the success of a project when having a material stake in the given venture. NuCypher didn’t have to re-invent the wheel in that regard. However, they did present an interesting solution that might help mitigate the risk for the blockchain projects of being forced into submission by the regulatory authorities.

Basically, the introduction of ETH escrow creates plausible deniability that the actual investment of funds had taken place. Therefore, it should be much harder for law enforcement agencies like SEC to categorize the token sale carried out under the WorkLock scheme as an unregistered securities offering.  

But, obviously, NuCypher is not inventing the way to bypass the law, their intentions are purely benevolent: to provide for better regulatory compliance and incentivize the users to take an active part in the development of a blockchain project instead of just acquiring tokens for speculative purposes.

The NuCypher team placed a particular emphasis on the fact that WorkLock is still a theory in progress that might require alterations and improvements. But it is definitely a step in the right direction towards resolving the issue of misapplication of tokens which hampers the blockchain industry. 

Author: Alex Paulson for Crypto-Rating.com