Bringing Teutsch and Buterin’s Vision of the ICO 2.0 From Whitepaper to Reality

The TV-TWO Project

We at TV-TWO are working on an open platform for a new television ecosystem, where reach on the Big Screen is tokenized. Users that connect their television to the Ethereum Blockchain by installing our Smart TV application can collect Tokens for Television (TTV) from advertisers. Content creators are rewarded with TTV for offering organic videos through the application.To fund the development of the platform beyond our prototype as well as to financially align believers in our mission with our project, we are looking to distribute 77% of all TTV in a crowdsale.

The Challenge

Established token sale models have well-documented drawbacks: In capped sales, a fixed price for one token as well as the minimum and maximum amount of tokens is set. Capped sales give large-scale investors an unfair advantage, as they are able to effectively exclude small investors from the sale by paying exuberant transaction fees. The transactions from the large-scale investors are processed first and by the time transactions from small investors get to the front of the line, the cap for the token might already be reached, as happened with the crowdsale of the Basic Attention Token. In uncapped sales, investors have to commit to buying tokens, before the ultimate valuation is determined. This makes it difficult to judge, whether the token price is fair or not.

The Solution

TV-TWO will turn its crowdsale into a game of perfect information with the help of the Interactive Coin Offering protocol. The Interactive Coin Offering was first proposed by Jason Teutsch and Vitalik Buterin. The idea: By letting contributors specify the desired purchase quantity at each valuation, they have the certainty of participation at a specific price. The protocol is detailed in their whitepaper.Teutsch and Buterin propose the following rules for the crowdsale:

• Participants in the crowdsale submit both a bid and a maximum sale valuation at which they are willing to participate
• If the sale amount reaches the maximum sale valuation, the participant’s bid is canceled
• If they so choose, participants have the possibility to withdraw their bid from the sale until a withdrawal lock period is reached
• A progressively decreasing discount is given at the start of the sale in order to motivate early participation

While the period prior to the withdrawal lock gives buyers the chance to calibrate their purchase amount, the period after the lock gives participants the chance to push the sale valuation to an equilibrium. Rob Bent provides an excellent article on the Interactive Coin Offering protocol, in which he walks the reader through an exemplified process.

The Implementation

TV-TWO is looking to be the first project to use the Interactive Coin Offering protocol for its crowdsale. TrueBit’s official repository for the Interactive Crowdsale Library can be found on GitHub. The code was developed and audited with the help of ConsenSys, Zeppelin, Modular and 50+ developers. TV-TWO will offer a portal for convenient interaction with the smart contract during the crowdsale. Let us dig a little deeper into the implementation of the library through its documentation:

The library utilizes a pointer throughout the sale that indicates which valuation is the cutoff point for being allowed in the sale. It only counts bids towards the total valuation that have personal valuation caps that are greater than the total valuation. At the beginning of the sale, the pointer is set at 0, indicating that no bids have been submitted. When the first legal bid (amount < personalCap) is submitted, its bid is counted towards the total valuation and its personal cap is inserted into the linked list. The cutoff pointer is still set to 0 to show that the user’s bids is still in the sale and above the cutoff.Every time a new bid is submitted, its personal cap is added to the sorted linked list if it is unique from all the other personal caps submitted. Then the contract adds its bid to a sum of all bids submitted with that specific personal cap. After that, it records the amount of ETH submitted in that bid and the token price at the time the bid was submitted. Then, if the personal cap is less than the current total valuation, the bid is still registered by the sale, but it is not counted towards the total valuation. If the personal cap is greater than the current total valuation, then the bid is added to the current valuation and the cutoff pointer is increased to show which bids have been “kicked out” of the sale. Bids that are overtaken by the pointer are subtracted from the total valuation. This is a process that happens throughout the entire sale.

Scenario: The two participants with lower personal caps than the total valuation of the sale are excluded

During the first stage of the sale, but not the second, participants are allowed to manually withdraw their bids if they decide they do not want to participate any more. During a manual withdrawal, if the bid’s personal cap is below the cutoff, they get a full refund. If the bid being removed is below the cutoff, it is removed without any effect on the cutoff pointer because it already had no effect on the total valuation. If their bid’s personal cap is above the pointer, the withdrawal penalty is applied. There is also the chance that the total valuation will decrease enough from the withdrawal to cause the cutoff to decrease. The pointer is moved to account for this. Because of the penalty, a removed bid will still have tokens purchased and ETH spent in the sale, but they have removed their bid and valuation, so their personal valuation and bid amount will not be counted towards the calculation of the cutoff pointer.During what is referred to as the AutoWithdrawal period (after the manual withdraw lock), no bids are removed automatically, because the bids that would have been removed already do not count toward the total sale valuation. The cutoff pointer still increases though, effectively cancelling bids that had personal valuations lower than any new total valuations. So now it is simply a time for bidders to submit more bids that have personal valuations that are above the current sale valuation without having to worry about manual withdrawals.After the sale is over, the bidders all have a chance to withdraw. If your bid’s personal valuation ended up being lower than the total sale valuation, then you get a complete ETH refund, but no tokens. If your bid’s personal valuation was right at the cutoff, then you are given a partial refund of ETH and tokens. If your bid’s personal valuation was above the cutoff, then you get your entire bid’s purchase in tokens.The valuations are stored in a sorted linked list. There is only one node in the linked list per personal valuation, so even if there are multiple bids at the same personal valuation, there will still be only one entry in the list. There is also a storage structure that maps addresses to their submitted valuation. If a bidder manually removes their bid, the penalty is a forfeit of their “bonus.”

The Addition

We propose the following addition inspired by Bancor to the Interactive Coin Offering protocol: Any ETH committed during the crowdsale beyond our target should be locked for two years in a smart contract. The smart contract functions as a market maker by automatically purchasing tokens, should the market price drop below the issue price in USD.While the original Interactive Coin Offering protocol already ensures that all participants contribute at a valuation that they consider justified, the valuation might still be higher than what the project team deems reasonable. Instead of giving more funds than needed to the team, the additional ETH is used to stabilize the market price of the TTV without putting TV-TWO in the position of a central bank, which would introduce uncertainty to market participants. This uncertainty is eliminated by implementing the rule-based monetary policy described above.

---

The TV-TWO ICO starts on February 24, 2018. For more information, join our Telegram and subscribe to the TV-TWO Newsletter. 
Feel free to have a look at the TV-TWO Whitepaper. 
More on our Website, Twitter (@tvtwocom), Facebook and Bitcointalk.