Vitalik Buterin, the co-founder of Ethereum, has spoken out against the initial coin offering (ICO) of the Raiden Network and vowed to use his advisor shares in other ICOs only to fund open-source infrastructures and non-profit projects.
“I’m announcing that 100 percent of my OmiseGo + Kyber Network advisor shares will be either donated to charity (AMF, GiveD, SENS etc) or used to privately fund Ethereum second-layer infrastructure (state channels, multisig wallets etc), or some combination of the two. [Rules for funding Ethereum infrastructures are projects] must be 100 percent open source, no baked-in profit scheme (incl ICO token), must be good,” said Buterin.
Buterin’s statement on privately funding Ethereum second-layer infrastructures and scaling projects with his personal funds earned from his work for major blockchain projects such as OmiseGo and Kyber Network as an advisor was released almost immediately after the development team behind the Raiden Network announced its plans to run an ICO campaign.
The Raiden Network is a public Ethereum scaling project which provides payment channels to process micropayments or transactions with substantially lower fees. The development team of Raiden is planning to create ICO tokens that are compatible with the Ethereum network that will be used to incentivize network operators to run or oversee payment channels.
The Raiden development team promised a small-scale and “boring” ICO campaign, sharing the team’s intention to pursue minimal marketing and raise sufficient funds to sustain the project. But, the ICO announcement of Raiden was not welcomed by the Ethereum community and key figures including Buterin.
Specifically, Buterin emphasized that he has created the private fund to support open-source infrastructure projects that are struggling to receive funds without running ICOs. “Open source infrastructure projects currently are struggling to get funding without the ICO+token route; hopefully this can help,” explained Buterin.
In response to a question asked by Udi Wertheimer on whether his statement was a reaction to the ICO campaign of the Raiden development team, Buterin wrote:
“Yes, also Nuco/Aion and hearing others thinking about it. And making it extremely clear that I was never advising ICOs to get myself more lambos.”
More to that, some of the largest online Ethereum communities including the Ethereum Subreddit also featured complaints from long-time Ethereum supporters and investors. The top Ethereum Subreddit (r/Ethereum) submission on September 23 read:
“Seriously, I don’t understand. When you have funding problems there is surely a better way. I can only speak for myself that I was very excited about your project being a candidate for a key component of the Ethereum infrastructure. I really do not understand why one needs a specific token. You are risking your integrity for a fast cash grab. Could you please specify why an ICO or a token is inevitable for Raiden? Why can’t you just use Ether?”
While several Ethereum users and analysts explained that the Raiden development team is not financed by the Ethereum Foundation and that it is a separate entity with the necessity to raise funds in order to sustain its project, others noted that projects in Bitcoin, for instance the Lightning Network, were able to introduce stable codebases and working prototypes without ICOs or other forms of investments.
So disappointed to see Raiden (i.e. Lightning on Ethereum) go for a cash grab. A token is not needed. 🤑
5+ LN teams on Bitcoin and no ICOs. https://t.co/A3XNoWnDGZ
— Charlie Lee (@SatoshiLite) September 22, 2017
Also, entities in Bitcoin such as Blockstream which have launched innovative technologies such as the satellites that transmit and process bitcoin transactions and were able to secure funding through venture capitals and angel investors.
Most of the Ethereum community seems to be concerned over the emergence of ICOs and projects that do not necessarily need crypto-tokens to maintain their networks, while some in the community see this new form of fundraising as part of embracing free markets.