This is still a form of premine. You can convert all of you ICO funding to coins in any scenario while paying those funds to yourself. Since you can pay yourself numerous times, and recycle the funds to pay yourself again, there is no limit to the number of coins you can buy from yourself.

Even if you require all funds to be presented up front, that doesn't prevent you from taking out a loan which you can pay back fully because you buy the coins from yourself.

Even if you limit the supply of coins and force all offers to be tendered at once and randomly choose in a publicly verifiable process, you can still stack the bids to be sure you get the % of coins you want.

If you instead have a market driven price for the ICO and a fixed supply of coins, then you can bid on your own coins driving the price higher and generating more funds while obtaining some of the coins cheaper than others who have paid you to buy your coins cheaper.

The only way around this would be to verify the identify of every purchaser and make this information public (or audited by a trusted entity), which I doubt most purchasers would agree to.

The only solution I see for this dilemma is to identify each purchaser, but do it in a convenient and non-intrusive way. That is why I have been thinking to only sell up to say $500 to each user (no investors! so as to avoid creating an illegal unregistered investment security so you all don't all end up in jail in the future) and allowing these purchases only by credit card (or verified bank account funding via Paypal to avoid chargebacks) with an auditing process that insures each name on the card is unique. I suppose you are clever enough you can pay people to let you use their credit cards (or steal them), but this is a crime and probably easy to track down (especially during any SEC investigation), so it is very risky and one would assume legit developers won't risk crime (heck they are talented, and can earn a lot of money taking programming jobs outside of crypto).

The only other way is some mining distribution, but wastes resources that could be better used to fund development.

This a serious dilemma. I have thought about it a lot. Has anyone else devised a better solution?

My picture contains as low amount of transaction as possible, just to express the idea. You can imagine several more transactions of the honest network on top of the green tip, but many more red transactions above the second doublespend.

I agree that it would be nicer to do something else than an ico.
CFB, I see you did not come up with a better idea. In the recent past, if im not mistaken, you were looking at a way to distribution to unique user. Why not pay a third party to do this verification process?

No a better idea. It's impossible to prove that we don't buy our own coins, if we kept some coins as premine we still could buy extra coins, so we put ourselves into the most unprofitable position to lessen advantage of our position to the max degree.

We know that mining can't be used here because CfB has stated that it undermines the security model.

If the idea is bootstrapping the distribution and not raising money, then spin off from an existing coin, preferably a widely used one. Multiple coins are even okay but make sure the weighting bears some sane relationship with fair market value (does not have to be exact).

If the idea is raising money while unambiguously complying with all the (perhaps mutually contradictory) laws in the world while at the same time using a structure that is achieves a widespread distribution in practice, and is verifiably resistant to cheating, well good luck. I don't know how to do that either.

The second doublespending won't be referenced because the longest tip already contains the legit transaction.

The attacker doesn't publish it untill he has enough transactions referencing the second doublespending transaction.

Then why the merchant would accept it?

But the cumulative weight of that tx is not so big, so why the merchant should accept it?