The problems with ICOs and how to fix them

Liquid
Liquid
May 17, 2018 · 6 min read

An initial coin offering (ICO) is when a blockchain project sells some of their token to early investors in order to raise capital for the development of that project. Early investors are usually offered bonus incentives, in one form or another. ICOs are popular with investors as they can be very profitable, but historically there have been a number of significant issues with ICOs. It’s with this scene in mind that we at QUOINE launched ICO Mission Control, an end-to-end solution that makes it east and safe for investors to take part in ICOs and stress-free for token issuers to hold them. Our aim is to clean up the ICO space and eliminate the pain points and bad practice that have become the norm.

A study conducted by Statis Group in New York found that 81% of ICOs are scams, and only 8% of ICOs progress to trade on the market (another area we cover as ICOs we host get listed on our exchange). Furthermore, an additional 6% of ICOs were found to have failed, which means they raised money but not as much as required. In these cases the investors were refunded. You start to see why ICO Mission Control is so important. ICOs on our platform are all thoroughly vetted to ensure they are legitimate projects with a vision for real-world use case, meaning ICO investors on our platform will not have to endure another ICO nightmare.

Cryptocurrency can be hazardous, especially to newcomers. There is a lot to learn, and even if you are cautious, sometimes things can go wrong that are out of your control. It’s important to make wise decisions. At QUOINE, your security is our priority, and we work to ensure your funds are safe.

This blog outlines some of the most nefarious ICO events that have occurred over the years to show why now more than ever there’s a need to clean the space up. Many investors have had to learn the hard way, but it’s not good enough as a sector that we’ve become so indifferent to all the negativity.

Here are some of the issues ICOs have had in the past, and how ICO Mission Control will make a difference.

Funds being stolen is perhaps the largest issue with ICOs. Well marketed ICOs usually draw in many investors. These examples show you just how careful you have to be when choosing which ICOs to invest in.

An ICO in Vietnam raised over $660 million before the team disappeared, the largest ICO exit scam in history. This particular ICO was promising large returns on investments that would increase if you referred people. There were more than 30,000 investors. Once the news spread that the team had gone, protestors flocked to the listed office. However, it was discovered that his office was a front and was never owned by the team.

This kind of ICO would never make it past our vetting process at QUOINE because we do a full review of the team behind any project looking to host an ICO with us.

The Denaro ICO was supposed to raise money to create a new payment ecosystem that would connect cryptocurrencies to the mainstream market. The idea was for individuals to be able to spend crypto much more easily. The team behind this project vanished one week before the end of the ICO. Soon after it was discovered some of their team photos were stolen. With the absence of the team the distributed tokens were worthless. The team raised a total of $8.7 million before disappearing.

LoopX claimed to have created a unique algorithm that would change cryptocurrency trading for the better, in the form of an app. The team behind this raised $4.5 million through an ICO before deleting all of the associate social media platforms and disappearing.

The Confido ICO raised almost $375,000 to create a product combining smart contracts and shipment tracking. The idea pitched was the product would store payment in escrow, only paying the seller when the buyer received their package. This was viewed as a good idea, hence the team’s ability to raise capital. The team raised the money and then disappeared, deleting all their social media accounts. A letter from a lawyer was later posted on the Confido website stating that the team had decided to pull the project as it was no longer viable. A second letter outlined a plan to buy back the ICO tokens at a fixed price.

Another dubious ICO was Prodeum. This didn’t raise a huge amount of money — only $11 — but they did attempt to raise $6.5 million before disappearing. This project was planning to combine price look up processes with blockchain technology. The founders said the project would drastically improve fruit and vegetable tracking. The team vanished, leaving behind a website containing one word: “penis”. As Wired pointed out, this was a clear sign that crypto scammers have become so brazen that they have no qualms about trolling the community.

ICO exit scams have become all too common and many people have lost money as a result. Any ICO hosted on QUOINE’s platform will have been through a rigorous assessment process to ensure that our users will not be investing in projects of this nature.

The Centra ICO was promoted by two massive celebrities — DJ Khaled and Floyd Mayweather Jr. This ICO was raising funds for a project that was supposed to aim to provide a number of financial services. The company was promoting partnerships with Mastercard and Visa. This all came to an end when the US Securities and Exchange Commission labelled the project as fraudulent and arrested one of the co-founders. This project raised more than $32 million.

Once again, projects that will be hosted on ICO Mission Control will be thoroughly checked to ensure they are legitimate with genuine partnerships.

One of the most annoying parts of ICOs is having to provide so much data to so many companies you don’t really know. This can also be a major security risk, as was proven by the DADI ICO. In January the developers of the DADI ICO announced that part of the mailing list had been compromised due to an issue with a third party server. Users who signed up to this list then received malicious phishing emails, which could have potentially resulted in the loss of funds.

Data leaks and phishing attempts have become a constant threat during ICOs. Investing in ICOs through QUOINE ensures your data is safe. Furthermore, you only have to provide your data once before you are KYC approved, and are able to participate in multiple secure ICOs directly on our platform without the need to send funds to token sale addresses.

Savedroid is based out of Germany. The company conducted an ICO that raised over $50 million, before pulling a marketing stunt by pretending to exit scam. This did not sit well with the crypto community, as can be seen from the feedback on the announcement video that the team had not vanished. The point of the stunt was to bring to the attention of investors how easy it is for a company to exist, raise a lot of money through an ICO and disappear. However, this has brought a lot of negative attention to the team and it will be interesting to see the effect on the perception of the project in the future.

We aim to keep our customers safe and we will only work with projects that we believe will do likewise.

Find out more about QUOINE’s ICO platform.

Liquid

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Liquid

Liquid is a next generation cryptocurrency trading platform that aims to be the leading provider of liquidity to the crypto economy