ICOs: investment or scam

Analytical company Stat Group recently conducted a study that showed that about 80% of IСO, in 2017 were fraudulent.

70% of the projects were initially classified as high-qual

ity, in terms of attracted funds, but 80% of them turned out to be fraudulent. 4% of the ICO failed at all, and 3% “died” after the fees. The ICO that “did not reach the listing of the tokens on exchanges, as well as those that did not place the open source code of the project on GitHub 3 months after the start of the project” the study was deemed «dead».

According to the study, the total funding for the ICO in 2017 was $ 11.9 billion – $ 1.34 million (11%) of them fell on scam-projects

The great majority of funds were directed to three major projects: Pincoin ($ 660 million), Arisebank ($ 600 million) and Savedroid ($ 50 million). This attests to the fact that, although most of the ICOs turned out to be scams, they still received very little funding compared to the general crowdfunding by way of the ICO as a whole.

Also, researchers at Boston College concluded that more than half of the ICO projects die within 4 months, and only 44.2% of start-ups remain active 120 days after the sale of the tokens.

Journalists of the Wall Street Journal conducted their own research on the ICO market, and concluded that the number of fraudulent campaigns is significantly higher than previously reported in the press. According to the researchers, holders of cryptocurrencies lost more than $ 1 billion.

Of the 1,450 studied tokens, were detected 271 cases of fraud – for example, the used in the description of ICO documents were copied literally from other projects, the list of team members included non-existent people, among the promises being published, were the theses falling under the description of the Ponzi scheme.

Researchers recommend paying special attention to the analysis of “white paper” in which teams of blockchain-startups describe their projects. Often, scammers fully or partially copy such documents up to the names of team members and descriptions of the mission of the project. In addition, they can copy marketing plans, descriptions of security features and even descriptions of the development progress.

Despite the numerous guidelines how to distinguish a good ICO from fraud, many cryptocurrency holders do not conduct analysis of projects in which they invest.  At the moment only $ 273 million became the cause of lawsuits – many investors still prefer not to notice signs of deception.

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