What is known about past ICOs and how to regulate the following ICOs

The British audit and consulting firm EY (formerly Ernst & Young) uploaded the ICO study, analyzing a total of 372 projects.
Analysis of investments from the 1st quarter of 2015 to November 2017 leads to a total amount of attracted investments of $ 3. 78 billion, double the size of venture investments in blockchain projects. In addition, another $ 400 million was accumulated by companies registered in China, which were supposed to return funds to traders after the September ban on ICOs. And if in two years (from July 2015 to March 2017), investments extended up to $ 190 million, then already in early April 2017 there was a strong jump, ICO investments increased from $ 290 million up to $ 1. 05 billion in 3 months, and by November 2017 increased by 4 times.
However, since the end of the previous year, the size of the ICO market has been decreasing and fewer plans are achieving announced goals: in early June 2017 – 93%, in early November – 23%. With all this, the bulk of ICOs were conducted in the United States ($ 1.031 billion), China ($ 452 million, including Hong Kong) and Russia ($ 310 million). In terms of regulating and promoting the blockchain industry, other countries are leading. The study shows that from 2008 to 2015, regulators did not pay attention to the crypto industry in any way. The first to support ICOs in 2016 were Singapore, Switzerland and the Isle of Man. In the first half of 2017, the Russian Federation also had the status of a cryptosphere-friendly state. Of the listed countries, Isle of Man alone has not changed its point of view and continues to constructively promote the industry.
The regulators of China, Japan, Malaysia and Russia became the first to discuss the crypto industry and warn about risks. With all this, in early January 2017, Japan was the first to coordinate the crypto area in accordance with applicable laws, since June the United States and Canada joined this scheme, and since September, Singapore joined the regulation in accordance with the laws of the state and in accordance with the nature of crypto projects. Hong Kong, Australia, Estonia, New Zealand and Lithuania.
The most effective blockchain projects are being implemented in the field of building blockchain infrastructure, followed by revenues in third place with social networks, media content and propaganda, and the gaming and virtual reality industry has become the fourth leader.
The bulk of ICO projects use the existing blockchain platforms, and according to the ICO Watch List for December 2017, the most famous was the Ethereum blockchain, which runs 77% of the examined ICOs. 13% of the projects built their platforms, another 4% used Waves.
Risks discovered in connection with the ICO relate to smart contracts, which prescribe a list of opportunities and conditions for using the token and have every chance of having secret conditions or errors in the program code; A non-credible token assessment based on the “fear of missing out” (FOMO) syndrome, rather than an analysis of the development of the project and the nature of the token; and more and more frequent hacker attacks.
Regarding the latter, the study revealed that more than 10% of the investments accumulated during the ICO process were lost as a result of fraud. The founders of the project focus on attracting investors, but not on security, so the largest ICOs are the first to attack: crackers are attracted by volume, rush, lack of centralized management, irreversibility of transactions and information chaos. The most frequent example of an attack by 2017 was phishing, followed by DDoS attacks, hacking a website or application, cyber attacks through company employees, IT infrastructure or investors, as well as hacking exchanges and wallets.
Dangers for traders can be associated with the nature of the project, even if it is not a scam. In many projects, there are no factors for the use of blockchain and cryptocurrencies, for this reason many do not move from the stage of design to implementation, or implementation suffers a collapse. Projects that nevertheless present a conceived project often begin to perceive a fiat currency, reducing the credibility of their token.
White paper, the bulk of the projects are filled with cliches that attract inexperienced investors, but do not say anything about the essence of the project. The most common ones are the “new generation platform”, “the first project releasing a multi-billion dollar market”, “a decentralized market that hands inspection to users”, “we create a community / ecosystem / economy”, “no corrupt central authority”, “ the most underrated token. ”
The PlexCorps ICO, whose assets were ordered by the SEC in connection with the violation of the securities law, used the following wording: “The next-generation decentralized world cryptocurrency, which will expand the possibilities of application and increase the number of users, making it as easy as possible.”


Turning to the task of evaluating tokens, experts believe that today it resembles the importance of gold or fashion collections, when a narrow supply stimulates high demand. In many cases, the fame of fresh cryptocurrency is combined with hype, White paper quality and token sale technology – with a fixed token value and emission, or unfixed when the token value and emission are set after the ICO is terminated. With all this, the second option scares away traders due to the uncertainty of the total amount of financing.

The token evaluation system, which has become a tradition, indicated in the analysis, is based on indicators that are not easy to establish at the development stage: the number of tokens (T) and their turnover at a certain moment (V) relative to the price (P) and the size of services (Q) on the platform for the same period: TV = PQ. In addition, the nature of the token is ambiguous and difficult to evaluate: traders expect an increase in the value of the cryptocurrency and the number of buyers while lowering the price of the services that it pays for.

Finally, the authors propose a set of laws for each of the parties involved, which, with coordinated “allied” efforts, will turn the blockchain into a fruitful mechanism for collecting investments for good projects.

So, the founders should give clear evidence for the use of blockchain and their own token, work out an ICO process similar to IPO in order to balance the cost of the token, make sure that investors’ funds and personal data are safe during and after the ICO, use a transparent legal structure, while making sure that legal legitimate measures are observed, not only in the state where the project is registered, but also in the entire territory where it is planned to operate and use the token.

Investors should initially verify the transparency of the public blockchain by analyzing the code of the smart contract and platform that are required to be publicly available, and add up “smart money” without succumbing to “fear of losing profit”.

From regulators, it is necessary to correlate crypto-terminology with current terms and only in rare situations introduce new concepts, standardize the smallest reporting requirements, protect the rights of token holders while they are used to pay for platform services, regulate token turnover, including changes in emissions and functionality, and to cooperate with regulators of other jurisdictions, for example, jurisdictions, the management sphere of which is related to the majority of ICOs and to which many investors and crypto exchanges belong.


Обязательно подпишитесь на наш Telegram канал