ICO – The Blockchain’s friend and foe

I still believe in many cryptocurrencies, the disruptive blockchain in general, and how they can positively influence our monetary system through openness and decentralization. I also believe in the untethered greed of humans; which is showing its ugly face very often these days in the crypto climate, in the long run potentially undermining the trust in, and usefulness of those very cryptos.

The problem lies in ICOs, Initial Coin Offerings, that are nowadays mostly funded through Ethereum (Ethereum itself got into existence through an ICO funded with BitCoin). So what’s an ICO? ‘An Initial Coin Offering (ICO) is used by (crypto) start-ups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks’ (investopedia.com). Not so bad, this complies with the openness and decentralization of the blockchain after all. In this unregulated way, people are not dependent on the banks or venture capitalists to fund projects, they can do it themselves. However, an unregulated market also leaves the door wide open for scams and market manipulation with no clear repercussions. Although Ethereum and Bitcoin already have applications; many of the Ethereum derivatives simply don’t, making ICOs even more of a gamble than cryptos inherently are.

This is seen in the fact that some ICO’s don’t even have functioning code, not even a Github page of their technologies. What they do have is a fancy website and some good ideas, and masses of small time investors who see a potential easy profit. So at the point of the ICO, some crypto’s are utterly worthless; meaning that a bank or venture capitalist would not invest, but we do. This doesn’t mean that every egg is a bad one. On 30 may, Mysterium, a decentralized VPN platform, raised 68,629 Ether (at that point more than 14 million dollars), in 45 minutes. Afterwards a long radio silence occurred, but now after more than a month they released a blogpost explaining their plans for the release of a working product. Somewhat hopeful, yet still there is no guarantee that the platform will come to be as the way described.

But ICOs can get very ugly as well. For example, yesterday was a true disaster with the ICO of CoinDash. Although nothing is certain yet, it smells extremely phishy. From the beginning of the ICO, the site was hacked, and another Ether wallet address was posted. Three minutes after the opening of the ICO, CoinDash proclaimed to be hacked and for people to stop transfering their Ether. By then, 43,438 Ether was already transferred, making the current value of the wallet over 8 million dollarsCoinDash claims the address belongs to a hacker, and will still send the duped investors the now worthless CoinDash tokens.

If CoinDash isn’t shamelessly scamming, they are terribly incompetent. Hours before the ICO some noted that the site was compromised.

‘Looks like the official web site is a phished one also

To everyone, check the certificate of www.coindash.io, you will easily see that the certificate is not conform and point to the CN ssl381493.cloudflaressl.com

Shame !!’  

People in the thread seem to completely disregard this statement and continue to proclaim their enthusiasm for the ICO.

Another internet hero warned people over two months ago of the high scam potential of CoinDash, of which I’ll give a short summary. It begins with Daniel Peled, who scammed people for over 800,000 dollar with the GetGems ICO, through the now shut down platform Koinify. GetGems turned out to be a simple clone (with some added functionality of being able to earn the worthless GetGems tokens) of the Telegram open source code. Daniel Peled proceeds to start PayKey partly with the 800,000 dollars of Koinify money. PayKey is basically a developed version of GetGems which is now patented to banks. Dario Mutabdzija, co-founder of Koinify ends up working for PayKey. As does Alon Muroch. Muroch was the head iOS developer at PayKey and also involved in GetGems, and now the CEO of CoinDash.

What many of these ICO scams show, is that people involved hop from project to project, as the previous ship starts to sink. Making a lot of money on the way.  But maybe Alon Muroch isn’t a scammer, maybe it’s just unlucky that he is associated with Daniel Peled and the GetGems scam. Maybe CoinDash truly was hacked. Yet if that is the case, what remains is gross incompetence. The site was compromised hours beforehand, yet it was only announced after the ICO. It is hard to believe that the CEO, and an experienced developer, would be so negligent of his own company and ICO.

So be warned. Many of these ICOs are not worth anything. After the initial profit is taken, development of the technology can just as easily be abandoned. Investors are then stuck with a worthless coin. You would be off just as well investing in UET, the Useless Ethereum Token. Atleast they are honest about where the money ends up.

 

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Author: Samuel Boyd

Hi, I’m Sam Boyd, a Dutch guy with an English name. Right now I’m in the first year of the research master Cognitive Science, part of the Artificial Intelligence Master at the VU and UvA. My background only partly connects to this master; my bachelor was in Psychology. Over the course of my bachelor, I found that I was mostly interested in how experimental psychological results are connected to the brain. This is why I specialized in Clinical Neuropsychology. Although I chose a different route for my masters, Clinical Neuropsychology still holds a dear place in my heart. After my Master here at the VU, I’m considering to do the Serious Gaming Master at the UvA. Take a look around to see the progress on a Serious Gaming project, me and two other students are working on!

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