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Dealing with Identity Is Still Crypto UBI’s Biggest Obstacle

The Lack of Transparency in Projects Raising Funds through ICOs

Reading Time: 2 minutes by on March 28, 2018 Altcoins, Bitcoin, Finance, News
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Due to the 2017 crypto boom, an even greater spotlight was shined on cryptocurrency with new investors flooding the market. Many startups also raised millions of dollars during and after their ICO campaigns. In general, digital assets and virtual currencies all experienced a bang due to the surge in the price of bitcoin in particular at the end of the year. But with the astronomical growth, it is alleged that most of these projects are not very transparent in their dealings.

Shady Business

According to ICO Rating, most of these coin offerings operate in a hazy manner and do not carry investors along. They have even gone ahead and deleted their white papers and taken their roadmaps offline entirely.

While investors empty their digital pockets to aid these up-and-coming firms, these projects, in turn, do not inform investors or the public on how funds raised and money got is spent.

In 2017, news broke out about the confido ICO scam that raised nearly $375,000 through Initial Coin Offerings and were nowhere to be found shortly after.

The cryptocurrency startup positioned themselves as a company developing “smart contracts” to act as an escrow between a buyer and seller during transactions. The ICO took place in November 2017 through a platform called TokenLot, which expedited the fundraising.

However, things went downhill when news broke out that the company had disappeared with the funds raised.

The company, who promised to bring new decentralized trustless payment solutions for online shopping, suddenly deleted their social media handles on Twitter and Facebook, as well as the company’s website.

ICO Rating Reports

Analysis carried out by ICO Rating, an agency that provides analysis of potential ICO investments for investors, investigated the top 50 successful ICOs and surprisingly discovered that many projects were not transparent with their reports on how investors’ money was being spent.

Further research explained that the top 50 ICOs from the first half of 2017 raised a total of $887 million, with the biggest one, Bancor, gathering $153 million.

These cryptocurrency projects, however, have not come out in the open to state their expenditure from funds raised, thereby putting investors and the public in the dark.

It was also noted, surprisingly, that crypto projects with no products (vaporware) tend to give investors better returns. Most times, token growth is manipulated or grown with faith in the project, rather than product development.

The Absence of Best Practices in the Crypto Space

According to ICO Rating CMO, John Slyusarev, the major problem post-campaign is the lack of honesty. With the reports given, this attitude poses a problem for the market in general, and steps are taken to bring a change.

Slyusarev also said that most white papers contain deadlines which are unrealistic, to attract investors, without focusing or considering the long-term success. Many ICOs have made many extravagant promises which they have been unable to fulfill; some of the projects are not even in existence as claimed by most cryptocurrency startups.

The CMO also advised investors to pay attention to the cryptocurrencies they have invested in and be able to detect a shady move when they see one. It is abnormal for crypto projects, for instance, to pull down their white paper without informing them and they should query a plan that cannot demonstrate an alpha version of their products.

Lastly, he urged crypto startups to be open and transparent and not fail to update their investors on the latest happenings. Honesty is always the best policy, especially when tokens are traded on exchanges.

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