CoinTor

Lack of Security Costs Initial Coin Offerings $400 mill in 2017

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Initial coin offerings have grown in popularity throughout 2017. Hundreds of projects have come to market during that year alone. Additionally, we see dozens of new projects pop up every single month. Unfortunately, this also attracts the attention of criminals from around the world. Nearly 10% of all ICO funds raised during 2015 and 2017 has been stolen. This is a very worrisome trend, yet it seems there is no sign of any improvements.

No one will deny initial coin offerings are a very popular trend right now. This business model allows companies and teams to raise millions of dollars. There’s no need to deal with accredited investors, as anyone who owns cryptocurrency can partake. Given the value appreciation of such currencies, it’s only normals criminals would show an interest in this business model as well. The statistics projected by Ernst and Young don’t paint a happy picture whatsoever.

Criminals Target Initial Coin Offerings

More specifically, they project close to 10% of ICO funds have been stolen so far. We are talking about nearly $400m worth of funds in this case. These funds have either been stolen or lost due to hacks. For a $3.7 billion industry, 10% if an unacceptable number.  There is usually no recourse when a hack occurs either. More specifically, if funds are stolen, they are hardly ever returned to the original owners. Most initial coin offerings focus on attracting investors rather than taking security precautions to keep the funds safe.

It is evident the initial coin offering business model has its benefits. It is an easier way to sell services or raise money. Companies can also issue their own native tokens. As a way to tie customers to one’s brand, that can prove to be invaluable in the long run. The SEC has kept close tabs on these developments, though. More specifically, they are concerned about the issuance of unregulated securities. A few of these initial coin offerings have faced additional scrutiny because of their tokens.

It will be interesting to see what the future holds for initial coin offerings. If projects keep losing a lot of funds due to lackluster security precautions, this situation will keep getting worse. Criminals will continue to attack this industry in every possible way.  Projects need to focus on security first and foremost. There’s no point in raising money if you will lose 10% of it or more in the near future. Always do your own research before committing money to an unknown project.