ICO’s Greatest Failures

An Initial Coin Offering (ICO) is heavily used by startups to avoid the excessively regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for tender or cryptocurrencies, mainly Bitcoin. This system has been widely used by new businesses all over the world, and its results may somehow be disappointing.

Main Reasons for ICO Failures

ICO, just as any other initial offering, possesses a variety of risks. However, as statistics show, ICOs are failing much faster than most other traditional businesses, or even highly innovative start-ups in other sectors.

As we will see from the cases below, one may conclude a few fair reasons for ICO failures:

  • Bad business ideas: obviously, it is not always the businesses’ fault in such a high failure rate, but rather an investor’s who does not examine projects accurately, and invests in admittedly bad ideas;
  • Technological discrepancies: these include scalability and security issues leading to hacking attacks and consequent money loss;
  • Regional imbalances: when looking at statistics, it becomes clear that projects executed in the developing countries generally have lower success rate than in the developed nations.

Biggest Failures

In 2017, ICO was offering the highest investment returns in the modern history. Sadly, a greater majority of these, to be more precise over 50{4d4efb78fa10855d5d140e2af5673824d1af287d54ee009b0f124d5154c3ffa9}, were not successful with investors receiving no returns. Some of the failures were drastic, large, and, in the majority of cases, illegal. Here are the most scandalous and impressive ICO’s failures of the previous year.

OneCoin. OneCoin was a Ponzi scheme known as a real cryptocoin with its own blockchain. It was founded by Ruja Ignatova with the only objective of stealing from investors on a large scale quickly. The OneCoin ICO raised over $350 million from its investors and these have never got their money back.

Coindash. Coindash suffered from the massive hack which led to the loss of $10 million worth of investment funds. The main prerequisite for the ICO failure was poor website security, which allowed the hackers to use the fraudulent address and send the money there. This situation obviously led to the ICO suspension and the arising question of the cryptocurrency security as such.

Enigma. Enigma is also among the ones damaged by the hackers’ attack. The issue here was with the irresponsible mistake of Enigma CEO, Guy Zizkind. Initially, the company started their ICO as a secure cryptographic coin with advanced encryption method. However, due to a human factor, and lack of proper attention to the security issues, CEO did not set up a two-factor verification for the accounts leading to a subsequent hack. More than $500,000 worth of Ethereum were stolen by hackers as a result.

Being aware of the above risks and possibilities, it would be easier for investors to make right decisions and not to let their investments fail. In order to hold one’s ICO investment, it is necessary to assess the project’s long-term strategy, as well as the product’s usability.