80% of Last Year's ICOs Were Scams, Study Finds

Francisco Memoria
  • 13 Jul 2018
  • /
  • In #ICO
  • A study conducted by Satis Group found over 80% of ICOs last year were scams.
  • These managed to get 11% of the funds raised last year, while 70% of the money went to "higher quality projects."

A study recently conducted by Satis Group has found that in 2017 “over 80 percent” of ICOs were scams that cumulatively managed to get about 11 percent of the funds investors poured into the industry. This suggests that while a large number of token sales are scams, most of the money still goes to legitimate projects.

The 11 percent figure the 30-page document reveals is significant, but the number drops to 0.3 percent if we stop considering the three largest scams that raised funds last year. These were Pincoin, which raised $660 million, Arisebank, which raised $600 million, and Savedroid, which raised $50 million. Their total equals $1.31 billion.

The study identified scams as projects that didn’t initially plan on following their roadmap, or that were deemed by the community as scams. Aside from these, it found that four percent of ICOs failed to go through with their plans, and three percent ended up “dead.”

ICO death, according to Satis, means that the project has “not [been] listed on exchanges for trading and has not had a code contribution in Github on a rolling three-month basis from that point in time.”

Per Satis’ research “over 70% of ICO funding (by $ volume) to-date went to higher quality projects.” An analysis of the over 1,500 crypto assets in circulation showed that about half were launched on top of an existing blockchain. The most popular platform was Ethereum, launching 86 percent of tokens, with Waves following at 2.9 percent. NEO came third at 2.3 percent.

The group noted that Ethereum has a number of advantages over other similar platforms, including a first mover advantage, “the entire market share of the ICO discovery phase through 2017,” community support, and more liquidity. The document reads:

Emerging platforms have been able to differentiate themselves with higher levels of transaction throughput (transactions per second), which generally comes at the cost of higher levels of centralization.

Satis Group

Avoiding Regulatory Hurdles

Elsewhere in its study, Satis also found that the number of ICO projects based in countries known for their appealing regulations has significantly increased. While in 2017 most projects were US-based, this year the Cayman Islands dominate every other territory, being chosen by 40 percent of projects, up from 3 percent.

In the US, the number of fundraising projects dropped from about 32 to 10 percent. Countries like China and Russia lost their representation on the charts from 2017 to 2018, presumably because of their approaches to ICOs.

Near the end of the report Satis Group’s author Sherwin Dowlat hinted more are set to come in the future, as the organization delves into the “wide variety” of regulatory approaches states throughout the world are choosing.

South Korean Startup That Raised 29,000 ETH via ICO Is Shutting Down

Contents Protocol Team, a South Korean cryptocurrency startup that raised over 29,300 ether via an initial coin offering (ICO) and a private token sale in 2018, is shutting down and refunding its investors.

According to the startup’s website, Contents Protocol decided to shut down and refunds its investors over a continued lack of regulatory uncertainty, and over difficulties with its own goal of collecting data from local platforms like Watcha and Watcha Play. Watcha is a Korean movie rating and recommendations service, while Watcha Play is a streaming service similar to Netflix.

The startup was looking to reward the platforms and their users with its own native token, the CPT, for the data it collected, so it could then sell the data to content providers and create a better content production ecosystem. The idea didn’t seem to work as the platform didn’t see cryptocurrencies in a favorable light. The website reads:

There were numerous difficulties in encouraging participation from content consumers because of their negative perception toward cryptocurrency, price volatility and complex user experience. It was also a challenge to bring in content platforms who would provide data to Contents Protocol.

The firm added that since its capacity to collect data was limited, it was hard to give content producers insightful data that helped them improved the ecosystem. Legal and accounting risks associated with the uncertainty surrounding crypto taxes also contributed to the firm’s fallout.

Contents Protocol detailed it’s liquidating and distributing its remaining assets to investors based on the legal opinion and advisory from law firms in both Korea and Singapore. Its assets are to be converted to ether and then distributed to CPT token holders who requested an ETH compensation.

Its initial coin offering was held in December 2018, where it raised 29,337 ETH when the cryptocurrency was trading at about $115. It currently has 26,878 ETH in its reserves which will be distributed to CPT holders following a specific ratio:

asset distribution ratioSource: Contents Protocol

According to CryptoCompare data, ether is currently trading at $281 after rising over 72.8% in the last 30 days.

Featured image via Pixabay.