Although not all cryptocurrencies and tokens are made for ages, research shows that projects in this industry are being closed, thrown in and become havens of scammers much more often than one might think. This writes CCN.
According to data collected by Coinopsy and Dead Coins – two sites that track information about digital currencies – there are no signs of development or even a hint of future activity in the protocols of approximately 1,000 cryptocurrency projects, although all these projects have attracted several billion dollars in total.
Although financial regulators constantly check the issuers of tokens for legitimacy, amateur investors tend to forget to conduct even a basic examination and invest millions of dollars in coins, only the names of which are enough to hastily press the alarm button – for example CryptoMeth or OreoCoin.
The reasons for the closure of crypto projects range from common ones, such as fraud, closure of sites and abandoned code, to exotic, like the death of project developers, faulty wallets and situations where token makers use the pump-and-dump market manipulation scheme.
“Clearly, the ICO market has experienced an excess of HYIP and fraud. According to my observations, 80% of them were fraud, and 10% lacked content, because of what they went to the bottom immediately after receiving funding. Most of the remaining 10%, perhaps, will also fail,” Bloomberg journalist Aaron Brown, writing about business markets, shared his opinion.
According to the Satis Group study, in 2017 fraudulent ICOs collected more than $1 billion, of which 271 of them could boast of plagiarism in white paper, employees posing as other people, and other dubious activities.
An additional study showed that only 8% of tokens after ICO were able to get to crypto-exchanges with a good reputation.
Although the startup industry is characterized by a high percentage of failures, the blockсhain start-ups show a failure rate of investment even higher than the market average. As the CB Insights report, published in October 2017 showed, only 28% of the blockchain-start-ups reach the second round of investment, whereas in the traditional business this figure is 46%.
“I do not think that there is already a project on the market that will beat the competitors to the nines,” said CB Insights analyst Arieh Levi. “Success has apparently been taken by quite a few projects, but there are not so many users of blockchain protocols, except for stock exchange players and traders.”