Artificial Intelligence In The Works To Sniff Out ICO Scams

With high risk comes great return. Investing in cryptocurrency is already pretty risky, but can it get any riskier than that?

Ofcourse! Invest in Initial Coin Offerings (ICOs). According to fortune.com, in 2017 over 56% of ICOs were considered failures, semi-failures, or scams. In addition, that is only the beginning of the ICO boom, it’s only going to grow.

There are a ton of ICOs that could 10x 100x or even 1000x but at the same time, there’s a ton of scammers. And its a process viewing every ICO whitepaper, site design, and team. And the only guaranteed way of not getting scammed is by not investing in the first place.

So what if there’s a way to eliminate the obvious scammer ICOs? It will sure make ICO hunting a bit easier.

Well, a Chinese startup called Shannon.AI is doing just that. Shannon.AI are working with researchers from University of California Santa Barbara, University of Michigan and Stanford. They recently released a whitepaper describing how they’re using AI to snuff out cryptocurrency scams.

Researchers stated in their white paper-

“Despite the fact that ICOs are able to provide fair and lawful investment opportunities, the ease of crowdfunding creates opportunities and incentives for unscrupulous businesses to use ICOs to execute “pump and dump” schemes, in which the ICO initiators drive up the value of the crowdfunded cryptocurrency and then quickly “dump” the coins for a profit.”

Many ICO scammers make their whitepaper and website look reliable and make it hard to differentiate them self with legitimate ICOs.

Also, if the scam ICO gathers a big following, and researchers show red flags/warnings of the project that appears to be a scam is usually dismissed as FUD by the project’s investors. Just like what happened with Bitconnect.

Therefore, making it impossible to get a distinct picture of a project/ICO legitimacy by communicating to investors associated with it.

So how does Shannon.AI separate the scams from the legitimate projects/ICOs?

Shannon.AI white paper describes how its AI machine will learn to approach projects to separate the scams from legitimate ones.-

“By analyzing 2,251 ICO projects, we correlate the lifespan and the price change of a digital currency with various levels of its ICO information, including its white papers, founding team, GitHub repository, website, etc. For the best setting, the proposed system is able to identify scam ICO projects with a precision of 0.83 and an F1 score of 0.80.”
This remarkable white paper describes an algorithm-based system that basically automates what investors are now doing by investigating openly available information that illustrates an overall representation of a coin.

The Shannon.AI team also points out-

“Compared against human-designed rating systems, ICORATING has two key advantages. (1) Objectivity: a machine learning model involves less prior knowledge about the world, instead learning the causality from the data, in contrast to humandesigned systems that require massive involvement of human experts, who inevitably introduce biases. (2) Difficulty of manipulation by unscrupulous actors: the credit rating result is output from a machine learning model through black-box training. This process requires minor human involvement and intervention.”
Overall, Shannon.AI does the same thing any investor would look for in a project /ICO but does the job in a fraction of the time. This could make scam ICOs a thing of the past. In the meantime, while we wait for Shannaon.AI to be completed and other emerging companies like it, be careful in what you in invest in.

What are your thoughts? Comment below.

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