A study by Pennsylvania University shows that ICOs do not respect promises in whitepaper

Four professors from the Law School of Pennsylvania University have conducted an extensive study of the ICO phenomenon. The findings show that most of the projects failed to meet the promises made in the whitepaper.

Also, most projects did not include investor protection measures. An example would be to prevent insider-trading (disclosure of confidential information that would benefit certain actors).

The document, entitled "Capitalism based on cryptomonas", presents an objective analysis of the reality of the ICO phenomenon. The expectations are compared with the reality of the projects and the deficiencies encountered are highlighted.

"The analyzes revealed that most ICOs did not include promises to protect investors against insider trading incidents. Also, the codes on which they are based have demonstrated significant vulnerabilities "

says the report.

"Surprisingly, in a community where techno-libertarian principles are essential, many ICO issuers have created codes that make it easier to maintain control over networks and allow the change of governance structures of"

explains the authors of the analysis.

One case study in the Pennsylvania University report is that of the Polybius project, originating in Estonia. His whitepaper included promises that did not materialize after the sale of tokens was completed.

In June 2017, Polybius raised $ 31 million in the ICO. The Whitepaper included statements that have made it clear that certain features will include the code on which the tokens are based and in the smart contracts.

"Beyond compliance with the ERC-20 and the presence of a change feature, we did not check whether any of these features are present, largely because the encoded governance of Polybius exists in bytecode ([...] the language of the Ethereum machine). Without spending a large amount of money to acquire the time and know-how of a motivated and talented inverse engineer, an investor would have been limited to relying on vernacular promises "

the authors conclude.

But this is not all

Unfortunately, this is often the case for most ICOs. The promises in the whitepaper hurt the reality in which evil actors are willing to exploit any vulnerability.

Another recent example was Bancor. The decentralized exchange managed to accumulate $ 153 million in a few hours last July. But this month, an attack has generated $ 12 million in losses. The situation has generated widespread criticism in the community, especially with regard to the statements made by the representatives of the exchange on decentralization and governance.

The University of Pennsylvania report confirms similar analyzes of the ICO industry, but most cripto market leaders continue to defend this fundraising system.

For example, Binance CEO Chang Changg Zhao said in May that

"Raising money through ICOs is 100 times simpler than through investment funds."