British audit and consulting company EY (formerly Ernst & Young) published a study ICO, examined a total of 372 of the project.
Analysis of investments from Q1 2015 to November 2017 leads to the total volume of borrowed funds of $3.78 billion, twice as much as venture capital investments in blockchain projects. In addition, another $400 million has been collected by companies registered in China, who were obliged to return funds to investors after the September ban ICO. And if in two years (from July 2015 to March 2017) investments increased by $190 million in April of last year there was a sharp jump, ICO expenditures increased from $290 million to $1.05 billion for 3 months, and by November 2017 increased in 4 times. However, since the end of last year the market size of the ICO is falling, and fewer projects achieve stated objectives in June 2017 — 93% , in November — 23%.
The majority of ICO was conducted in the USA ($1.031 billion), China ($452 million, including Hong Kong) and Russia ($310 million). With regard to regulation and support the blockchain industry, leading other countries. The study shows that between 2008 and 2015, the regulators did not pay attention to the crypto industry. The first was supported by ICO in 2016, Singapore, Switzerland and the Isle of man. In the first half of 2017, the status of friendly to scriptvalium the country from Russia. Of these States, the Isle of man, the only not changed his position and continues to actively support the industry.
To discuss the crypto industry and to warn about the risks of the first, in 2016, become the regulators of China, Japan, Malaysia and Russia. In January 2017 Japan first began to regulate crypto-region in accordance with existing laws, from June to the scheme joined the United States and Canada, and from September to regulation under the laws of the country and in accordance with the nature of crypto-projects launched in Singapore, Hong Kong, Australia, Estonia, New Zealand and Lithuania.
The most successful blockchain projects are implemented in the development of the blockchain infrastructure, second place — Finance, the third — social media, content and advertising, and the fourth became the leader of the games industry and virtual reality.
Most of the ICO projects use the existing blockchain platform, and according to the ICO Watch List for December 2017 became the most popular blockchain Ethereum is running on 77% of the ICO. 13% of projects have created their own platform, another 4% used the Waves.
Risks identified in relation to the ICO relate to smart contracts, which prescribe the functions and conditions of use of the token and may contain hidden conditions or errors in the program code; unreliable assessment of tokens based on the «syndrome of lost profits» (fear of missing out, FOMO), and not on forecasts of development of the project and the nature of the token; and the increasingly common hacking attacks.
Regarding the latter, the study revealed that more than 10% of the collected during the ICO funds lost due to fraud. The founders of the project are concentrated on attracting investors, not for security, because attacks most often exposed to the most high-profile ICO: hackers attract the volume, haste, lack of centralized control, the irreversibility of transactions and information chaos. The most popular form of attack by the year 2017 has become phishing, followed by frequency followed by a DDoS attack, hacking the website or application, cyber attacks through the employees of the company IT infrastructure or investors, as well as the hacking of exchanges and wallets.
Risks for investors can be associated with the nature of the project, even if it is not Scam. In most projects there is no reason to use the blockchain and cryptocurrency, so many do not go from the idea stage to implementation, or the implementation fails. Projects still planned and presented product, often begin to accept Fiat currency, reducing the value of your token.
White paper most projects, a complete cliche, which attract inexperienced investors, but says nothing about the nature of the project. The most common of them — the «new generation platform», «the first project, releasing a billion-dollar market», «a decentralized market, which transfers control into the hands of users», «we are creating a community/ecosystem/economy», «no corrupt Central government», «the most underrated token».
ICO PlexCorps, whose assets were frozen by order of the SEC in connection with the violation of the securities act, used the following language: «the decentralized world crypto currency next generation, which will extend the application and increase the number of users as easy as possible for the use.»
Returning to the problem of evaluating the tokens, the researchers believe that today it resembles the value of gold or fashion collections, when a limited supply creates high demand. In most cases the popularity of a new cryptocurrency is associated with the HYIP, quality White paper and technology of licensee — fixed-price token and issue or not fixed, when the price of the token and issue set after ICO. The second view discourages investment because of uncertainty of the total funding.
Traditional assessment of a token specified in the study based on parameters that are difficult to identify at this stage of development: number of tokens (T) and their turnover in a certain period (V) relative to price (P) and the volume of services (Q) platform during the same period: TV = PQ. In addition, the very nature of the token is ambiguous and difficult to assess: investors expect growth rates of cryptocurrencies and the number of buyers by reducing the cost of services, which it paid.
In the end, the authors propose a set of rules for each of the participating parties, which coordinated «Alliance» action will turn the blockchain into an effective tool of collecting funds for quality projects.
So, the founders must provide a clear rationale for the use of the blockchain and its own token, to make the process similar to IPO ICO to balance the price of the token to verify that the tools and personal information of investors is kept safe during and after the ICO, to use a transparent legal structure, thus make sure compliance with legal standards not only in the country where the project was, but in all areas where the planned activities and the use of the token.
Investors are obliged to ensure public transparency of the blockchain, to perform code smart contract platform, which should be free, and invest «smart money» without succumbing to «the fear to lose benefits».
From the regulators want to associate crypto terminology with existing notions, and only in extreme cases to introduce new terms, to standardize minimum reporting requirements, protect the rights of the holders of the tokens until they are used to pay for the platform, to regulate the circulation of tokens, including changes in emissions and functionality and interact with regulators of other jurisdictions, at least with the jurisdictions, to the sphere of influence which is the largest part of the ICO and to which belong the majority of investors and kryptomere.