Most of the high-valued Initial Coin Offerings (ICOs) for 2017 did not reach their stated goals, according to a University of Pennsylvania report published on Tuesday. The academics researched how the fifty ICOs that raised the biggest amount of money in US dollars last year fulfilled their white paper claims.
Shaanan Cohney, David Hoffman, Jeremy Sklaroff and David Wishnick analyzed if the codes (the smart-contracts and the distributed ledger technology functions), met the initial ICO’s claims by using four criteria: supply fulfillment, vesting, burning, and modification claims.
Based on these criteria, the scholars created a paper-code classification with scores from zero to four, with zero meaning the code met the white paper promises in full, and four meaning that there are big differences between the claims and the reality. One point was given for each of the four criteria.
Of the 50 ICOs, only 20% followed their white papers. 60% have one point, 16% have two, 2% had three, and another 2% have four.
“To sum up: there are systematic differences between code and contract, even within projects that have attracted significant investments. Projects are making governance claims that look to be modeled off of offline VC or traditional equity-based rules intended to reduce agency costs, but they are not encoding those promises into the sort of trustless, decentralized systems which undergird their networks’ purported sky-high values,” the report explained.
The US academics emphasized that their empirical research is not a representative for all the ICOs in 2017, which raised a total of $3.6 billion, but for the top 50, which accounted for $2.6 billion.
The authors also analyzed the regulatory approaches towards the ICOs and warned investors to be more careful because at the moment, the legal safeguards against fraudulent crypto schemes are significantly weaker than in other investment markets.
“It is easy for an issuer to set up shop in a low-regulation jurisdiction, and the architecture of the cryptoeconomy enables far more user and promoter anonymity than typical markets.”
This article appeared first on Cryptovest
