Initial Coin Offerings (ICO’s) are becoming part of the cryptocurrency world with help from blockchain applications such as Ethereum. Most businesses are now looking for innovative ways of how to integrate blockchain into their systems and through the help of ICO’s they have been able to raise large amounts of money.
With the prices of Bitcoin and Ethereum skyrocketing over the past 12 months, investors have been led to research for the next big coin after the popularity of most cryptocurrencies. A number of ICO’s have received massive investments in terms of capital for their projects but we all know that where there is wealth there is bound to be criminal interest hence ICO’s becoming a target for hackers.
More than 400M lost in the past 2 years
A research that was done by Fortune indicated that more than 400M raised by ICO’s in the past two years was either lost through hacking or through crypto ether. Most companies never look at the necessary security precautions that they can take especially when looking at ways of how to attract investors and hence end up not only exposing themselves but the investors too.
A report by Ernst and Young proved that hackers are now turning to ICO’s as they view them as a soft spot. The report quoted:
“Hackers are attracted by the rush, absence of a centralized authority, Blockchain transaction irreversibility and information chaos. Project founders focus on attracting investors and security is often not prioritized. Hackers successfully take advantage- the more hyped and large scale the ICO, the attractive it is for hackers.”
What attracts the hackers mostly is what you call the speed and size of the transactions that are made. According Ernst and Young report, Russia and China have raised more than $300 million each.
“There is a risk of having the market swamped with quantity over quality of investments,” said Paul Brody the Ernst and Young global innovation blockchain leader.
Most regulators are now sounding an alarm that ICO’s have a high risk of fraud and investors could lose the money they have invested.
The tides are turning for cryptocurrency
The tides may indeed be turning for cryptocurrencies with regards to their popularity and regulation. It is already being noted that fewer projects are meeting their fund raising goals with a margin of around 93%
There are countries that are now issuing regulations for cryptocurrencies and this is not due to the decision that the G20 member states decided that cryptocurrencies are going to be regulated. China and South Korea are examples of countries that have already issued bans while others such as US, Japan and Canada are seeking to regulate ICOs with laws in their countries.
The United States through its Securities and Exchange Commission recently launched a Cyber Unit to deal with digital financial fraud.
The report by EY suggests that in future investors, founders and regulators need to be more transparent and need to do a due diligence before investing in the cryptocurrencies.
Another report that was widely shared last year also indicated that cybercrime rose at a time that Ethereum was raising hence making crypto’s to be more volatile to online fraud.
Phishing is the most common tool
Ernst and Young report shows that phishing is the most common tool that is currently being used by hackers. This makes it easy for them to accomplish all that they want to do thereby making cryptocurrency an easy target for them. The other things that plaque the crypto world include lack of regulation, poor security and poor standards for ICOs