Archive, November 11, 2017, how not lose money
A couple of months ago we saw what a ICO is. Before we face the rapidly growing market connotations, it seems appropriate to analyse the phenomenon from the perspective of potential crime : the product lends itself easily to being a protagonist.
The main problem is that through a ICO the issuer can raise money and run with the cash without intersecting in any way regulated markets and operators : the whole process can develop within the cryptoeconomy where, with a minimum of shrewdness and planning, physical and digital tracing and tracking are extremely difficult in the aftermath.
Structurally a ICO is a decentralized autonomous agent, so devoid of legal references and regulatory requirements present in the traditional constructs ; tokens (digital) that give rise to the future performance are emitted against smart contracts which, equally, reflect the same (not normal customary) characteristics saw for the agent; the payment of tokens by the underwriters, to the issuer, takes place through cryptocurrencies, with the consequent the possibility of disappearance of the funds (towards the unknown) with elementary complexity.
To confirm that the alert, which is the subject of the bulletin to investors on 25 July this year, of the SEC which, for those who want to invest in the investment in ICO, highlights four factors :
- the traditional financial sector is not involved in the ICO, so it is difficult to ‘follow the money’ ;
- the jurisdiction of the proposers, if it exists, is on location where it can be very difficult to obtain information ;
- for ICO there are no central regulatory authorities in place to turn to for posterior problems ;
- it is difficult for police forces, even if it was traced back to the perpetrators of the fraud, find and freeze the extorted money : it is in cryptocurrencies.
So how do you do it? The solution lies in the prevention and SOCMINT force, by analyzing the structure of the offer before signing it up and combining it with an action of intel verification on social media with regard to the information contained in it. The weak point of the ‘scam ICOs’ is that to raise money they necessarily must make yourself know and to publish net information liable of verification. The foundations of the verification are :
- relationship between the required amount of money and the complexity of the project ;
- use of the blockchain actually advantageous for the purposes of the project ;
- a return of the non-irrational investment ;
- a credible team ; a demonstrable prototyping of the adopted technology.
They mainly deploy in an analysis that involves the following factors :
- Is the project innovative? Are there any at least conceptual competitors of the proposed product? Are there partners? Who are they?
- Is the indicated team actually part of the project? Do they have competence in relation to the project? What background?
- Does the white paper explain the project in a clear and consistent way?
- The token :
- Is it a utility token (i.e. is it finalized to the collection of money (alternative, with crowdfunding functions) in exchange for future goods / services)?
- Or is it a security token (i.e. it provides share share of the project)?
- How is the offer structured? indistinct or articulated for subjects (underwriter, VC …) ;
- Is it monetized in a reliable cryptocurrency or ‘born tomorrow’? Who are the exchange deputies at the exchange of tokens?
- The good/service, to which the production is targeted is the ICO, exists and provable in its final configuration?
- Does a social network structure exist? It is connected to the project, explain it and replicate to stimuli finalized at the reaction?
- Are there opinion leaders of sector (of the final product) that are supporting the project?
A proper preventive intelligence approach can therefore be useful, in the indicated manner, to address a market that given the novelty is almost ignored, intentionally and by unsuspecting, by traditional regulators and still lacks diagnostic self-regulation capabilities.
This post was originally published on November 11, 2017, in Italian version on www.thescanner.info .This is adaptation of a neuronal Italian/English AI translation by IBM Watson.