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Study Reveals Lack of Code Compliance in ICO Projects
The vast majority of initial coin offering (ICO) projects fail to uphold promises made in their smart contracts, a recent study finds. Only 10 out of the top 50 projects analyzed contained all the relevant code to fulfill their commitments.
Legal Paper Analysis
A new legal paper titled “Coin-Operated Capitalism” by a team from the University of Pennsylvania School of Law sheds light on the inner workings of ICOs. The study collected data from 50 top-grossing ICOs of 2017, revealing discrepancies between the promises made in whitepapers and the actual code implemented in smart contracts.
Key Findings
- Smart contracts lack provisions for team token vesting periods and limitations on token minting post-ICO.
- ICO investors often overlook smart contract code, leading to potential risks in investment.
- Many ICOs allow centralized control through undisclosed modification powers.
Founder Desertion Concerns
The study highlights the issue of founder desertion in ICO projects, where teams dump tokens onto the market without honoring vesting periods. This practice raises doubts about investor protection and the role of smart contracts in enforcing commitments.
Paper-Code Distance
The authors introduce the concept of paper-code distance to measure the alignment between whitepaper promises and smart contract implementation. The study rates ICO projects based on this metric, revealing varying levels of compliance.
Overall, the study underscores the need for enhanced legal understanding in the evolving landscape of ICOs and emphasizes the importance of regulatory frameworks to safeguard investor interests.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
