Hackers have been one of cryptocurrency’s biggest threats, and it appears more money is falling into their hands. As the success and popularity of bitcoin and ICO projects continues to grow, hackers are finding more opportunities to take what isn’t theirs.
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One of the biggest issues the cryptoverse faces is the current security surrounding Initial Coin Offerings (ICOs). According to researchers at London research firm Ernst & Young, ten percent of funds from ICOs have wound up in hackers’ pockets. Between 2015 and 2017 alone, nearly $400 million USD from about $3.7 billion in total ICO funds has been stolen. This is equal to about $1.5 million per month, and numbers are only expected to rise.
Global technology and telecommunications leader at Ernst & Young, Greg Cudahy, explained:
“Once new standards are in place that are accepted by all participants – allowing for improved transparency, fraud prevention and legitimacy – the protection of investors and users alike has a greater chance of success.”
Hackers’ Main Mode of Offense
The research firm’s latest report identifies phishing attacks as the most common methods for stealing cryptocurrency. The document states that hackers are “attracted by the rush, absence of a centralized authority, blockchain transaction irreversibility and information chaos.”
Indeed, the main problems maligning ICOs are their current lack of regulatory tactics and poor valuation standards. This gives cyber-creeps the open doorways they need to sneak off with digital treasure. ICOs, according to Ernst & Young, are often “value based on hype and FOMO – fear of missing out” among potential investors.
Time to Get a Grip
Clients simply aren’t researching enough. Wanting to get in on a powerful new investment is one thing. Jumping in head-first without learning the facts or understanding the long-term risks is only contributing to a world where faceless criminals can hide and commit their dastardly deeds behind the safety of their computers.
Swedish lawyer Luka Mueller claims he assisted in the original structuring of the present-day ICO format, which he now calls “old, inflexible and stupid.” He believes changes are necessary to improve the security of ICOs before anyone can take them seriously again.
“If you structure your token sale in a way that it would look like an initial public offering, then even if you launch a [blockchain] protocol, the foundation is not suitable,” he explained. “If […] the background is more an investor environment rather than a technical environment, yes, do all the registrations. If you want to sell it, if you want to be active and actively promoting it in the U.S., apply U.S. law.”
Do Your Homework!
The aforementioned Cudahy also had a few words for investors, saying “You as a user must be absolutely clear – and if you don’t understand it, keep your fingers away – that if you have an ether or a bitcoin and it does not work, you have nobody to claim against.”
Ernst & Young has analyzed nearly 400 separate ICOs to reach its conclusions. The firm claims that general interest in ICOs is dying down, and many are facing lawsuits from individuals who feel they were misled or subjected to fraudulent activity.
Are ICOs worth one’s time and attention, or are they dead in the water? Post your comments below.
Images via Pixabay, Ernst & Young