University of Pennsylvania Research Uncovers ICO Centralization Backdoors

Researchers at the University studied the top 50 initial coin offerings that have gathered $2.6B in total revenue with an initial total market cap of $3.8B. David Hoffman, a professor at the University explained that research was conducted on the top 50 ICO’s from last year, including every bit of information, documents, code and social media presence the researchers could acquire.



One unfortunate discover was that several initial coin offerings made no promises or even let investors know that their assets would be protected against inner-dealings within the ICO. In light of this, it provides to insurance that investors would be protected from big-time whales, inner-trading, and other manipulations.


Even worse, a much lower number of ICO’s did make their investor promises in code. 37 guaranteed vesting and 80 percent of them did not code it. 32 promised restrictions on supply and 25 percent of them did not comply. 17 promised to burn coins but also did not comply. This pattern proves the unethical and inner-operations among many ICO’s.


While many have fallen victim to false promises, many continue to invest into coin offerings that only promise what they’ll do as opposed to actually coding it and providing proof. David Hoffman stated that a hefty amount of ICO’s have also exaggerated any claims of a decentralized system since centralization is still a requirement which. He also explains the manipulation from many initial coin offerings to continue their controlled centralization through undisclosed code, little to the investors knowing.

The Law


In terms of self-regulation and the law of code, both are undermined by the new research. Investors must form trust with developers to ensure that their whitepaper and its product actually go through and continue production. The other aspect is that any promises made are essentially founded on traditional terms of use or bytecode which cannot deconstruct and that these promises will continue as planned.


As of now, more than 90 percent of blockchain startups continue to fail, with most of them surviving just over one year. On the other hand, a new report has revealed that 20 percent of all ICO’s were fake. With the SEC’s recent classification of Bitcoin and Ethereum as non-securities, the research could aid in lawmakers in classifying securities for many ICO’s.

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