Recent Research Paper from University of Pennsylvania Casts Doubt on ICOs

Recent Research Paper from University of Pennsylvania Casts Doubt on ICOs

A recent legal paper from the University of Pennsylvania’s School of Law has touched on the matter of ICOs, and several important aspects of ICOs which it believes has gone largely unreported previously.

More specifically, the paper – called “Coin-Operated Capitalism” – has made a number of startling accusations regarding how ICOs are organized and carried out.

It includes a section on the divergence between many investors’ expectations and the reality they face when it comes to ICOs. It also goes into some detail as to what technical frameworks are in place in order to realize their expectations, and the “technical inconsistencies” found within ICOs.

For example, the paper states that many ICOs do not even feature code within their smart contracts to guarantee the mint of additional tokens – even those who touted support for this prior to the conclusion of ICO.

Moreover, the inquiry also revealed that a great deal of ICOs has failed to offer investors any sort of protection against self-dealing, and almost no ICOs have measures meant to protect against this.

Put simply, this means that ICOs are a financial form that is, according to the paper, “ripe for fraud”. Furthermore, the paper also expressed surprise over the fact. 

The main objective of the paper is supposedly in order to create legal literature on the subject, in order to further the use and adoption of ICOs as a means of fundraising.

The paper also notes that ICOs often rely on so-called cryptocurrency “salesmen” who push the coin offerings in return for tokens, as well as the presence of a bull market for cryptocurrencies.

In addition to this, the paper also suggested that whilst ICOs provide a relatively easy form of funding for entrepreneurs and technological innovators, there is also the possibility that ICOs are a form of a financial bubble.

The study states that there needs to be more scrutiny done in order to affirm whether this is the case or not. According to the paper, bubbles “misallocate capital to unproductive uses”, which is to be avoided.

Nonetheless, although the study urges care when it comes to the matter of cryptocurrencies, it does not outright dissuade the use of them.

It is also to be recognized that whilst ICOs should be treated carefully, as any sort of investment or venture, it is still a comparatively easy and practical way for technological entrepreneurs to source funds for projects.

For example, Binance’s CEO recently stated that ICOs are “100 times easier” for raising funds compared to conventional means. Nevertheless, more literature on the subject of ICOs is always welcome, in order to further cast light on this multifaceted area.

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