Blockchain: Is it a hoax?  109

• Most of the cryptocurrency exchanges were hacked due to inside jobs

(employee’s fraudulent behaviours)

• The infrastructure hosting the exchanges were lacking appropriate

cyber security controls

• The exchange software code had security vulnerabilities

• There were no software and infrastructure audit requirements or the

audit policies adherence/compliance were lacking

• Cryptocurrency exchange employees were not appropriately trained

for cyber security policies and controls

• The owners of the exchanges were involved in fraudulent activities

and scamming customers for their own greed

• There was a lack of regular requirements to assess the physical, infra-

structure and application software code security requirements as per

the standards

• The end users were not educated enough and wanted to become rich

by blindly betting on their money. They were trusting the upcoming

coins and exchanges supporting them

• Finally, most of the incidents happened during the years whereby a

majority of the exchanges were not regulated by governing financial

regulators.

INSIGHTS ON ICOs

ICO stands for initial coin offering. It is like crowdfunding whereby start-

ups try to raise funds for developing projects and launch new companies, by

the means of ‘token sales’. Participants of the ICO receive digital tokens in

exchange for invested funds (fiat currencies like USD, GBP etc.). The tokens

are provided in the form of a cryptocurrency. It can be already established

currencies like Bitcoin, Ether or the ICO will launch its own tokens and dis-

tribute them to the ICO participants. ICO is the cheapest and quick channel

to raise funds for a project as it is not regulated like IPOs and can avoid

huge costs surrounding financial regulators and comply with local laws.

ICO is also the best and most popular channel to raise funds for a project

from the public and investors directly. The funds raised are utilised to sup-

port the development of a project as mentioned in the ICO documentation.

The tokens (or coins) are promoted as functional units of currency, once

ICO’s funding goal is met as defined in the ICO roadmap.

Most ICOs are unregulated and hence can be part of a scam or fraud.

However, some of the ICOs like Ethereum have been very successful, so it

all depends on the project team and their vision along with their project

roadmap. We will go through some insights and pointers that will help

you to assess if the ICO is a scam or a real project with a high potential

for success.