A report from Yahoo Finance UK found even if top ICO projects promise decentralization, the truth is most of them are far from truly delivering. Even projects that propose this concept as a vital characteristic rarely uphold it in an effective way to protect investors.
Decentralization: Just A Word
A Yahoo Finance UK report discovered most of the funds from the top 50 cryptocurrency token projects (78% of them) are being managed by only 20 cryptocurrency wallets.
In fact, Jai Prasad, CEO and founder of Token Analyst, suggested many projects are either failing to gain traction or did not need to use cryptocurrency technology for their ideas in the first place. For 16 issued tokens, the situation is even worse: more than 90% of the tokens were in control of the top 20 wallets.
This study included big cryptocurrency project like Binance Coin, 0x and other important ERC20 tokens, a popular tokenizing solution most ICOs are using right now. They also found other concerns regarding exchanges and tokens concentrated on them.
Exchanges and ICO Tokens
According to the Jai Prasad, wallets containing most of the cryptocurrency funds accounted for were addresses from the most important exchanges, indicating these tokens are far from fulfilling their intended role on their platform, and instead are being used as speculation tools.
“Other than a dilution-free fundraising tool, the goal of an ICO is to incentivize different actors to participate in the network the ICO is building via the use of a token. The promise is that token holders will also have sway in the future development of the network — the governance,” he Prasad.
The lack of decentralization is also a worrisome for governance issues: if more than half of the tokes are a few wallets, owners can associate and collude to cause changes in those platforms. The security of those funds can be in danger, and even if exchanges should be better protected against hacks and attacks, it’s possible to get attacked.
In any case, this means these projects could also exist without a decentralized environment, something Prasad urged. “In my opinion, the most important characteristics of crypto networks are being ‘permission-less’ and ‘censorship-resistant’; anyone can use the network and anyone build on top of it,” he said. “Without these properties, we probably don’t need a crypto network to begin with.”
CONTINUE THE SPICE and check out our piping hot VIDEOS. Our podcast, Milk, might help sooth that crypto burn. Follow CoinSpice on Twitter. Join our Telegram feed to make sure you never miss a post. Drop some BCH at the merch shop — we’ve got some spicy shirts for men and women. Don’t forget to help spread the word about CoinSpice on social media.