The University of Pennsylvania in collaboration with Law professor David Hoffman and other leading academic figures have published an in-depth study and analysis of ICOs. With a particular focus on ICOs that promise concepts such as autonomous governance and the philosophy that “code is law”, the results have been disappointing, to say the least.
The results entitled “Coin Operated Capitalism” detail the author’s survey and study of the top ICOs of 2017 and whether they lived up to the promises that were included in their whitepapers. They also took a careful look at whether the whitepapers matched the technology’s codebase and in almost all cases, the study finds a huge gulf between claim and reality.
“The automated mechanisms found in code—known as ‘smart contracts’—are not the only way entrepreneurs can deliver on their promises,” Wishnick explained.
Failure to match promises
Results showed that only 20% of the 50 contracts surveyed actually matched their promises to code 100% of the time. Almost 60% made at least one government promise that was not present in the code, and another 20% had two or more failures.
“Surprisingly, in a community known for espousing a techno-libertarian belief in the power of ‘trustless trust’ built with carefully designed code, a significant fraction of issuers retained centralized control through previously undisclosed code permitting modification of the entities’ governing structures,” the working paper explains.
In the conclusion of the paper, the authors state that the informal nature of smart-contract production can lead to risks but it can also result in creativity. It seems that developers of smart contracts are much more creative than a group of lawyers who usually reuse language from contract to contract without much thought. However, the study does state that the community is full of passion and energy but it also points out that the creation of smart contracts and the promises made must be carefully evaluated and fully scrutinised.
“Beyond the production of smart contracts and blockchain code, our study also highlights the importance of the ecosystem through which crypto code is vetted, audited, and made legible to the outside world,” the paper concludes.
Engaging a professional team
There are several reasons for this sort of result. Because the industry is still in its infancy, it could be attributed to a lack of experience and understanding. It could also be said that some do not yet fully understand the potential of the projects that they create and that such errors are nothing more than a mistake. There could also be problems regarding how the whitepaper is authored, such as a lack of understanding from the person writing it. To avoid such issues, when writing a whitepaper and planning the tokenomics of your ICO, you should always work in conjunction with a team of professionals.
At E&S Group we have expert legal minds, corporate services experts, leaders in the ICO and crypto industry and guide you through the process of setting up your ICO through the tailor-made ICO Legal Service. To avoid situations like these unfortunate ICOs, contact us on firstname.lastname@example.org or by telephone on: +356 2010 3020