ICO and hacking: Two sides of the same cyber coin?
It’s no wonder that more and more entrepreneurs turn to token sales, or ICOs financing, as they offer a quicker and more efficient financing solution.
According to Max Kordek, co-founder, and president of the Lisk Foundation, ICOs crowdfunding approach has enabled to funding up to USD 1.7 billion.
This is not something you would see happening within the same period with traditional financing options, which makes it ideal for startups and tech entrepreneurs who need to be hitting the road promptly. It’s the ability to bypass the approval of VCs and other third parties that lets entrepreneurs use their ICOs to raise funds immediately, regardless of their location in the world and their financial status. Token sales open the door to a new type of investors who can easily and rapidly turn a startup dream into reality.
While this sounds promising, there’s one thing that Max Kordek has failed to mention. Summer 2017 has been punctuated by several scams of the cryptocurrency startup fundraisers. CoinDash, Parity bug and Enigma developer are some of the names that popped out in these ICOs scandals over the past few months. And as we’re talking millions of dollars, it’s worth asking why ICOs appear so simple to hack.
Have you checked your cyber wallet recently?
The most major ICO wallet breach to date has hit Parity, a contract coding business, that suffered vulnerabilities in specific versions of its wallet software. The result was beyond their worst nightmare: A whopping $30 million was reported stolen, as a result of a bug that comprised Ethereum addresses in July 2017.
Needless to say that developers felt cold sweat running down their backs as they investigated the security breach. Several notable wallets were targeted, included Swarm City, Edgeless Casino, and Aeternity. In other words, it was the work of a hacker who knew exactly what to do and who to hit.
Defending your wallet
Let’s get things clear from the beginning: Not all ICOs get hacked. But if your startup relies on cryptocurrency fundraising, you may want to find ways to defend yourself against scams and hacks with reliable and professional IT services.
Indeed, running penetration tests and independent audits on top of standard security checks can make all the difference between a successfully financed project and the hacking of your Ethereum wallet. In fact, cybercriminals have been able to steal about 10% of the accumulated $1.7 billion ICOs investment over the past year. For small businesses, it’s the equivalent of a sentence of bankruptcy.
New regulations for your safety
The majority of ICOs scams have been carried out through social frauds and manipulation, where cybercriminals masquerade as cryptocurrency administrators and share fake information. Enigma scam, for example, was the result of attackers using the company’s mailing lists to reach out to investors.
As a result, the Securities and Exchange Commission has been determined to bind ICO blockchains to regulated exchanges. The new regulations demand that some ICOs meet the standards of securities applied to non-crypto financing options.
To put things simply: When there’s monetary value, there’s a risk of fraud. It’s in your best interests to play by the SEC rules and maximize all the necessary data protection scenarios.
Yes, as a result, ICOs fundraising might not occur as smoothly as you hoped. But without time-demanding protections, ICO becomes the paradise of hackers.