May 23, 2018

3 Traps That Can Sink Your ICO - and How to Avoid Them

In the first quarter of 2018, ICOs have already raised almost 7 billion dollars []. The pie is big, and what’s even more important, it is booming – in half a year we will raise more funds in ICOs than in the whole of 2017.

But you know all that well enough, and the reason you’re here is that your company is seriously considering cutting off a piece of that delicious pie for itself.

We are here to share our experience and make sure you won’t burn your fingers.

If you wish to learn more about the technical details and processes of ICOs, check our recent post:
>> How to launch an ICO project

Now, to the point. What are the biggest issues you have to face?


Preparing your company and website for an ICO

The first IT topic strictly related to your ICO campaign is the website, which falls into your domain as the tech expert.

It can be either neglected or perfectly polished by your marketing team, but in both cases the more important thing for us is a technical background which guarantees safety. We are dealing with financial data here, and people put enormous trust in your brand to take care of their money.

As the tech expert, it is your job to ensure that nobody messes with the data displayed on your website, and the investment process is smooth and secure.

Our pro tips:

  • Avoid content management systems for your website.

They can open your doors to online threats. Even though it often allows your team to work more as the middleman between marketing and the website itself, in the end it’s a fair price to pay to prevent your website from being hacked.

  • Educate your coworkers.

For many small and medium-sized companies, an ICO may be the first project of such a vulnerable nature. You are the one that fully realizes the threats and consequences of possible attacks. It makes you the natural chief security evangelist.

Of course, this can easily turn into a full-time job, and we do not want that. For a start, just make your team aware of the threats, and remind them about security standards, proper passwords policy and not opening those weird attachments.

During the ICO, you will also have to build a web application to allow your investors access to the system as well as to manage the process of buying and selling your cryptocurrency. Bugs and holes in your app code can drown your ICO in no time.

Private key

Your private key is a password to your cryptocurrency account. You will have to use it to allocate tokens to your investors in the final phase of the ICO.

We’ve observed a tendency to store this asset in a rather light-hearted manner, putting it into unverified applications and storing it in insecure places. You do not want to do that – giving up your private key means that you lose control over your account and your money.

That’s why during our ICOs we suggest a process based on the MetaMask Chrome extension, which allows you to avoid unnecessary risks. It gives you more control over your private key, and makes sure it won’t be used to transfer your funds into the wrong wallet.


30% of phishing messages get opened by targeted users and 12% of those users click on the malicious attachment or link.
>> Verizon Data Breach Investigations Report

Phishing is a big threat, and you shouldn’t underestimate its power. The most fragile moment to target will be in collecting funds during your ICO – money sent to the wrong crypto account will never find its way back.

In this time, your investors might be getting deceitful emails almost indistinguishable from your own, urging them to take actions which drain their funds and expose them to other risks. It's crucial to establish secure communication channels and provide clear instructions on how to participate in your ICO safely.

Here's how to fortify your defenses against phishing:

Educate Your Investors

Forewarned is forearmed. Make sure your investors are aware of the risk of phishing and know how to identify official communication from your company. Use multiple channels to inform them about possible scams and regularly update them on how to stay safe.

Use Verified Domains

Having a verified domain with a secure SSL certificate can reassure investors that they're dealing with your legitimate website. Ensure that all communications, especially those involving the transfer of funds, are sent from this secure domain.

Implement Two-Factor Authentication (2FA)

Require two-factor authentication for all sensitive actions, including logging in, making transactions, or changing account details. This adds an extra layer of security and significantly reduces the risk of unauthorized access.

Legal Compliance

The legal landscape for ICOs is complex and varies by jurisdiction. The consequences of non-compliance can be dire, ranging from fines to criminal charges. Here's what you need to keep in mind:

Know Your Jurisdiction's Regulations

Stay informed about the regulations that apply to your ICO, both in your country and in the countries of your investors. This includes securities laws, anti-money laundering (AML) and know your customer (KYC) requirements.

Seek Legal Counsel

Don't try to navigate this alone. Engage with legal experts who specialize in cryptocurrency and ICOs. They will help you ensure that your ICO complies with all relevant laws and regulations.

Disclose Risks Transparently

Provide a clear, comprehensive white paper that outlines the risks involved with your ICO. Transparency isn't just good practice; in many jurisdictions, it's a legal requirement.

Unrealistic Goals and Promises

Overpromising and underdelivering can quickly sink an ICO. Investors are becoming more savvy and can see through unrealistic claims. Here's how to keep it real:

Set Achievable Goals

Ensure that your project's goals are realistic and achievable. Don't promise the moon if you can't deliver at least a rocket.

Be Transparent with Your Roadmap

Share a detailed and honest roadmap with your investors. Keep them informed about the progress and any setbacks you may encounter.

Avoid Hype-Fueled Promotions

While marketing is important, avoid hyperbolic claims and promotions that you can't back up with solid data or a working prototype.

In conclusion, the potential of raising funds through an ICO is enormous, but so are the pitfalls. By focusing on security, compliance, and realistic promises, you can increase the chances of a successful ICO. Remember that trust is hard to earn and easy to lose. Treat your investors' trust as your most valuable asset, and your ICO will be on the right path to success.

May 23, 2018