Two top bitcoin rivals are in agreement: Many initial coin offerings (ICO) are fraudulent.
According to news from CNBC, both Joseph Lubin, co-founder of Ethereum, and Brad Garlinghouse, CEO of Ripple, have issued warnings about the rise in fraudulent projects that offer little value to investors.
While many ICO sales are used to back “high-quality projects, there have been a lot of copycat projects where people copy all the same materials (and) don’t intend to deliver any value to the people buying the tokens,” Lubin said during an interview while attending the Singapore FinTech Festival.
Lubin — who is also the founder of blockchain software company ConsenSys — said many of the copycat companies issuing tokens were based out of China, which is why the country’s ban on new token sales was an “appropriate approach.”
“With China’s political approach to things, and with the fraud that was rampant there, it made a lot of sense for them to pause things a little bit and get a better, deeper understanding of the ecosystem and scare potential fraud perpetrators,” he said.
Garlinghouse agreed. “I think a lot of what’s happening in the ICO market is actually fraud, and I think that will (eventually) stop,” he told CNBC. He went on to say that token issuers are currently operating in a “gray area” while waiting for regulation to catch up.
In the meantime, he said, that gray area will eventually go away, and it could take decades for rules protecting both cryptocurrency investors and companies to be implemented.
“There are a lot of really fabulous things that get done with digital assets and blockchain technologies to reduce friction, to reduce costs and [to] enable things that weren’t possible before. I think instead of focusing on those, we’re distracted by what’s going on in this gray area,” Ripple’s Garlinghouse said.
Both executives have noted that their own cryptocurrency tokens — Ethereum and Ripple (XRP) — have more potential than bitcoin.
“I prefer to look beyond bitcoin,” said Lubin. “The real excitement is building decentralized infrastructure for the planet, so Ethereum is, by far, in a way in the lead on that, and it provides [an] internet of trusted transactions.” The cryptocurrency, he predicted, will be the “foundation for the decentralized worldwide web.”