Initial coin offerings, or ICOs, have become one of the most popular trends in the cryptocurrency space. Inspired by the Ethereum network, many startups have launched ICOs as a means of gaining funding. The money is significant: by some estimates, over $1 billion has been earned through ICOs in just a few months. However, there are also concerns about the entire process. A number of major company ICOs have resulted in those companies cashing out their tokens for fiat currency in a hurry, leaving some analysts speculating that the entire ICO craze could be a front for a scam in some cases. Further, in spite of the ICO craze, few if any marketable apps or other blockchain-focused products have emerged as a result. And now there is another reason for investors to be skeptical: CoinDash reported that its site was hacked during an ICO, losing $7 million in Ether.
CoinDash Hack Halts ICO
A report by Business Insider reveals that CoinDash, the cryptocurrency trading startup, indicated that its site suffered a malicious hack during an ICO. Hackers redirected $7 million in ETH tokens. Alexandria Arnold of Bloomberg wrote that "investors had been instructed to pay with Ethereum and send funds to the token sale's smart contact address. In an email, CoinDash said it appeared that the sending address was hacked and changed to a fraudulent address."
CoinDash maintains that it will overcome the damage caused by the hack. The company issued a statement indicating that "this was a damaging event to both our contributors and our company but it is surely not the end of our project. We are looking into the security breach and will update you all as soon as possible about the findings."
More Fuel for the Skeptic's Fire
Despite CoinDash's certainty that the matter of the hacking will be resolved, many skeptics on Wall Street have seen the entire ICO craze as more evidence that cryptocurrencies represent a bubble which will surely collapse at some point in the future. David Rutter, a Wall Street veteran who leads R3CEV, a fintech startup, has indicated that "there's approximately 200 coins now. If you had an analyst look at it, this is a typical kind of bubble, in that folks that have made money in Bitcoin are trying to parlay that into other kinds of cryptocurrencies and now they're moving out of those."
In spite of those concerns, however, many different startups have been highly successful with their ICO attempts in recent weeks. Gnosis, the prediction market using Ethereum technology, raised $12 million in a span of only 10 minutes in April. Brave, a new web browser designed by the founder of Mozilla, topped that: it earned $35 million in less than 30 seconds with a sale of "Basic Attention Tokens" in June.