The devastating effects of ICO on the Ethereum blockchain [2]
Part 2/?
In my initial post, we discussed some of the good, bad, and ugly parts of ICO. Today, we'll be diving into a spacific example of blockchain stress caused by ICO.
Status
The Status ICO began and ended on June 20, 2017, raising well over $100 million USD. However, the end didn't come before a massive slowdown of transactions and astronomically high gas fees caused major mining pools such as Dwarfpool and certainly others to lose large amounts of money to fees, not to mention the thousands of investors flooding the network to try and take part.
The issue with Status was caused in part by ICO's incessant need to suggest higher gas prices when taking part in order to ensure that the transactions are processed, though the real crux of that matter was the very design of Status. As a race-condition ICO, Status' goal was to allow only the fastest processing (fastest placed/highest gas prices) transactions to completed, but what it really accomplished was creating a race-condition on the Ethereum network itself by causing investors to cram their transactions into a smaller interval of time with higher gas prices in a desperate attempt to buy in.
Ethereum does have some scaling issues to address, however these are exacerbated by ICO which take advantage of the network's transaction processing methods and the hype surrounding ICO in general. Without better planned offerings, an alternative blockchain or viable scaling solutions, the life of ICO mania is looking short lived.
Very interesting - I did not know that the Status ICO was a self-inflicted race condition! At some point very soon, people will have to start realizing that almost all of these ICOs are just making the creators filthy rich, while taking your money.
Exactly! ICOs are the new startup, but with almost 0 legal repercussions if you implode or try and exit scam at the moment. I sort of welcome legislation surrounding ICOs, but unfortunately all I've seen are bills introduced to hinder people having or moving with cryptocurrency.
With all due respect, I would not support legislation around ICOs. It's a slippery slope, and if you give the government an inch, they will try to take a mile. People just need to know the risks, and not invest more than they can afford to lose. It's the wild west with crypto, but that's the way it should be.
If an investor wants to work within a framework of government regulations, then they should stay away from crypto and invest in the stock market (I don't say this with disdain; I truly think the stock market is essential b/c it provides an investment environment with regulations, for those who want that).
Yeah, I can totally understand that. I'm usually a proponent of small government and I agree that the government would take a mile. I guess what I'm saying is that it'd be nice for some sort of ramifications in the event an ICO tanks or scams its users. Because as of right now, it's hard to prove that the company didn't try everything in their power to deliver, thus making litigation few and far between (so far, I've only heard of one or two companies being taken to court).
However, I do see what you mean in that crypto should be the wild west. It's nice being essentially a cowboy and being the master of your own destiny for the most part.
The ramification is that idiots that invest in the crap ICOs as well as the massive Ethereum hype each learn a valuable lesson. Sure, there will always be more idiots that need to learn a tough lesson, but that's life. The government solution would be to create a big f'n convoluted control system around it and then hand it off to Wall St. buddies to run so that politicians can take kickbacks. Not really a great alternative option