Investment in ICO results in Ethereum being cheated

1.

Ethereum energy coin is not MLM

Ethereum is an open source public blockchain platform with smart contract function. Ethereum provides decentralized virtual machine (Ethereum virtual machine) to process point-to-point contract through its special cryptocurrency Ethereum

in 2013, vitalik buterin, 19, first mentioned the idea of Ethereum in a book entitled "Ethereum white paper: next generation intelligent connection and decentralized application platform". Then, in 2014, the algorithm and protocol of Ethernet coin were officially implemented, and $150 million was raised. The system itself was finally completed on July 30, 2015

as the representative of blockchain 2.0, the mainstream currency Ethernet is regarded as the wind vane of crypto digital currency market. However, over the past week, the price of ether currency has continued to fall. On August 14, 2018, the ethereal currency plummeted by 20%, reaching a record low of $257 this year. Compared with this year's peak of $1295, the price of Ethernet currency has shrunk by more than 80%. Affected by this, on August 15, 2018, none of the top ten mainstream currencies in the digital money market was spared, falling across the board, with a number of single day declines exceeding 10%

extended data

Ethereum started planning almost in 2013, and started to implement the project in 2015. Before that, there were many digital currencies imitating bitcoin in the market, and they made various modifications on the basis of bitcoin code. In this way, it is very difficult to develop a new blockchain application, to re deploy a new chain, and then to develop an application on this chain. Using a consensus mechanism of pow alone is a huge maintenance workload. It's like developing an app on a mobile phone and developing the Android system together

after Ethereum comes out, it is equivalent to the underlying operating system of the blockchain. On Ethereum, it is very convenient to develop various dapps without considering the underlying development, and it can also share the computing power and storage of Ethereum. For programmers, the threshold of blockchain development is lowered instantly. The emergence of Ethereum has played a very important role in the development and popularization of blockchain applications. That's why Ethereum is called blockchain 2.0

2.

There is an essential difference between Ethereum and bitcoin. What is the difference? Bitcoin defines a set of currency system, while Ethereum focuses on building a main chain (which can be understood as a road) to allow a large number of blockchain applications to run on this road

from this point of view, Ethereum's application scenarios are more extensive, which is why we say that Ethereum marks a simple monetary system in the era of blockchain

1.0, and a transformation to other instries and application scenarios in the era of blockchain 2.0

however, there is no perfect thing in the world. Although Ethereum has expanded the application scope of blockchain in all walks of life and improved the speed of transaction processing, it also has some disputes and doubts

first, the solution to the lack of scalability of Ethereum: slicing technology and lightning network

the bottom design of Ethereum, the biggest problem is that Ethereum has only one chain and no side chain, which means that all programs have to run on this chain equally, consuming resources and causing system congestion. Just like last year's very popular Ethereum game "encryption cat", when this game was very popular, it once caused Ethereum network paralysis

to improve the processing capacity, Ethereum proposes two ways: shard and lightning network. Let's introce these two technologies respectively

(1) fragmentation technology

vitalik buterin, founder of Ethereum, believes that the reason why mainstream blockchain networks such as bitcoin process transactions very slowly is that every miner has to process every transaction in the whole network, which is actually very inefficient. The idea of fragmentation technology is: a transaction does not need to be processed by all nodes in the whole network, as long as some nodes (miners) in the network are allowed to process it. Therefore, Ethereum network is divided into many pieces. At the same time, each piece can handle different transactions. In this way, the network performance will be greatly improved

however, the slicing technology is also controversial. As we all know, the important idea of blockchain technology is decentralization. Only when the whole network witnesses (processes) the same transaction can it have the highest authority. The Ethereum slicing technology is similar to the group witness, not all nodes witness together. In this way, it will lose the absolute "decentralization" attribute, and can only achieve the purpose of high performance by sacrificing certain characteristics of decentralization

(2) lightning network

lightning network uses the way of transaction under the chain. What does that mean? It means: when the participants of lightning network transfer money to each other, they do not need to confirm the transaction through the main chain of Ethereum, but create a payment channel between the participants and complete it under the chain

however, lightning network is not separated from the main chain. Before establishing a payment channel, you need to use the assets on the main chain as collateral to generate a balance proof, which indicates that you can transfer the corresponding balance. In the case that both parties of the transaction hold the balance certificate, both parties can make unlimited number of transfers under the chain through the payment channel

only when the off chain transaction is completed and the assets need to be transferred back to the chain, the balance change information of the main chain account will be registered on the Ethereum main chain, and no matter how many transactions occur ring this period, there will be no record on the main chain

another real benefit of lightning network is that it can save the cost of miners for you. At present, when we trade on the main chain of Ethereum, we need to consume gas and pay for miners. Once we move the transaction to the lower chain, we can save this part of the cost

Of course, lightning network is not perfect. When using the lightning network, the assets on the main chain should be used as collateral; And this part of assets as collateral can not be used before the user completes the transaction under the chain. This also determines that lightning trading is only suitable for small transactions

the above is the problem of insufficient scalability of Ethereum, as well as the two main solutions: fragmentation technology and lightning network

Second, there are loopholes in Ethereum's smart contract and the infamous Dao event

Ethereum's smart contract is very powerful, but there are loopholes in any code. The biggest controversy of Ethereum's smart contract lies in the so-called loopholes, that is, security issues. According to relevant research, 34200 (about 3%) of the nearly 1 million smart contracts based on Ethereum contain security vulnerabilities, which will allow hackers to steal eth, freeze assets or delete contracts, such as the infamous Dao incident

(1) what does Dao mean

before introcing the Dao event, let's first introce what Dao is. Dao is the abbreviation of decentralized

autonomous organization, which can be understood as decentralized autonomous organization. From the perspective of Ethereum, Dao is a kind of contract or a combination of contracts on the blockchain, which is used to replace the government's review and complex intermediate proceres, so as to achieve an efficient and decentralized trust system. Therefore, Dao is not a specific organization, that is to say, there can be many Dao, all kinds of Dao

(2) the infamous Dao event

however, when we talk about Dao now, we basically refer to the Dao event, that is, the infamous hacker attack event we just mentioned. As we know, the English word "the" refers to "the Dao event". The Dao event

refers to "the Dao event", because we just said that Dao is not a specific organization, there can be many Dao, all kinds of Dao

in 2016, slock.it, a German company focusing on "smart locks", launched the Dao project on Ethereum in order to realize decentralized physical exchange (such as apartments and ships). Since April 30, 2016, the financing window has been open for 28 days

unexpectedly, this Dao project is very popular. It raised more than US $100 million in just half a month. By the end of the whole financing period, it raised a total of US $150 million. Therefore, it has become the largest crowdfunding project in history. However, it didn't last long. In June, hackers took advantage of the loopholes in the smart contract to successfully transfer more than 3.6 million Ethernet coins and put them into a Dao sub organization, which has the same structure as the Dao. At that time, the price of Ethernet currency fell directly from more than $20 to less than $13

this event shows that there are loopholes in smart contracts, and once the loopholes are exploited by hackers, the consequences will be very serious. This is why many people criticize Ethereum and say that its smart contract is not smart

to solve this problem, many foreign companies begin to provide code audit services in order to solve the vulnerability problem of smart contract. From a technical point of view, some teams are currently testing smart contracts. Most of these teams are led by professors from Harvard, Stanford and Yale, and some of them have obtained investment from leading institutions

in addition to the problems of insufficient expansibility and loopholes in smart contracts, the controversy over Ethereum lies in the POS consensus mechanism it pursues, that is, the proof of equity mechanism. Under the proof of equity mechanism, if anyone holds more money and holds it for a longer time, he will get more "rights" (interests) and have the opportunity to get bookkeeping power, Bookkeeping can also be rewarded. In this way, it is easy to create the oligarchic advantage of "the stronger the stronger"

Another problem is the chaos of ICO. ICO is a common way to raise funds for blockchain projects, which we can understand as pre-sale. The outbreak of ICO projects on Ethereum has caused illegal activities such as fund allocation and money fraud under the banner of ICO, which has caused security risks to social and financial stability

3.

First of all, we need to understand what is MLM:

MLM refers to the illegal behavior of organizers and development personnel to obtain wealth by calculating and paying remuneration to the developed personnel based on the number or performance of the personnel directly or indirectly developed, or requiring the developed personnel to pay certain fees to obtain the qualification to join. The essence of MLM is "Ponzi scheme", that is to say, the money of later comers is distributed to the income of former comers

However, the new type of MLM does not restrict personal freedom, does not accept ID cards and mobile phones, and does not take classes collectively. Instead, it uses capital operation as a banner to pull people to cheat money, drives luxury cars, wears gold and silver, and uses money to attract your relatives and friends to join in, and finally makes you lose all your money

then judge whether the ether coin is a kind of MLM, whether you need membership fee, whether you need to ask your relatives and friends to join

extended materials:

Ethereum is an underlying technology platform on which developers can create distributed applications. With the application, there will be transactions. With a transaction, you need money to complete the transaction. In this way, money has value, and investors' investment has a return. If the transaction volume on the platform is larger and larger, the demand for money will be higher and higher, and the money will be more and more valuable

from the perspective of image, bitcoin creates a kind of digital gold, while Ethereum creates a country, and Ethereum is the credit currency of the country

after bitcoin, there are thousands of digital virtual currencies in the world, many of which are completely deceptive in the guise of "digital currency". Previously, Haikou Municipal Public Security cracked down on a pyramid selling organization called "Eurasian currency", which operated on the internet pyramid selling platform, making more than 40000 investors cheated, involving 4.06 billion yuan. The field of virtual currency has just started, so we need to be cautious

resources : Ethernet money network

4. What was the situation of Ethereum ICO at that time - bitcoin Forum

5. On August 28, an insider of China Securities Regulatory Commission confirmed to reporters that the recent hot ICO has attracted the attention of the regulatory authorities and is currently preparing various materials“ At present, ICO has great risks. In the long run, it will definitely be included in the regulation. "

according to Caixin, the relevant regulatory authorities will take action against ICO. Whether to ban the program is under discussion, the central bank, the CSRC are involved. The legal basis for this action comes from the measures for banning illegal financial institutions and illegal financial business activities promulgated in 1998
the reporter learned from a person in the instry that many departments including the financial market department of the central bank have stepped up their research on ICO, but there are still some related problems to be solved
according to a number of instry insiders, on August 18, the central bank, China Securities Regulatory Commission and China Banking Regulatory Commission organized a special ICO forum, which was interpreted as a "landmark event" in the instry, and it was only a matter of time before it was brought into regulation< On July 25 this year, the securities and Exchange Commission (SEC) issued a report on the Dao, which determined that its token was securities. At the same time, it emphasized that any act of buying or selling securities in the United States, whether it was real currency purchase or token distributed with blockchain technology, must comply with the securities law of the United States
according to the definition of financial market division on the official website of the central bank, its main responsibilities include drawing up the development plan of financial market, coordinating the development of financial market, and promoting the innovation of financial procts; In addition, the Bureau of currency, gold and silver is responsible for drafting the relevant measures for currency issuance and gold management, organizing the implementation and undertaking the work of RMB management and anti-counterfeiting currency< According to the regulatory practice of the US Securities Regulatory Commission, ICO is defined as a securities issue. Therefore, if China draws lessons from it, it should also be supervised by the CSRC. However, in China, the digital currency is supervised by the central bank. Therefore, it is the central bank and the CSRC that jointly study and decide who will supervise the digital currency< Since the first half of this year, the number of domestic ICO projects funded by virtual currency has increased explosively, which has aroused controversy over whether ICO is illegal in raising funds
according to the report released by the national Internet financial security technology expert committee, since 2017, the cumulative financing scale of ICO projects completed through various platforms has reached 63523.64btc, 852753.36eth and some RMB and other virtual currencies. Based on the zero point price on July 19, 2017, it is equivalent to RMB 2.616 billion in total. The total number of participants reached 105000
on August 24, the CBRC made regulations on virtual currency financing for the first time. The CBRC drafted the "Regulations on the disposal of illegal fund raising (Draft for comments)" (hereinafter referred to as the draft for comments) and pointed out that the illegal fund raising administrative investigation should be carried out in the name of virtual currency without legal permission or in violation of the relevant provisions of the state. The participants of illegal fund-raising shall bear the losses caused by their participation in illegal fund-raising
it is reported that Huo Xuewen, director of the Beijing Municipal Bureau of financial work, once pointed out at a closed door meeting that all activities of "managing other people's money" should be included in the supervision
Wu Xiaoling, deputy director of Finance and Economics Committee of the Standing Committee of the National People's Congress and chairman and President of Wukou School of finance of Tsinghua University, also publicly pointed out a few days ago that internationally, ICO has been regulated as a kind of securities in the United States. The people's Bank of China has also made a corresponding statement to bitcoin (pointing out that bitcoin does not have monetary attributes), and further regulatory measures are expected
a blockchain practitioner said that "blocking is better than sparing". Supervision is expected, but if it is totally negated, some enterprises will inevitably move ICO abroad<

4 ask ICO
1. Should ICO be included in the regulation
Tang Ling, CEO of Zhigui technology and general initiator of ink chain, told reporters that ICO should be included in the regulation. Under the demonstration of wealth effect, there are too many "pyramid selling currency" and "air currency" at present. Many projects can be financed before they are determined. Investors are crazy about speculating in currency, and the risk is great
Xiao SA, director of China Science and Technology Finance Law Research Association, believes that the national financial work conference emphasizes the need to strengthen the "professionalism, unity and penetration" of financial supervision, and all financial businesses should be included in the supervision. ICO should also be regulated. Financial innovation has vitality only when it is in accordance with the law, and any violation and abuse will be counterproctive
Li Lin said that since there is no supervision on the use of funds after ICO financing, the whereabouts of funds after ICO financing have become a mystery. He suggested that regulators should pay attention to the appropriateness of investors
2. How should ICO be supervised
Tian Ying, vice president of okcoin, believes that the first step in the supervision of ICO is to clarify the legal nature. The registration management of ICO's enterprises and the open and transparent trusteeship management of ICO's tokens should be carried out. The project sponsor, token circulation platform and the third-party propaganda organization should strengthen the inspection of the authenticity of the project, increase the risk ecation of investors, and effectively control the risk. These regulatory measures can be implemented after qualitative analysis. There are also many legal experts who suggest to refer to the financial technology sandbox regulatory system implemented in the UK and Singapore to minimize the contradiction between innovation and risk
for how to supervise, Tang Ling suggests setting up project audit and e diligence. At present, the ICO project is "self-examination and self passing meeting". Although the agent investment platform will also audit, it has not been put on record. At the same time, we should set up the fund trusteeship. In the early stage, some media exposed that indivial platforms used capital precipitation to buy financial procts, which was caused by the lack of fund custody, and it was easy for the platform to roll up money and run away. In addition, standardized management, the funds should not be allocated at one time. Many entrepreneurs haven't seen so much money and don't know how to spend it. It's easy to have problems
Xiao SA believes that the specific regulatory focus is: proct registration, information disclosure, asset custody, project authenticity and qualified investment
"proct registration is an effective way for regulators to understand and monitor high-risk financial business; Information disclosure is a routine scheme, which can make the project more transparent; Asset custody to prevent stakeholder cases; Project authenticity is the minimum requirement for ICO issuers; Qualified investment, matching the risk and investors, restricting speculative funds. " Xiao SA said
3. What are the difficulties of ICO supervision
Tang Ling said that the regulatory difficulty lies in that many platforms can now achieve ICO through smart contracts, especially through Ethereum projects, which can be raised by themselves without going through the platform. There are many private placements with high risks
Tian Ying believes that identifying the nature of ICO is a difficulty in promoting supervision. ICO is a bit like crowdfunding, but it is not exactly the same as crowdfunding. A while ago, the SEC of the United States announced the results of the investigation on the Dao token, believing that the token has the scope of securities and is under the supervision of the securities and Futures Law. This judgment is also the result of a lot of research and analysis by US regulators. Some non security tokens may expect the right to use certain procts, which does not belong to the category of securities
she believes that ICO is an Internet proct, and some ICO projects are operated globally. In the process of management, international coordination needs to be strengthened. What's more, how far should supervision go
Xiao SA said that there are differences in the instry on the nature of ICO. If we define the essence of ICO as "barter" and exchange one special virtual currency for another, it can be explained
if the ICO project directly raises "legal currency", including RMB, US dollar, euro, etc., it can be understood as "deposit" of illegally absorbing public deposits. Once it meets the requirements of article 176 of the criminal law on the crime of illegally absorbing public deposits, it may constitute a crime
Xiao SA believes that if the ICO project has a dividend clause, it has an equity mark; if the project has a repurchase clause, it is suspected of "capital preservation and interest preservation". It is similar to a financial proct, and it is actually an illegal operation to issue a financial proct without a license. In judicial practice, if illegal business is difficult to define, then the above behavior is likely to be identified as pyramid selling. Many ICO projects in the promotion process, there are promotional incentives, such as "pull an investor back token."
4. The impact of regulation on ICO
Xia Hu, CEO of Weiyou Yuanjie, told the Beijing news that regulators should regulate the development of ICO, especially the establishment of "qualified investor system", because many ordinary investors do not have the ability to bear high risks and should not participate in such high-risk projects. If there is no qualified investor system, it is easy to cause social problems
as for the regulatory impact, Tian Ying said that in the short term, it will have an impact on the current market, and in the long term, it will be concive to the sustainable and healthy development of the entire digital asset instry, so as to truly make the market healthy first and then efficient. On the other hand, supervision will also enable high-quality projects to present their value
according to a research report of Huachuang securities, the innovation trend of ICO is worthy of attention. In the long run, with its growing influence, it is necessary to accept supervision to promote the healthy and orderly development of the instry. ICO platforms or projects with strong strength are expected to take the lead in embracing regulation, balancing innovation attributes and potential risks, and become the beneficiaries of ICO's future development.

6. Virtual currency and token have different functions

7. Direct network is enough
there are two ways to improve your foraging skills: 1. Collect items in the field; 2. Chop trees with an axe. All the above behaviors can increase your skill experience. If you reach a certain number, your skill level will be improved

8.

On September 2, it was reported that on August 21, the central bank headquarters received the relevant emergency report. The report analyzed in detail and clearly pointed out that from the perspective of penetrating supervision with substance more important than form, ICO belongs to illegal fund-raising in disguise

according to the lover quoted, relevant people of the central bank have studied a large number of ICO white papers and come to the conclusion that "90% of ICO projects are suspected of illegal fund-raising and subjective and intentional fraud, and less than 1% of the ICOS that actually raise funds for project investment."

ICO is the full name of initial coin offering, short for the first public offering of digital token, which imitates the IPO (initial public offering) in the stock market. That is to say, the project sponsor can obtain financing by issuing initial token through blockchain technology, but the initial token cannot be purchased in legal currency (RMB, US dollar, etc.), because it violates the laws and regulations of various countries on financing, and needs to be purchased with digital assets with good liquidity such as bitcoin and Ethereum

Yao Qian, deputy director of the science and Technology Department of the people's Bank of China and director of the digital currency Research Institute, pointed out in an article a few days ago that the current ICO is at the edge of legal supervision. Starting from the system construction, we should give the ICO a legal statement as soon as possible. He suggested that the implementation of sandbox supervision on ICO (in a "safe space", financial technology enterprises can test their innovative financial procts, services, business models and marketing methods, instead of being immediately subject to regulatory rules when related activities encounter problems)

On August 16, Huo Xuewen, director of the Beijing Municipal Bureau of finance, also said in an internal closed door talk that Internet finance, blockchain and ICO can only have vitality if they develop in accordance with laws and regulations, and any violation and abuse will be punished

"the national financial work conference made it clear that all financial activities should be regulated. All activities of "managing other people's money" should be subject to supervision. Blockchain innovation, Internet finance innovation, ICO innovation, but if you do not control the risk, then all the innovation will go to its opposite. If the traditional financial risk is 1.0 and the Internet financial risk is 2.0, the current blockchain and ICO risk is 3.0. " Huo Xuewen said at the meeting

9.

ICO is the abbreviation of initial coin offering, which literally translates into the first issue of token. It is the first issue of token in the blockchain project to raise general digital currencies such as bitcoin and Ethereum. To put it simply, it is a crowdfunding for blockchain projects with encrypted digital tokens as the subject matter

ICO began to appear in China in the second half of last year, and then became famous. On May 23, the highest price of quantum coin reached 66.66 yuan, which was 33 times higher than the crowd funding price of 2 yuan in March, crushing all the record of ICO's first day increase

why stop

in the announcement issued by seven ministries and commissions including the central bank, it is clearly pointed out that token issuance financing refers to the so-called "virtual currency" raised from investors through the illegal sale and circulation of tokens. In essence, it is a kind of unauthorized illegal public financing, suspected of illegal sale of token tickets, illegal issuance of securities and illegal fund-raising Financial fraud, pyramid selling and other illegal and criminal activities