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Blockchain and ICOs
December 16, 2017

What can go wrong in an ICO?

Running an ICO involves much more than just generating and issuing tokens. There are numerous issues that can arise and it is important to be equipped for any that can arise. Someone running a token distribution event should be concerned with legal issues, a KYC (Know Your Customer) process, the smart contract or token issuance method, and security for the distribution event.

KYC
When issuing a token, you may be required to know your recipient’s identity in a KYC process. This may vary depending on your project, your jurisdiction and that of the recipient. It is important to consult with your legal team to collect all of the right information, as well as develop a way to collect it from the participant in your token sale. There are APIs and products that have emerged to help with this, some of them even on the blockchain. Whether you integrate one of those to your product or build one yourself, it is a critical part of any token sale.

Token Issuance
Whether you have a Smart Contract issuing a new ERC20 token or using another method, you should consider how you are generating and distributing cryptocurrency to your participants. Smart contracts have risen in popularity for this purpose, and there are many publicly available options to use as a starting point to base your specific token off of (you can even check out this list from blockstarter). Even if you adapt one of these to your own purposes, it is good to subject it to as much testing and review as possible, as it can be very embarrassing to have a tokensale go incorrectly and refund users.

Security
When performing your tokensale, aside from the security of your product itself, you should beware of spammers / scammers that reach out to the community. This may take the form of impersonation, with people pretending to be your team members with fake profiles to creating fake agencies that scam money out of people by pretending to represent your ico. People may also attempt to hack your social media profiles and send fraudulent information in order to scam money from people. The best solution to this is to control where information comes from or payments are made to, and announce it clearly and regularly. This makes it easy to discern scammers from the actual tokensale employees. Additionally, building a strong and proactive community can help people recognize and remove scammers from message boards.

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