Without a doubt, the appearance of the Ethereum Smart Contracts opened a new era in the way start-ups can raise funds more easily from investors around the world and it also generated a new term: ICO (Initial Coin Offering). The basic method is simple: The ICO creates its own token, which is generally based on the Ethereum ERC20 standard. Then it adds a smart contract to the ICO Ethereum address. Usually, when the smart contract receives ETH form an external address, it will automatically send the ICO token back to the external address, based on the ETH/ICO token parity. Piece of cake, right? Well, it was easy, but as things evolved, it seems it’s not that safe anymore. Nowadays, serious ICOs usually use Token Sale Platforms, as they provide higher security and can also be fully integrated with the ICO website.
But why are smart contracts not that safe for ICO usage?
Coding bugs: Smart Contracts are meant to be just that; smart, irrevocable, transparent, and secure. And they are like that, if programmed correctly. Coding bugs in more than 34.000 of these contracts currently in circulation has exposed millions of dollars’ worth of cryptocurrency to the risk of theft. In November 2017 an individual known as “DevOps199” managed to trigger a major vulnerability in the Parity multi-sig wallet. He tweeted “I accidentally killed it”. Before anyone can blink an eye, his “accident” has “killed” Ethereum accounts holding over $300M of crypto assets. The affected wallets—known as “multisignature” wallets because they require multiple people to sign off before funds are moved, making them popular with companies—were all created with Parity, a popular program for digital wallets. Parity multisignature wallets experienced a bug in July that allowed a hacker to steal $32 million in funds before the Ethereum community scrambled to band together to hack back and secure the rest of the vulnerable ether.
Scarcity of experienced Smart Contracts programmers: Smart Contracts aren’t accessible to those without programming skills. And what makes it even harder, there aren’t many real Smart Contract programmers out there. Finding a good, experienced programmer is hard work and let’s face it, you kind of don’t know how to verify his skills, right?
Smart Contracts cannot be updated: that’s right, a Smart Contract cannot be further edited once it has been released. This means that Smart Contracts can do a job, however they are not future-proof, as they cannot be updated . Additional coding is not possible.
ICO websites are vulnerable, therefore hackable: as ICO websites sometimes have security glitches, there have been cases when funds were hijacked during an ICO token sale. The hackers simply replaced the official Smart Contract Address with a new one that directed the crypto funds into their wallets instead of the ICO’s wallet. Such examples were the token sales of CoinDash, Enigma (to mention some big names). This has nothing to do with the Smart Contract itself, but can be prevented if using a Token Sale Platform.
So, what is a Token Sale Platform?
If you don’t feel like reading a lot, I can describe a Token Sale Platform shortly: it is the easy and secure way to launch your ICO. If you feel like finding out more details, keep reading. A Token Sale Platform is actually the whole package you need for conducting a safe and hassle-free ICO. It is an all-in-one solution for organizing and conducting the most important part of the ICO – the fundraising.
Usually, Token Sale Platforms are products that are ready to implement into the ICO website and their front-end can also be customized according to the ICO website visual identity. They are developed by teams of professional programmers that usually spent thousands of hours tweaking, upgrading and updating them. The one that I personally consider best in class is provided by Ingenium Blockchain Technologies and has three main modules: KYC, Contribution and Bonus.
The KYC module helps identifying and verifying the identity of the ICO clients. The one that is provided by Ingenium Blockchain Technologies can be integrated with two of the most important KYC providers: Trulioo and Onfido. It also supports demographic settings and restrictions. The restrictions can be applied to certain countries or based on different steps required in the platform: having read the Technical White Paper, by ticking the corresponding boxes, etc.
The contribution module is the one that allows ICO contributors to purchase tokens. After logging into the platform, there are multiple contribution options, such as Bitcoin, Ethereum or even Changelly.
The bonus module can be customized with different bonus schemes, such as registration bonuses, contribution bonuses depending on the contributed amount, referral bonuses and so on.
As a conclusion, if you are interested in organizing an ICO, you should definitely consider using a Token Sale Platform instead of a simple smart contract. If you would like to know more about this, don’t hesitate to drop us an e-mail!