Crypto Community Insights #1 — Why We Can’t Trust some ICO Rating Sites Anymore!

A Disturbing and Shady Practice I Found out Emerging. Déjà Vu 2008!

With a hundred new ICOs a month, popping up like popcorn in hot cooking oil, choosing which one to invest in, becomes a challenge.

Thus, ICO rating sites were created to help us easily sort them out. The problem is, they are already rigged. Or will soon be. And it is not their fault at all. To find out why, we will take a look at a recent ICO bounty program from one side, and a popular rating site like ICObench from the other.

With the booming number of new ICOs, competition amongst them for funding has become severe. A common practice for spreading the word is to run a bounty campaign. 9 out of 10 projects are running a bounty campaign. Early contributors are incentivized with free tokens to perform different marketing tasks in order to raise awareness for the project.

Typically, the bounty campaigns are comprised of standard and routine practices like Facebook and Twitter sharing, writing articles, making Youtube videos, advertising in the community forum or translating technical information to another languages. Completely legit and beneficial ways both for the project and the contributors to earn money.

PROBLEM 1 — THIS IS NOT ENOUGH ANYMORE

The competition for ICO investors’ money is now much bigger. Bounty managers have to get creative and find new ways to stand out, attract attention, beat the competition and bring investor money for the project. While some practices are completely legit and help early contributors earn fair and deserved tokens, others are pretty shady.

The screenshot below taken from a bounty campaign, currently running on the community forum bitcointalk.org, shows an example of the latter:

Note: I am not disclosing the particular ICO because the focus of the topic is ICO rating sites.

As you can see, bounty hunters are incentivized and rewarded for giving high ratings and writing positive reviews at ICObench. Not any ratings, but only high ratings! This means a lot of people will do it just to earn tokens and the percentage of dishonest reviews will grow and dominate.

This is the only bounty program so far I have found out offering this type of incentive, but I am pretty sure a lot more bounty managers will start using it. If this practice spreads, ICOs will have tens or even hundreds of reviews on sites like ICObench soon. And 99% of them will be dishonest.

PROBLEM 2 — NOT ENOUGH REVIEWERS ON THE RATING ICO SITES YET

Currently, most ICOs on ICObench have very few reviews and ratings. Most of them have just a single rating, made automatically by Benchy — the ICObench rating bot. Benchy assesses the provided initial information. It is not a real rating, but rather a checklist. The more info for the ICO is uploaded, the higher rating the bot gives. Some ICOs have been rated by a couple of people. And very few ICOs are rated by more than five people.

Let’s say Benchy’s rating is the only one right now, which is often the case, and Benchy gave the ICO a rating of 3.0. Maximum rating is 5.0.

Now, just a single rating of 5.0 from incentivized reviewer will drive the total average rating from 3.0 to 4.0. This is a huge difference. If five incentivized reviewers all give a rating of 5.0, then the overall score is going to be 4.67. And in our example, the bounty program incentivizes (pays in free tokens) 15 people to give high ratings. In this ICO’s case, the overall score will become 4.87, provided that no other reviews are made.

PROBLEM 3 — THERE ARE NO BARRIERS TO BECOME AN ICO REVIEWER AND GIVE RATINGS ON ICOBENCH AND SOME OTHER ICO RATING SITES.

Let’s look how easy it is to become a reviewer on ICObench. You have to register a profile. No KYC, of course, so you can pretend to be anybody. Then you have to “Apply for Expert” in order to be granted the privilege to assess ICOs. The checklist before you are ready to apply is the following:

Source: www.icobench.com

You validate your email, choose a username, add a photo, place a link to your LinkedIn profile, write a title and bio and add your location. I don’t know what percentage of the “Apply for expert” applications is approved by the ICObench team, but soon after the forementioned bounty incentive was announced, this particular ICO quickly got two 5.0 ratings and it only had 3 ratings prior to this.

In defence of ICObench, I have to mention that I made a quick new random profile, filled the minimum information required, applied for an expert, but approval hasn’t come yet for a week. And I hope it won’t come ever. This speaks for some control on their side, at least.

However, I found another ICO review sites, which may be possible to be influenced by the general crowd’s ratings with no barriers at all. These are ICObazaar.com and WiserICO.com, but there may be more. I wrote an email to ICObazaar.com and asked them whether the generel crowd ratings influence the official rating, but I didn’t receive a response.

WiserICO.com takes in consideration the general crowd ratings. In this site you don’t even go through an approval phase. Zero barriers to enter. You just register and start making money. Bounty tokens, pardon me. All on the expense of potential ICO investors who are browsing these sites in search of quality ICOs. What they will find out instead, are well-incentivized and dishonest ICO ratings, sending potentially crappy projects to the top of the ranking.

Obviously, not all ICO rating sites are created equal. I highly recommend sticking to the ones that don’t accept public ratings and reviews, such as smithandcrown.com and ICORating.com. I will suggest the rest to reconsider their business model, before they are made completely obsolete.

The sad part is that ICO rating sites are not doing anything wrong or shady. They are trying to provide a useful service, but they have become a battleground on which the good actors playing the angel side are too few, while the bad actors playing the devil side are becoming more and more in the same time. The result is an environment dominated by bad actors, working for their own interest. I hope that in the near future, the user base of honest reviewers will grow and this will save the rating sites.

The victims are the users - the potential investors, visiting these sites.

ICO rating sites are becoming a vital part of the ecosystem. They play the same role as the rating agencies Standard & Poor’s, Fitch and Moody’s play in the traditional economy (ICObazaar.com even have the same “AAA, AA+, BBB” rating scale as S&P/Fitch). And we all know how this played out back in 2008. The rating agencies were one of the key players that lead to the housing market crash. What is happening today in the crypto world is a complete 2008 déjà vu. Be careful and beware!