In September 217, the central bank and other seven departments jointly issued the Announcement on Preventing the Financing Risks of Token Issuance, which defined ICO(Initial Coin Offerings) as illegal and open financing without approval, suspected of illegal sale of token tickets, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities.
although ICO has been banned, the currency circle is still lively. On August 1, 217, the birth of BCH(Bitcoin Cash) marked the first generation of forked coins in the currency circle, and IFO(Initial Fork Offerings) followed, and more and more new virtual currencies were generated through IFO.
Lawyer Chen Yunfeng, director of the Internet Finance Committee, believes that this form of financing activity has not been clearly defined in law and does not have uniform technical standards, so there may be fraud risks, technical security risks and illegal financing risks in practice.
Bifurcated coins generated based on IFO emerge in an endless stream
In p>217, ICO became a big hit relying on concepts such as "digital currency", "blockchain" and "smart contract". However, only a few teams release a "white paper", and even some of them can start financing activities without a white paper. This operation mode has laid a great risk for investors, and the outside world has always been controversial about the legitimacy of ICO. In September last year, seven departments, including the central bank, gave a clear definition of ICO and stopped all kinds of token financing activities. The seven departments stated in the announcement that the financing of token issuance is essentially an unauthorized illegal public financing, which is suspected of illegal selling of token tickets, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities.
However, after ICO was banned, a new way of playing-IFO emerged in the currency circle. IFO refers to the bifurcated currency issuance based on mainstream currencies such as Bitcoin and Ethereum. On the basis of the original blockchain of these mainstream currencies, another chain is split according to different rules, resulting in a new digital currency. People who hold mainstream currencies can get new coins after bifurcation in the process of IFO, and IFO has become a new virtual currency financing means.
on August 1, 217, the birth of BCH marked the first time that the currency circle produced bifurcated coins. The size of the bitcoin block is only 1M, and the smaller the block and the smaller the capacity, the slower the transaction of bitcoin will be. In order to solve the problem of bitcoin block congestion, the BCH block chain was successfully separated from the main chain in block 478559, resulting in a new cryptocurrency with a default block size of 8M, and the block capacity can be dynamically adjusted. At the same time, the original holders of Bitcoin can get BCH for free at a ratio of 1: 1.
since its birth, there are different opinions in the industry about whether BCH is a new branch of Bitcoin or another "counterfeit currency". However, after several ups and downs, the price of BCH began to develop steadily. As of 2: 3 pm on February 26th, the data of Huobi.com showed that the price of BCH reached 858.8CNY, and that of BTC (Bitcoin) was 67558.69CNY.
following the success of BCH bifurcation, more and more new virtual currencies have been produced through IFO, such as BTG (bitcoin gold), BCD (bitcoin diamond), SBTC (super bitcoin) and so on. Chen Yunfeng believes that, according to the technical explanation, some forked coins are upgrades or improvements to the original technology. If they are forked in this sense, it is hard to say that they are worthless. In the case that the risk of virtual currency investment is repeatedly reminded at the regulatory level, the investment value should be judged by investors themselves.
Shi Qingwei, the founder of * * * Enjoy Finance, said that IFO is a new game generated in the currency circle in the past two months, and most of the projects generated by IFO have no investment value. Some IFO issuers think that they are not raising funds through ICO, but a bifurcation of mainstream currencies such as Bitcoin and Ethereum, which have a large number of users. After users get forked coins, they will generally ask to join the transaction, and then the issuer of IFO will get huge profits from the number of forked coins previously dug. He further stated that most of the forked coins generated by IFO have no investment value, even higher investment risk than ICO.
"pre-digging" forked coins or there is a risk of fraud
So, how does IFO make money? National business daily reporter found that miners developed forked coins in bitcoin blocks through technical means, and then distributed the developed forked coins to bitcoin holders in proportion, and gained value in trading circulation, and some of them were also traded through digital asset exchanges. It is worth noting that most forked coins will be "pre-dug" before they are officially released, and the pre-dug forked coins are equivalent to free access, so the founders of the forked coins will be able to make profits easily. In the market, some people think that the IFO in the name of "pre-digging" is actually a more naked token issuing game.
On November 15, 217, the well-known super bitcoin team in China announced that it would implement forking at the height of 498888 in the bitcoin blockchain on December 17, and start technical experiments on BTC, such as zero knowledge proof and supporting Turing's complete smart contract, and expand its block to 8MB. It will also launch the smart contract in early March 218 to increase the scalability of BTC, and by the end of May 218. If the fork is successful, a new split coin, SBTC, will be generated, and the original holder of Bitcoin will give it one to one, with a total amount of 21.21 million, of which 21, is pre-excavated for fork, which is managed by the fork team foundation, mainly used to encourage early developers to invest in ecological construction and foundation operation.
Song Qinghui, a famous economist, said that due to the lack of regulatory policies, the threshold for user participation is extremely low, and IFO itself may be suspected of illegally selling token tickets, illegally issuing securities, illegally raising funds, financial fraud, etc. Many new virtual currencies born through IFO have little value, and there may be flicker and fraud, which investors need to pay enough attention to.
Shi Qingwei thinks: On the one hand, IFO will cause great division in the community; On the other hand, the people who issue IFO are basically some investors, and there are few people who really do IFO projects, because IFO projects are difficult to do without strong execution and values. To put it bluntly, some IFO projects are short of money, so they will not be done after cashing out, and there is no particularly big risk. Just intensify market acquisition and cut leeks. The most typical risk is fraud risk, and the other is the risk of market operation. Some investors have been trapped in IFO projects.
According to Zhang Yexia, a senior researcher at Yingcan Consulting, firstly, there is no clear definition of IFO as a financing activity in our country, and there is a risk of being banned; Secondly, the risk of fraud. With the rise of the concept of IFO, it is easy to attract criminals to attract investors by using concepts such as "mainstream currency bifurcation" and "blockchain technology", but there is actually no so-called token issuance and technical research; The third is technical risk. At present, there are different technologies and standards for the bifurcation of mainstream currencies such as Bitcoin and Ethereum in the market. There is no same technical standard, and the technical level is also different. The technical security risks cannot be ignored.
Chen Yunfeng believes that for the financing behavior in the name of IFO, the forked coins issued by IFO itself have no practical application scenarios, and investors only gain value-added income through the trading process in the digital currency exchange market. This form of financing activity has not been clearly defined in law, and it needs to be specifically regulated by relevant departments.
Hong Shuning, chief researcher of the blockchain laboratory of Suning Financial Research Institute, believes that the risks of IFO are manifested in these aspects: First, there may be serious loopholes in changing the agreement without careful consideration; Second, the software released in a hurry will inevitably have a lot of BUG；; Third, every IFO will divert some miners, which will cause fluctuations in the smoothness of bitcoin transactions; Fourth, due to the low acceptance of forked coins, the price fluctuation may far exceed bitcoin, which is not good for investors.
Hong Shuning also said that there should be no pre-digging behavior in the real IFO, because it violates the original intention of bitcoin development, fairness and freedom. In fact, IFO, like ICO, is a disguised means of financing. Teams that need to make profits in advance should issue their own digital currency instead of using the banner of IFO.
none of them are legal.