TOP 9 Cryptofails, why Cryptocurrency exchanges closed

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03.06.2021 13:52
Top Cryptofails

    There are new cryptocurrency projects every day. Each promises to change the world or to be useful for humanity. They spend a lot of money on promotion and development. Those new projects show impressive results at the beginning due to hype. However later, not all of those projects are able to meet the expectations. Financial and moral responsibility is tough for some of them. A loud start transfers into the loud fail.

    The team is the reason for those failures in most cases. Blockchain is a cutting-edge technology that can change the financial system but it can’t change human nature.

    The fall of Qadriga CX

    The representatives of the Quadriga CX exchange have announced the death of the platform’s CEO Jerald Williams Cotton at the beginning of 2019. His widow confirmed this announcement by showing a death notification that was given to her in India. According to the team, Cotton went to India to build an orphanage there but he died because of illness.

    Quadriga CX team assumes that the cryptocurrency is stored in cold wallets. The keys from this storage are saved in Cotton’s laptop. His widow owns the laptop currently but she is unable to enter it as Cotton has protected his laptop by the most powerful security methods. He hasn’t left passwords to his wife. The exchange was closed with $145 million left from investors.

    This story triggered many disputes within the community. Those disputes were driven by the situation with the death of the founder, his wife, and the team’s steps. And what is even more important, the team and the wife and team can’t confirm that the exchange had this amount of money at the moment of Cotton’s death. Skeptics think that Quadriga CS has no money. The situation with the CEO’s death is a kind of a trick to deflect attention from the true problem. The verdict of independent auditors confirms those suspicions. The cryptocurrency exchange has no money on the exchange wallets.

    The Einsten exchange bankruptcy

    The Canadian court has made a decision to appoint an independent auditor Grant Thornton as the head of the Einsten cryptocurrency exchange. The main reason for that step was customers' complaints about the inability to get access to their funds that were stored in the cryptocurrency wallets on the exchange side. During the investigation that took place, the representatives of the Securities Commission found out that the exchange had a deficit of fiat money and cryptocurrencies. The employees used customers’ funds on their own, the exchange became unprofitable. There were no investors to buy this exchange. The debt to customers was $12 million at the moment of the exchange closure.

    Komodore 64 bankruptcy

    The Komodore 64 team has announced that they have received $85 million from Goldman Sachs to develop their business. This news attracted investors but this was not enough to save the project. Regular system mistakes that were made by the project’s administration have led to the total money deficit. The exchange was closed and the naïve investors had nothing to do but to calculate losses.

    Spacebit story

    The Spacebit team had an ambitious project to launch satellites to provide the whole world with the Internet and access to Blockchain. According to the project’s administration, even far regions would get access to cryptocurrency and financial services.

    Spacebit’s promotion was very active in 2014 and 2015. This campaign included marketing articles describing the advantages of the project. However, the team representatives avoided showing any equipment prototypes. They made no efforts to give a single proof of their concept.

    All works were stopped in 2015. The company’s CEO Pavel Tanasyuk has told that he has no interest in payment systems and he has already created one (MoneyXy). He was attracted by the space.

    Since 2015, Tanasyuk was developing a spider bot for Moon exploration. Spacebit was closed without any criminal consequences as the CEO invested his money into the project.

    Gems

    GetGems social network platform developers were proud of their idea to use cryptocurrency to pay customers for watching ads. They were sure that they will win the competition and their social network will become the leading platform in the industry. However, they have managed to attract $110 000 only during the crowd sale while other projects attracted millions of US Dollars. Gems development was almost shut due to the lack of interest from the cryptocurrency community.

    The project is still alive and it is popular among certain users category. For example, Gems is in the top 50 of popular applications in Uzbekistan.

    Auroracoin

    Iceland's government has launched an experiment in 2014. They have decided to issue cryptocurrencies to save the economic situation. Auroracoin was distributed in equal portions among all users that were included in a database on March 25. One Auroracoin was equal to $96. The rate fell to $11 and to $1 later. Iceland’s government attempted to reanimate the project in 2018. They allowed Skiptium cryptocurrency exchange to start operating on the territory of Iceland but this attempt failed again. Auroracoin is far beyond the Top 100 by CoinMarketCap.

    Omni

    This project was initially known as MasterCoin. It included a token, a wallet, and a decentralized crypto exchange. MasterCoin offered three tools that were built on the basis of Bitcoin Blockchain code. However, the developers made a mistake when they haven’t considered a high level of competition in their concept. They offered nothing new that could give some advantages to the project. Even when they have changed the name to Omni, their token failed to become a part of the Top 500 cryptocurrencies.

    Pay Coin

    In 2014 Joseph Garza and his GAW Miners team have launched a new token that was considered as a new generation of cryptocurrency. Pay Coin emission was largely covered by mass media and became one of the leaders of the industry by market capitalization. However, the company failed to keep their promises. Us federal authorities started an investigation one year later. Garza ran away. Pay Coin holder were trying to save their investments but their efforts were in vain.

    The Dao

    The Dao project was one of the biggest crow funding efforts in the industry and in cryptocurrency history. The Dao offered a decentralized financial management system. It was based on the Ethereum Blockchain and smart contracts. They have created a venture fund that was managed by AI.

    Investors were to vote for any promising project and AI was to do the rest, i.e. allocate funds and monitor the project execution via control points.

    The project attracted $150 million, which was eight times higher than the investments in the Ethereum project. However, The Dao failed as in 2016 an unknown hacker found a weakness in the smart contract and stole $50 million in Ethereum. Investors were in panic and they have withdrawn the rest.

    This attack buried The Dao project. To give the money back to the investors, Ethereum Foundation has made a hard fork. There were two forks since. One was with the data before the attack and the other with the data after the attack. The hacker’s fork should disappear after this operation.

    However, a part of the community didn’t accept the hard fork considering it as a rough infringement of cryptocurrency basics. Miners continued to work with the fork where the attack took place. A group of volunteers has created a new token called Ethereum Classic. Both cryptocurrencies are currently listed on various exchanges but they have different rates and values.

    Cryptocurrency platform that minimizes risks

    It is hard to create a reliable cryptocurrency portfolio. Those projects we have described above may attract your attention. Broex.io offers ready cryptocurrency solutions that allow you to add various tokens into your portfolio. This will help to minimize risks and to increase chances to succeed.

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    Final words

    Those projects had chances to succeed but they failed for a single reason – Those projects were created by humans!

    The history of the cryptocurrency industry shows that humans are the main reason for those failures. The code can’t predict humans steps. Happily, this industry includes many success stories. When dealing with reliable projects it is important to remember that some of their competitors failed because of human ambitions and mistakes.

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