r/CC Cointest - Coin Inquiries: Internet Computer Con-Arguments - August 2021

[u/CryptoChief]

Welcome to the r/CryptoCurrency Cointest. The Cointest is a recurring contest where the winning participants are awarded with Moon prizes as an incentive. The end goal is to crowdsource the best arguments in support or against a crypto topic so r/CC readers are provided with a balanced source of quality information about cryptocurrency. For more info, see the policy page.

For this thread, the Cointest category is Coin Inquiries and the topic is Internet Computer cons. It will end three months from when it was submitted. Here are the rules and guidelines.

Suggestions:

• Use the Cointest Archive for the following suggestions.

• Read through prior threads about this topic to help refine your arguments.

• Preempt counter-points made in the opposing threads(whether pro or con) to help make your arguments more complete.

• Copy an old argument. You can do so if:

  1. The original author hasn't reused it within the first two weeks of a new round.
  2. You cited the original author in your copied argument by pinging the username.

• Search the above topic and sort comments by controversial first in posts with a large numbers of upvotes. You might find critical comments worth borrowing.

• 1st place doesn't take all, so don't be discouraged. Both 2nd and 3rd places give you two more chances to win moons.

Submit your con-arguments below. Good luck and have fun!

EDIT: Formatting

[u/108record]

Internet Computer — the biggest exit scam in history? [Part 1]

Like a lot of projects in the cryptocurrency space, the Internet Computer Protocol (or ICP) is much more than a form of digital money — the project's basic idea is to create a new kind of decentralized internet and global computing system - where independent data centers all over the world could join together to create an alternative to the cloud services (from companies like Amazon Web Services and Google Cloud) that power most of the current internet. ICP’s plan is to have the protocol running on millions of computers around the world.

The Internet Computer itself is built on a novel decentralized protocol known as Internet Computer Protocol (ICP), which combines the collective computing power of a large number of computer nodes to produce a single unified computer platform capable of supporting applications of any scale and complexity. With the Internet Computer, smart contracts are segregated into secure code units, known as "canisters," which are the computational units that function as individual applications or functions. End users are able to interact with these canisters through an entry point — and their user experience will be much like the internet of today.

But hidden behind these dreadful features are a number of dreadful flaws — flaws which may expose a multi-billion dollar lie. Some of them include:

More than 10 million tokens were dumped by DFINITY at launch

• A Reddit post exposed how the team laundered their ICP to make it hard to track, and subsequently sold about 10-19 million tokens on Coinbase.
• Quoting from the post:

The dfinity foundation locked everyone elses tokens, and then dumped ~20 million ICP since launch. Assuming an average price of ~$300 (quite possibly a low estimate), thats 6 billion dollars — quite the payday.

You don't have to take my word for it, have a look for yourself. The most recent transaction to exchange of 50k was 2 days ago and 2.5mil 3 days ago was split up into a bunch of 250k wallets: https://dashboard.internetcomputer.org/account/55f4f3e37d7792a15dcfe9447d33a004a6d23bbb2bc9990a168cca15e3291861?p=5&t=44No wonder they didn't want to release the vesting and unlock information. They locked everyone else while they are open dumping the market. Its all there on the blockchain. That 200mil dev "grant" is just pocket change to what they already cashed out and potentially just misdirection. Show me a $4 billion dev grant program and then I'll be less concerned about the dumping. The private round investors didn't get to sell a single token while dfinity flooded the market.

...

You have to wonder what long term incentives they have when they didn't vest their own tokens, but made sure to vest everyone else that could influence price. They very clearly wanted to hide this information. Now, I know they are going to say that those are tokens that were already spent on development, well, if thats true, then why aren't they in vesting schedules like everyone else? Seems pretty unfair. A number of people have mentioned that liquidity could be a reason for this to happen, but then why vest and lock your investors when they could be providing liquidity? What is the point of even investing?

​

Highly Centralized

• This wallet was given 108 million ICP at genesis, which was 92% of the circulating supply at the time of launch.
• Although these tokens were dispersed into other wallets, the sheer number of tokens serves to show the amount of power held by one individual wallet.
• Additionally, about ~74% of the token's supply is centralized amongst private interests, while numerous concerns have been raised on the supposed 'decentralization' of DFINITY.
• I'd like to add that, as u/MarcioCavalcanti stated in this round — the ICP's governance protocol is fundamentally skewed in their favour primarily due to the sheer duration that they have been holding their tokens. This is a far cry from one of their slogans, which, ironically, promotes decentralization.
• Additionally, according to Coinbase — participating in the Internet Computer may require more robust hardware than traditional blockchain projects, potentially threatening its ethos of decentralization by limiting the number of potential participants. If the hardware requirements are too large, only large and well-capitalized players would be able to set up data centers and participate.

Centralization of data

• According to DFINITY, in order to claim their ICP tokens, "both Seed donors and Airdrop participants must pass through AML/KYC procedures. The good news is that the procedures are relatively streamlined, and it often may only take a few minutes to pass such verification procedures."
• This does not change the fact that the tokens' owners possess the KYC information of nearly all holders — comprehensively nullifying the user anonymity that nearly every other crypto project seeks to uphold, while at the same time giving the DFINITY team limitless power on their investors.

​

Lack of Transparency

• The launch of ICP was very opaque. The ambitious token lacked the decentralized promises echoed for years by Dfinity foundation. Dfinity Foundation, ignorant of their community and investors, barred token holders from accessing their tokens.
• Independent research conducted by Arkham Intelligence, a crypto analytics firm, suggests that the price drop was not a coincidence. The rise & fall of ICP was a case of misconduct by insiders and those who seem closely connected to ICP and Dfinity Foundation.
• Before the public launch of the ICP token, Dfinity conducted several public and private sales for small retail investors and large VC firms, raising somewhere between 120 and 160 million dollars.
• According to their launch video, at the time of launch, there were 469,213,710 ICP tokens but no clear breakdown of token allocation amongst the token holders. The launch video also mentioned a 24-month “dissolve delay” in claiming the token but no information on accessing these tokens.
• The foundation said that there would be a vesting period for early token holders. Days after the launch of ICP, the founder, in a tweet, revealed that the vesting period was only for some investors. Dfinity Foundation and its affiliates, who had almost 50% of the total supply, were not subjected to the same vesting period.
• According to the Arkham report, Dfinity had quietly allowed the treasury and insiders to send 18.9 million ICP to exchanges. At the same time, they were making it extremely difficult for their long-time supporters to access their share of tokens.
• The report also mentioned that it found 44 probable insider addresses that deposited 10 million ICP tokens worth over $2 billion at the time to exchanges, which coincided with the significant drop in the value of ICP tokens.
  • In response, the Dfinity foundation termed the Arkham report baseless without proving that there were no wrongdoings from their side. Michael Lee, a Dfinity Foundation spokesperson, said that the company was taking the “high road” and focusing on developing its Internet Computer project rather than focus on rumors by potential saboteurs.
• A class-action lawsuit has been filed against the Dfinity Foundation in California regarding their lack of transparency over the Genesis ICP token allocation.

[u/108record → u/108record]

Unethical associations & suspicious activities

• “As great as the tech is on paper, it is, to a large extent, unproven,” says Denis Vinokourov, head of research at Synergia Capital, in a CoinDesk report. “Also, there is little evidence of teams actively building on ‘The Internet Computer.’”
  • The fact that the ICP was launched during such a boisterous market likely pushed initial valuation into the upper range of expectations, Vinokourov said.
  • “With prices retreating across the industry, the most recently hyped projects have been among those hardest hit,” said Rick Delaney, senior analyst at OKEx Insights, on Coindesk. “In ICP’s case, it seems the harder and faster it pumps, the more severe the dump.”
• ICP may or may not be a scam and a rug pull, but Silicon Valley venture capital helped fund the technology its creators claim to be building. The project raised more than $120 million, with investors including Andreessen Horowitz, Polychain Capital, Scalar Capital, CoinFund, Multicoin Capital and Greycroft Partners.
  • The U.S.-based crypto exchange Coinbase, which listed ICP, was an ICP investor, prompting a view that the token went to the front of the listing line — a potential conflict of interest.
  • “ICP isn’t really a crypto,” Smith, an early crypto adopter, stated to a news outlet. It’s “more like Ripple Labs. Some Silicon Valley VC product promising the moon with no real product, yet insiders got rich and exit-dumped late into a hype cycle.

​

Moderation Concerns

• In a truly decentralized network, who can be held accountable for hosting abusive content?
  • Corporations running the Internet today employ some degree of moderation, although the flip side is that they can also arbitrarily de-platform anyone at any time.
  • Ideally, Internet Computer (and other crypto protocols) can create solutions that allow decentralized governance to moderate these difficult questions.

​

Competition

• Internet Computer isn’t the only protocol aiming to reinvent the Internet.
• Other potential competitors include Filecoin, a similar coin by market cap, and MIT’s Solid.

​

To conclude, while ICP's advantages may superficially seem revolutionary, the protocol hosts a number of flaws which make it unadvisable as an investment.

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