Hello BitcoinTalk community, it's been a rocky last few weeks for Ethereum, with large fluctuations in the price of ETH and sketchy ICOs launching left and right. Now more than ever, it's important to be prudent with our investments. This is for the sake of our own wallets, the stability of the Ethereum economy, and the reputation of cryptocurrencies going forward. Of course make your own decisions about what to invest in, but please do research before giving projects your money.
One of the dapps I was tipped off to a few days ago is AdEx (
adex.network), an Ethereum advertising dapp, and I've been researching them for the past couple of days. They are having their ICO today (actually in roughly 1 hour from the time of this posting).
Here is my analysis of the AdEx ICO, based on their website, white paper, ICO announcement, and actions up to this point in time.
OVERVIEWThe first problem I ran into with AdEx is that I'm not really sure what exactly their product is. Their website and white paper are not informative in any meaningful way, and nothing they've released actually explains what the product does or how it works.
AdEx describes itself as "A Decentralized Ad Exchange" on the website. Later on the website and in the white paper, it is described as an "ad serving network", which is in principle quite different. It is not specified what either of these things mean or if they refer to the same thing or different things with respect to AdEx. The extent of detail provided is essentially that advertisers use AdEx tokens to bid on ad properties and publishers get paid after ad delivery is verified, with a few off-hand mentions of "smart contract" throw in sporadically. No details are provided on what is actually going on and how any of this would work or be implemented.
The white paper claims that the core feature of AdEx is the "AdEx Profile", where web users volunteer personal information to advertisers which allows advertisers to deliver more targeted ads. What I've described to you so far is basically the extent of the information that AdEx has provided about their dapp across all of their website, white paper, and announcements. It's still unclear how exactly these three things they've mentioned (Ad Exchange, Ad Serving Network, and AdEx Profile) fit in with each other.
If they are in fact trying to be all three things separately, that warrants clarification and some explanation for how they plan to do at least one of them, not a total lack of information about any of them. Creating an ad exchange and an ad serving network are both extremely difficult and complicated tasks and not something that anyone can just go and create on a whim (even with money).
As for the AdEx Profile, which is supposed to be AdEx's special feature, that seems to be an even taller order than creating an ad exchange and/or ad serving network from scratch. I actually did a double take in my chair when I read that: a project springs up in the midst of a minefield of scams, it somehow manages to describe almost nothing about the product in 20 some pages of writing, one of the few things it does say is that its grand plan is to get Internet users to voluntarily hand over personal info to advertisers so they can see even more ads, and then it asks you to give it a huge amount of a mostly unregulated and highly valuable currency.
This is basically a barrage of red flags on the first pass, and unfortunately many of them are big red flags. At this point, I'm not comfortable giving ETH over to a group that has not yet formed a clear idea of what its product is. I'm even less comfortable giving ETH to them knowing that
they are still pushing forward with an ICO despite this.
ICO DETAILSThey make a few statements about a locking period for the portion of AdEx tokens that they will keep. Unlike many other dapps, this locking period is not enforced at all in their smart contract.
Additionally, against the de facto code of conduct for ICOs, they have not made any statements regarding token burning in the case that the ICO does not sell out or any locking period on these unsold tokens. Looking through the ICO code, I did not see any mechanism implemented for token burning (let me know if I missed something).
The three biggest categories on the budget are Software Development, Business Development, and Marketing at 45%, 20%, and 20% respectively. Yes, business development and marketing are both are allocated a fifth of the total budget, almost as much as software development combined. One might think that figuring out what the product actually is and having some sort of development underway would be a prerequisite to allocating almost half the budget to business and marketing, but maybe that's just me.
On top of all this, the AdEx roadmap specifies quite a large window between the ICO and the first preview of any product (currently listed as February 2018). The ICO is structured such that there is no accountability for how the team behaves in the mean time.
They specify no period of time for when the ETH they receive from the ICO is locked. There is nothing stopping them from taking the entirety of the ETH earnings and exiting quickly.PLAGIARISMThis section is probably the one that is most disturbing to me, because what AdEx has done in terms of plagiarism suggests a willingness to first steal other people's work and then be dishonest about it when caught instead of doing the right thing. Several parts of AdEx's white paper appears to be heavily plagiarized from existing competitors. This pretty much lines up perfectly with AdEx's inability to describe what their product is and how it works with any sort of clarity. That becomes less surprising when you find out that a lot of their writing is a combination of different chunks taken from existing competitors' literature.
There are currently several other projects competing in the blockchain advertising market, including BAT (
basicattentiontoken.org), adChain (
adtoken.com), and Qchain (
qchain.co). It is important to note that all three of these projects published their websites and white papers well before AdEx.
A couple of weeks ago, it was pointed out on Reddit in r/EthTrader (
https://www.reddit.com/r/ethtrader/comments/6gxxr9/warning_be_careful_about_adex_advertising_dapp_ico/) that AdEx's white paper shows large similarities to the white papers of all three competitors. The EthTrader post links to several examples comparing the AdEx white paper to the other three white papers. In many cases, the AdEx white paper is not only unoriginal but is essentially a sentence for sentence copy of a competitor's white paper.
Comparing the four white papers, the similarities between the AdEx white paper and each of the other three are real and actually go beyond what is illustrated in the Reddit post. It is also worth noting that while AdEx's white paper is in many parts a mashup of its competitors' white papers, the other three white papers are quite distinct and show no sign of copying from each other.
After AdEx's copying was pointed out on Reddit, one of its founders posted a reply saying that he and the AdEx marketing person wrote two of the sections (there are several sections highlighted in the EthTrader post), and then simply did not bother addressing the remainder of the concerns. Also pointed out in that Reddit post was that the AdEx white paper originally included a table comparing AdEx to various competitors. AdEx
misrepresented every single competitor included in this comparison. It's hard to argue an honest mistake when that mistake involves an inability to do the most basic research on all of AdEx's several competitors.
TIMING OF ACTIONSIn December 2016, AdEx issued a paid press release (
https://cointelegraph.com/press-releases/stremio-selects-wings-dao-management-platform-for-the-adex-crowdfunding-campaign). From then until the end of May 2017, there was no activity from AdEx as far as I can tell. This includes no visible development of any kind. Because of this, it bears saying that the sudden timing of their very recent website, white paper, and ICO announcement less than one month before their ICO is extremely suspect. The suspiciousness of their timing is well-explained by the following timeline:
December 2016 - May 2017 -- AdEx press release, followed by nothing
May 2017 -- BAT releases white paper, announces late May ICO
May 2017 -- Qchain releases white paper, announces summer ICO
May 2017 -- adChain releases white paper, announces late June ICO
For half a year, AdEx showed no activity. Then after three different advertising dapps release white papers and ICO dates within roughly a one month period, AdEx suddenly breaks silence.
June 2017 -- AdEx releases white paper, announces late June ICO
One could maybe argue that this was a coincidence if it wasn't for the following factors, which strongly suggest that AdEx is pursuing a fast ICO after seeing other advertising dapps enter the market:
All of the other three advertising dapps:
- have unique designs and business models
- have coherent websites and white papers that explain their products
- have evidence for products in development
On the other hand, AdEx:
- has no clear design or business model
- has an almost empty website that is uninformative
- has no evidence for any product in development
Additionally, AdEx:
- has a white paper that is blatantly plagiarized from all three competitors
- draws strongly from all three competitors' white papers regarding market outlook and product vision, but somehow does not deviate beyond what has already been discussed by these competitors
- launched their website, white paper, and social media accounts all within the past couple of weeks
It is hard to believe that all of these things in combination and in their order of occurrence are merely a continual series of coincidences. The timing of AdEx's recent announcements and ICO date, after months of total absence, seems to be in response to the entrance of other advertising projects instead of any sort of rational development roadmap.
SUPPRESSING LEGITIMATE CRITICISMAdEx's behavior on BitcoinTalk alone has been less than confidence inspiring. AdEx made an initial ICO announcement thread a few days before creating the currently active one. This original thread accumulated several pages of discussion before it was closed. The circumstances and timing behind the closing of the original thread are, perhaps unsurprisingly at this point, highly suspicious.
The original thread (
https://bitcointalk.org/index.php?topic=1960509.0) was created on June 10 and accumulated multiple days of discussion and interest. Later in this thread, there was criticism against AdEx's white paper for being poor quality and looking like it was made overnight (June 13). This was separate from and posted before the EthTrader plagiarism discovery. Additionally, BitcoinTalk community members had asked for some confirmation that the team listed on AdEx's website is real (which is still as far as I know unconfirmed). Despite these requests, no confirmation was provided. Shortly after, another user posted a link to the EthTrader post documenting various parts of AdEx's white paper that were lifted from its competitors.
Then all of a sudden,
later in the same day that several serious criticisms and ethical concerns were raised, AdEx closed that thread and moved to an entirely new ICO announcement thread. This was declared with a single post linking to the new thread on June 13. I suppose they thought, why constructively and openly engage with the community about serious criticisms when you can just close the thread and ignore them?
It is unclear why they felt the need to make an entirely new thread, conveniently
right after the above criticisms were raised on the original thread. Also, the new thread is
self-moderated, so now everyone's posts on the new thread are subject to AdEx's moderation instead of the BitcoinTalk community. An ICO announcement is not a typical case where a self-moderated thread is appropriate, and the fact that self-moderated threads are relatively unheard of among previous ICO announcements here reflects that.
AdEx claims that the reason for the new thread was to update the announcement with images. Standard protocol since the beginning of time would be to add images to the original thread, not suddenly creating a new one. It is also odd that they would choose to throw away the several days of conversation and buzz that had occurred on the original thread. Even if AdEx's own account could not add images for some reason, it seems highly unlikely that they would be refused help on this. There is no apparent reason to make an entirely new thread, other than to intentionally try to bury the
public questions raised about AdEx's plagiarism and the legitimacy of its team immediately before the thread was closed. Of course, AdEx's explanation also does nothing to explain why they needed to make the new thread self-moderated.
IMPACT/CONTRIBUTION TO CRYPTOAdEx has demonstrated a worrying pattern of refusing to engage in a transparent dialogue with the crypto community. This is not acceptable and at this point in 2017 after the amount of scam ICOs we've seen in the last quarter alone, this behavior needs to be openly and harshly criticized and discouraged at all costs. More questionable funding events is the last thing the crypto community needs at the moment when so many keen government financial eyes are fixed on cryptocurrencies and watershed regulations are on the horizon. AdEx's lack of transparency represents self-destructive behavior that is not representative of a dapp that has any sort of long-term viability or healthy contribution to the crypto ecosystem.
Also, regardless of how you feel about online piracy, the legal consequences surrounding it are bad news and an unnecessary addition to the legal headaches faced by crypto. There's already more than enough legal suspicion over crypto and ridiculously harsh legislation being proposed as is. I imagine we can all agree that it'd be best to not drag into our community any of the vast existing legal interest, money, and power invested in digital piracy over the last decade. I mention this because the co-founders of AdEx are from a project called Stremio, which is essentially a media app for easily pirating movies and TV. Even worse, they presented this by claiming personal qualifications for the team as coming from a background in the video-on-demand industry and a video entertainment startup, instead of saying that the co-founders previously created a product for facilitating online video piracy before deciding to do AdEx.
It gets harder to convince crypto outsiders and politicians that we are building a legitimate crypto ecosystem when a front-running piracy outlet with a sketchy team is holding a sketchy ICO. If we aren't diligent in supporting good dapps (including good ethics and good communication with the community) and deterring bad ones, the bad ones muddy the waters for everyone and increase the chance that we end up fighting against instead of working with laws and regulations a few years down the line.
VERDICTI'm not going to definitively accuse AdEx of being a scam, but there is overwhelming evidence that many things are very wrong with their operation. Every action AdEx has taken so far falls somewhere in between unprofessional and flat out fraudulent, from the lack of product vision and plagiarism of competitors to the timing of their recent announcements and actions leading up to the ICO, and on and on.
Additionally, I simply don't trust what the team says at this point. Too many of their claims are either verifiably false or strongly twist the facts, and too many of their actions scream ulterior motive. They also cite a paid press release from a few months ago to claim that they have been around for a long time. In reality, there seems to have been no activity for AdEx between that press release and their recent ICO announcements earlier this month. Even now, they are unable to provide any real description of what they plan to do with the ICO money they asking from people. Despite AdEx's fixation on that paid press release, they only showed any movement earlier this month after three much more legimitate competitors made announcements in the last month with actual development progress. Of course, AdEx didn't stop there, and instead decided to plagiarize heavily from the competition's existing literature. When caught doing this and called out on Reddit, the only response from AdEx was its co-founder posting a non-answer deflecting blame and not even bothering to address the majority of the examples that were laid out.
Worst of all, dapps like AdEx are harmful to the crypto community as a whole and hold back future acceptance and development of decentralized technologies. It is because of projects like AdEx and their teams' demonstrated bad behavior that the mainstream associations between blockchain/cryptocurrency and scams/illegal activity are maintained, and cause politicians to push for knee-jerk legislation that has the potential to suffocate the amazing growth we've seen.
Given the available evidence, it appears that the best case scenario for AdEx is that it is a particularly unethical and incompetent operation that has legally and ethically questionable connections (including Jihan Wu and Bitmain, who are rightfully infamous for selling people Bitcoin miners that included a backdoor to remotely sabotage the miner's hashrate), a track record of dishonesty and suppressing legitimate criticism, a refusal to engage the community transparently, and no product in sight. Even if it is not explicitly a scam, it is looking a lot like a terrible investment. It's hard to imagine that an investor could expect to make profits from a project that to this date cannot even coherently describe what the product is.
I've seen a few people expressing enthusiasm for the project, often citing a few marketing statements that AdEx has released. Hopefully this post sheds some light on how many red flags AdEx has left in its wake, the extent of the unscrupulous behavior from its team, and its actual state of development. It's not as if there is a shortage of dapps to invest in, and for advertising dapps in particular, there are already multiple competitors that announced before AdEx, and who AdEx copied from. If you want to get in on advertising, there are already several much better options.
I'm really at a loss as to why so many people still keep throwing money at projects that don't even provide enough information for you to describe what their product is. It's hard enough for companies with products and VC funding to succeed, it's even harder for legitimate dapps, and it gets harder for the legit dapps every time a sketchy ICO comes along (and usual exits shortly after). Again, it's one thing for someone to gamble with their money, and it's another thing when these gambles hurt the entire crypto community.
TL;DR: Less than one month between publishing website/white paper and having the ICO. No clear idea about what the product is and no sign of development. White paper contains many parts that are highly plagiarized from multiple competitors. Leadership has shown a track record of dishonesty, copying others' work, and censoring criticism. Multiple team members, advisors, and partners are ethically and/or legally suspect (including Jihan Wu and Bitmain, who sold people Bitcoin miners that included a hashrate-sabotaging backdoor, and the AdEx co-founders' previous project Stremio, which is basically a convenient way to pirate movies/TV). Stay away.
