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THEKEY.RIP: The Story Behind The Worst ICO of 2018

Internet 3.0 Breaks Under Weight Of Internet 2.0

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By Spencer Kellogg | WORLDWIDE

The night (or day depending on your longitude) had finally come. The KYC’s (mostly) had been filed and the NEO bought and transferred to wallets in anticipation of the latest crowdsale token launched through the NEO blockchain: THEKEY. With the successful launches of Red Pulse and Deepbrain Chain, many expected a smooth crowdsale for the newest NEO asset. The crowdsale was scheduled for 8AM Beijing time on January 15th. It was two in the morning in England and just after dark here in the Rocky Mountains as investors far and wide plugged into THEKEY’s telegram chat to prepare for the token crowdsale. That’s when everything went to hell.

THEKEY, a blockchain based identity verification platform, had looked for weeks to be one of the most promising ICO’s of Q1 and a confirmation that NEO had solidified itself as not only the Ethereum of China but perhaps a new contender to be the ICO builder of the future. The performance of the network left some unimpressed. Now questions are arising about the failed launch of THEKEY that could threaten NEO’s price stability in the short term and affect the confidence of investors in other companies launching through NEO. While the NEO blockchain slowed to a crawl and eventually stopped tracking altogether, THEKEY’s website was inoperable well in advance of the dated timestamp for the ICO. Leadership was scarce in the panicked chat room as angry speculators and freaked out noobs butted head in an epic frenzy.

The trouble began sometime during the last week when it became apparent that the number of people who were accepted into the ICO and the number of tokens offered for sale were drastically different. Close to 40,000 people passed the KYC (know your customer) that ICO’s require users to participate in the fundraising phase. The problem was, only 10,000 Neo were going to be accepted in the distribution model leading to speculation that less than 1,500 of the 40,000 whitelisted members would get their orders accepted. Some members of the cryptocommunity saw this for what it was and we’re predicting days in advance that this was going to be a rushed, overloaded ICO with major uncertainty in the leadup and aftermath.

To confuse things further THEKEY’s communication was dodgy and suspect throughout the week with a refusal to confirm how many TKY (THEKEY) tokens investors would receive per NEO until one hour before the sale at 8AM on Jan 15th. To further accentuate the circumstances, investors learned close to the sale that any NEO transferred to the crowdsale address after the initial cut off of 10,000 NEO had been accepted would be held in storage for over a month as THEKEY performed an audit of the sale. When the conversion rate was finally announced less than 60 minutes before the 8AM crowdsale many investors balked at the price which appeared to be almost triple the previously announced rate. As investors scrambled to confirm the inflated price and make new strategic plans, the clock was ticking and the website shuttering. Outages were reported throughout crypto twitter and the main telegram chat was aflame with cries of scam and “worst ICO ever” abound. Later in the night, a message was sent out to investors that explained that THEKEY’s website was under constant DDOS attack and suggested that members try and email the team to participate. For many, this last-gasp send us your money and let’s see what happens strategy was the final straw and many began attacking the team for lack of transparency and organization.

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What’s worse is that the ICO exposed flaws with the scalability of NEO’s blockchain. A common structural weakness throughout many of these young blockchains is their glaring inability to handle sudden and urgent use. While THEKEY must account for the poor performance in the launch of their token, the flooding of the NEO blockchain and its subsequent failure under only medium stress signals a need for improvement of this new technology. Neotracker.com, a site used to track transactions and view public addresses, also struggled during the evening to perform orders and gather data.

Another alarming trend that I witnessed in the build-up to the token sale was a terrifying amount of incompetence from new users attempting to participate. Many seemed completely confused about how to transfer NEO (yes, it can only be moved in whole numbers) or if they could use ETH to buy (no, that’s a totally different blockchain). Mere hours before the event and days after KYC registrations had closed many users spammed the official chat wondering if they could still get whitelisted. Each one of these questions could be answered with only a few minutes of research or a timely and well-organized admin. If users are asking these sorts of questions only two hours prior to throwing $1,000 at a mysterious project that can’t keep their website from crashing, what does it say about the headspace of the overall crypto community in 2018? It says that nobody actually cares about the technology. Echoing Vitalik Buterin sentiments from last week it appears everyone is here just to post shit memes, go x10 and get a Lambo.

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Nearly eight hours after the token sale that wasn’t, various components and aspects of the NEO blockchain are still unusable. For all the hype in this burgeoning space these are the cruel and difficult lessons that we must analyze and overcome. For investors and speculators it is a clear warning that things are not always as they appear to be on the blockchain and that the old slow boring internet of our past still reigns king in the farlands of Internet 3.0. This entire event is reminiscent of the Ethereum ICO craze during the summer of 2017 and longterm I fully expect NEO to overcome this. THEKEY however is another story. I have not seen this type of anger and FUD surrounding a project since the SONM ICO. If leadership can be so negligent and if the team cannot handle what should’ve be a straight forward token sale, how can we trust they are capable of implementing technology to change the world? It could take months for the perception of THEKEY as an unreliable asset to wear off and it will be interesting to see just how quickly the token sale concludes once they resolve the website issues. The new year is only two weeks old but already we have witnessed one of the great calamities in the history of the blockchain space and what may very well be remembered as the worst ICO of 2018.

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  1. gareth pendlebury-brown January 15, 2018 at 9:44 pm

    With the exception of the part about telegram descending into chaos, this is complete rubbish.
    Firstly, you do realise that the neo blockchain has been suffering from several nodes misbehaving prior to the key ICO right?. This is detailed on neo tracker and has zero to do with the key and hd been going on for several day already. The blockchain was already struggling with the trinity ICO. Why you choose to associate this with the key is beyond me. There was no flash losing of the blockchain as no one could send anything.
    I’m suspecting you missed out and are ever so slightly salty.

    Secondly the key are not holding anyone’s neo for a month. The order system in place was performed manually so only neo going to be accepted was sent.

    You can see this clearly in the deposit address.
    Do some proper research.

    Reply

    1. More power to you garth. I didn’t miss out on anything , just watched THE KEY descend into hell and shutter the NEO blockchain! Thanks for your insight

      Reply

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