ICOs are nowadays most risky, but most popular investment methods. There’re lots of flourishing projects and projects that lose. This article is for those, who don’t know how to choose an ICO for investing money.
Every ICO nowadays is ensuring great returns and beneficial perks for investors and there’re millions of them. But before investing money in each project, that promises you’ll become rich, remember, that largest part of these projects is going to lose or is going to be a scam.
Always remember that all the cryptocurrencies, including Ethereum, are experimental technologies. Majority of the ICOs are made on Ethereum platform, this means that it’s a double experiment.
The very first thing that is essential for an ICO, it’s to own a white paper, which contains lots of data about the project and its purposes. Also, there’ll be a description of the team, working experience and so on.
The one thing that is absent here is the real product. So, ICOs’ are about “I have a great idea and I want to make it real, so send me some cash please”. And now it’s time for a decision. You may look at all the aspects of the website and idea fully and decide whether this project worths your investment or not.
Does it worth investing in ICO?
Of course, there is a golden rule about this: “Invest just as much as you can afford to lose”. You may want to break this rule, but here’s what chief of Ethereum said:
How to know that it’s a scam?
1. Find out as much information as you can about development team
The very first step is to be sure that developers of the ICO aren’t anonymous. If so this is the biggest sign for not spending your money. If you have found developers on their website just google them as attentively as you can. Many scam ICOs use photos of people, who don’t even know what blockchain is. Also, there’re some scam projects that are involving some authorities of the industry, re-check this information before investing.
Always learn the story of team members. What they studied, where they previously worked and so on. Try to find information related to the sphere, maybe it’s an ICO they took part in or something. The key point is to find something that a team member participated in, which had success.
One very good sign is that members have attached links to their social platform accounts, like Twitter, LinkedIn or GitHub, on their website so you can quickly get all the information you want.
2. Check its media and community
The significant point is to check and see that ICO has a broad and open community of support. A public chat for investors on some platforms, like Telegram or Slack, is also a very positive sign.
Be extremely attentive to bounty posts and threads. This’s a very common method of increasing media and community awareness by asking people to share something positive about the project. Bounty posts are not always indicating that the project is a scam, but a successful project with an experts team will not need this kind of techniques for grabbing attention.
ICOs, where experts are working, will send press-releases to cover the required media and will build up hype through this method.
3. Check VC investments and the stage of the project
Sure, there is no certain point which is considered to be an ideal time for starting an ICO. Sometimes there is only a white paper and a roadmap and sometimes there is already a beta version of the product.
Everyone understands that it’s much safer to invest in a project, which is going to be launched in the nearest period. In general, investors are giving money to the projects that have at least some lines of code. But, of course, there are many examples of successful projects that launched an ICO without having nothing but white paper.
Another good sign is venture capital investments. Those VCs, who are already well-established in the sphere will never invest their funds in projects that won’t have success. But, of course, there are some exceptions.
If an ICO has a VC investment, it will surely try to focus your attention on it, but again re-check the information, before giving your money them.
4. Reading the white paper is necessary
This is very simple: you must exactly know what you’re investing your funds in. And the white paper is the easiest and best way to learn about the project.
Keep in mind, that ICO is a method of crowdfunding, this means that developers must be able to clearly introduce their goals and purposes.
A good white paper of a successful ICO will additionally contain outlines of a legal framework among two sides: developers and investors.
Also, pay attention that a good white paper must answer to the question “Why does this project need a token?”. If they can explain this, it is a very positive sign.
The final thing, which is one of the most important, check if collected funds are storing in an escrow wallet. The best variant is when this kind of wallet is operating via smart contracts of Ethereum.