The ICO is the favorite way that new cryptocurrencies raise funds. For investors, the ICOs are an opportunity to be part of a supposedly revolutionary project on the ground floor, but the space also has its fair share of scams. Being in such a situation, knowing the ways to differentiate a legitimate ICO from a scam will make the difference. This guide will show some of the essential tips for finding the real ICOs.
What is an ICO?
An Initial Coin Offering, or as it’s more commonly known, an ICO, means a means through which cryptocurrency projects obtain capital. An ICO issues new project tokens to early investors. These tokens later go on to be used to access services or products provided by that project. An ICO is somewhat similar to an IPO in the stock market but relates to cryptocurrency.
Research the Team Behind the ICO
Researching the people behind the ICO is one of the first steps in verifying it. Most genuine ICOs will publish their team, mostly comprising experienced professionals. Take a glance at the LinkedIn profile and past projects of the team members. The well-known and reputed team is a plus in lending credibility to the ICO.
Key Points to Check:
Team members’ professional backgrounds
Past successful projects
Public profiles and social media activity
If you come across a team with no track record or anonymous members, this is a red flag. Con artists hide behind anonymity.
Look at the White Paper
A white paper is an informative document that usually describes the project of the ICOs. It describes the goals of the project, how the technology will be used, and how these goals will be accomplished.
What to Look for in a White Paper?
Clarity and detail: A valid white paper should be clear and all-inclusive. It should explain the purpose of the project, the technology behind it, and the tokenomics involved in the project.
Plausibility Roadmap: Whether the project has a realistic roadmap. A roadmap simply outlines the projected course and timeline for milestones that a project aims to achieve. Unreasonable promises or unclear plans may raise some red flags.
Technical Information: The white paper should mention some specific technical information regarding the technology behind the project.
Avoid an ICO that has poorly written whitepaper or is incomplete. These could be the ingredients of a scam.
Verify the technology of the project.
Many genuine ICOs would at least have a working prototype of their technology if a demo is not available. Sometimes these are open-source, and any person can go through the code.
Ways to Verify Technologies:
Prototype or Demo: The prototype or demo of the technology of the project should be provided. Many times, this is housed on the website of the project or GitHub.
Free Code: Check if the code of the project is available in places like GitHub. Open-source projects are even more open:
If a project fails to provide any test of technology or makes its code closed, then it should raise a flag.
Find independent reviews and opinions
Independent reviews and opinions can shed more light on an ICO’s legitimacy. Check out reviews from reputable sources or industry experts.
Where to Look for Reviews:
Crypto News Websites: Generally, sites like CoinDesk or CoinTelegraph review most ICOs.
Crypto Forums: On cryptocurrency forums like Bitcointalk, check the general opinions about them.
Social Media: You need to know the comments by influential industry people or experts via social media. Views on the website of the ICO itself or less-than-known sources may be suspicious. Scammers create fake reviews to lure investors into investing money with them.
Look for transparency and communication
Transparency is an assurance that the ICO is serious. Serious projects are quite open to activities, goals, and improvements they are making.
Signs of Transparency:
Regular Updates: A genuine ICOs gives regular updates on the progress they are making. It may be through a blog, newsletter, or social media updates.
Open Channels of Communication: They have open channels of communication through which you can ask questions and get answers.
If an ICO operation is secretive or unresponsive to inquiries, then something may be fishy.
Beware of the Red Flags
There are some kinds of red flags that may indicate an ICOs is fraudulent. Watch for the warning signs.
Common Red Flags:
Improbable Promises: Steer clear of those offering assured high returns; no investment can assure returns, and it is always risky.
Lack of Transparency: If the owners do not show transparency in the workings or operations of an ICO, that is a red flag.
High-pressure tactics: The fraudsters try to force quick decisions. In every genuine ICO, there is sufficient time to make an informed choice.
Always do thorough research before you start investing. Never invest based on lofty promises, trends, and pressure tactics.
Conclusion
Finding a real ICO requires cautious research and due diligence. Always check who is behind the ICO, check the white paper if any, and check the technology. Research independent reviews and ask for transparency of communication. Any red flags: do not invest in pressured or far-fetched promises.
This will help you to at least be more protected from scam ICOs projects and more wisely invest your funds.
