Given the increasing number of large companies wanting to start their own ICO and that 2018 has been an extremely prosperous year for this new fundraising method, it may be thought everything in the ICO world is wonderful, but reality is not so magical.
According to studies and expert reports, up to 80% of ICOs that have been carried out in the market are scams, leading to more and more troubles and disappointments among investors who really belived that they were investing in the best project of their lives.
This situation is a warning sign for all of us and we must always be careful when analyzing and finding out which projects are scams, which are actual ICOs and those that may have the potential to break into the market. Here, we offer some very practical tips allowing to determine when we are facing an ICO and in which cases we are not.
Analyze the Whitepaper closely
The whitepaper is one of the most critical documents about ICOs and are usually very useful for investors and for the market itself that wants to know the details of the project. In general, this document must contain accurate, clear and easily understandable information for the average public.
Although there is no regulation or guidelines to draft the Whitepaper, it is always necessary to include the business idea, the objectives, the methods and the tools to be used, the roadmap and information called “Tokenomics”, which refers to all economic and financial data related to the token sale.
Currently, the experts and advisors of ICO remind us that we cannot trust Whitepapers that look very good aesthetically or with a very well-polished marketing-oriented writing. Nor should we believe that a Whitepaper is good because it is extensive. What many of these Whitepapers normally do is to blunt the space with very vague wording by including concepts of Blockchain technology and other technological elements.
We must always be analyzing the bases that sustain the project and the hardest and most important data that sustain its development. There are ICOs with very-well designed web pages and very well created Whitepapers from the aesthetic and marketing point of view, but they have illogical tokenomics or their proposed business idea they are proposing are simply unfeasible.
Be very careful with ICOs promising quick returns
All ICO investors hope their investment is guaranteed a return in at least a long term, but, we must also remember that in this market you can both win and lose.
Any project on the market promising a huge return on investment or insisting on the token revaluation, is highly suspicious. The ICO have to convince with their commercial idea and within it to explain the utility that the token will have. If the ICO does not place greater emphasis on the development of this idea, it is very difficult for the token to have a positive revaluation.
The vast majority of the most successful ICOs being launched to market today are seeking to emphasize utility tokens beyond legal regulations. That is, they are looking for the investors and next tokens holders to use them within the platform that is designing the project and not to see this currency as a simple asset to speculate.
These spaces are the showcase ICOS use the ICO to show itself to the outside world and evaluated very closely by investors and experts who claim to have knowledge of the ICO in question.
The creation of a good website requires time and monetary resources, the same happens with social networks. When we see an ICO that has lots of followers in social networks and a very well-polished webpage, we can realize that there is an investment and an interest in taking a project forward.
However, some experts say that these indicators are not trustworthy. According to what these experts have been able to evaluate, nowadays there are scammers who are willing to spend part of their money to devise a “legitimate” appearance in the virtual space to deceive investors. These experts usually advise that this element is only taken into account as a good signal but not as a definitive strategy.
Another element to be evaluated are Telegram groups. This is a space where the project promoters relate to investors, stakeholders, curious people and the market in general. There, they are often asked questions or presented with concerns and we must evaluate the answers.
If we see that the developers are not answering the questions or are not doing it convincingly, we must see the red flags.
The development team of the Project: a key player in ICO scams
Behind all ICO, there must be people, made of flesh and blood, who are committed to the execution and implementation of the project. This element is also critical for our study of the ICO and that is why we must verify very well the identity, skills and experience of the members of the development team.
It is necessary to verify there is a relationship between the interests and experience of the team members and what the project needs to develop. In many ICOs, there are usually people who do not have any interest or experience in the subject, showing that they are just opportunists who want to get into the Blockchain fashion. If you get to see this situation, you have to be very careful because it can be a sign of fraud.
Advisors announced in the ICOs must also be carefully evaluated. Often, some Blockchain technology claim that an expert is part of the project, but it turns out to be a falsehood, which means that we must always verify the veracity of these announcements. What must be done to avoid this type of situation is to check for comments from these advisors about their participation within the project or about elements related to the ICO in question.
Evaluate what the market says
Just as we work at todoicos.com, there are different sites on the network that are constantly evaluating and analyzing ICO projects launched to the market in order to ensure that investors have greater clarity and knowledge about the project. Through these evaluations, we can be guided by the seriousness and solidity of the ICO and also by measuring what the experts think about it.
There are also forums on Reddit and groups on social networks that are made up of several investors from all over the world in which there is a lot of discussion about the different ICOs that are coming to the market and where suspicious projects are usually mentioned