ICO’s — Crypto Gold or Crypto Bust
An exciting environment loaded with incredible technology in an unregulated landscape. Everyone’s jumping in — worried, they may be missing out on the investment of a lifetime. It’s the Wild West. As with any hot, unregulated market the attraction of big investment returns garners the attention of all walks of life, including the not-so-honest types.
We already know from history that most ICO’s are not gonna cut it. Most new startups don’t make it; that’s not a statistic that just applies to ICO’s and that does not make them all SCAMS.
ICO’s or Initial Coin Offerings, are a way to fund or ‘crowdsource’ a concept. You are investing in an idea, essentially. ICO’s are currently not regulated; that coupled with everyone thinking they are going to miss out on something great, is what makes them attractive to scam-artists.
So how do you know which ICO will succeed? You don’t. If there was a surefire way to tell we would all invest in those. But we can do our research to see which ICO’s may look like they are more likely to be SCAMS.
7 things to look at when researching ICO’s
#1 — Research the development team
GOOGLE GOOGLE GOOGLE
Check out who makes up the development team. What companies have they worked for? Do you recognize those companies? Are their profile bios vague? Do they contain lots of flowery descriptions without saying anything substantial?
Find development team members on LinkedIn and read their bios there as well. Do they match up? Scroll through their activity on LinkedIn to see how long they have been active there. Do they engage in posts? Many ICO’s create fake teams with fake members. If the bio on LinkedIn does not match up contact the person on LinkedIn to see if, in fact, are connected to the ICO company.
How deep is the talent on the team? How many team members have blockchain experience? Again, use Google to verify anything you see. Use Google Reverse Photo Search to see if the photos of team members are legit. Some end up being stock footage used to prop up a fake bio.
Google will be your best friend in regards to doing this search. For example: I searched the lead developer on a current ICO on Google and found company affiliations, university mentoring, events where they were a guest speaker, comments in magazines, social mentions by others in the industry etc. I Googled another developer involved in another ICO and I could not find a thing about them other than what was on that ICO’s website. Plus — they had a LinkedIn profile that had no depth, no activity and a very vague resume.
If finding out anything concrete about core team members is a challenge; that’s a huge red flag.
#2 — Read the white paper
Every ICO should have a white paper. A good white paper will cover, basically, the commercial, technological and financial aspects of the project. In detail it should cover the projects vision, the technology behind it, the purpose of it. What problem is the ICO going to solve and why is this ICO the solution. Has a competitive analysis been done? It should cover token distribution and the project timeline. Introduce any patents and copyrights listings. Are any Vestment Capital companies involved in the project?
Read a couple of white papers from successful ICO’s. When you read a bad one, you will pick up on it and that should raise a red flag.
#3 — Search Reddit and Bitcointalk.org
Don’t just read the company’s posting on the ICO offering, use Google and search for all links in regards to the company. Read every link you can find to see if red flags have been raised by others. **warning — many Reddit accounts with ‘High Karma’ and old established Bitcointalk.org accounts have been sold, possibly to ICO companies, however, users are quite smart and will follow the companies posts and other conversations and pick up on promotional speak, overly promotional posts etc.
#4 — Has part of the code been published publicly?
Has any of the code for the product been published on GitHub or SourceForge? Blockchain projects tend to have open-source code. These are available for other developers to see to check for validity.
#5 Is there a proof of concept available?
Is there a working demo — something potential investors can see, test, play, etc. Is an ALPHA version available to download?
#6 — Does the company have a brick and mortar address?
Go back to Google (Google is your best friend) and look up the addresses associated with the ICO — are they real? Or are they virtual offices? If there is no actual, physical address you may want to raise a red flag.
#7 — Remove the token (coin) from the business plan
Can the business plan survive without a token? If so, why is there a token?
There are some incredible projects out there. Do your research and if it seems too good to be true, it probably is.
All this background research can be exhausting. If you have a good sense of humor and want to lighten the mood read about ‘the first 100% honest Ethereum ICO’, called the USELESS ETHEREUM TOKEN. The developer claimed it was a totally useless coin, even named it as such and people still invested. You can read about that here https://uetoken.com