We are at the dawn of a new age: the age of Initial Coin Offerings (ICOs)…which will probably last as long as any other age when it comes to Cryptocurrency. Before it, we went through the age of HYIPs, cloud mining and Revshares, and before that we had the age of faucets and matrices. Of course, even though an age is more or less over, we will still see some HYIPs and some Faucets appear every now and then. However, undoubtedly for now, we are in the age of ICOs.
An ICO is when a company raises money for its projects by selling blockchain tokens or assets. Many blockchain platforms have widely contributed to the birth of this age; however, the most important are Ethereum and WAVES among others. When these platforms allowed for the almost effortless creation of blockchain tokens, every crypto-business-minded person out there, including us at Cryptoways, jumped at the opportunity to have our own blockchain tokens or assets.
Just like with HYIPs, Cloud Mining platforms, Revshares and other investment programs, with ICOs we also have a lot of scams and a few rare legit opportunities. With a small sum of money and access to Fiverr, almost anyone can create a great looking project; however, there are a few things you need to consider before jumping into the next ICO that crosses your path.
1- Whitepaper or Website
First of all, one of the most important aspects of an ICO is called a Whitepaper. It should detail everything related to the particular token or coin being offered. Some ICOs don’t have a whitepaper, but they may have everything explained on their website, which is mainly serving like a whitepaper. In either case, before you buy a coin, check its website or whitepaper and see if they make sense to you. If it’s too complicated or they use very specific jargon, just forget about it because it’s not for you.
The second important thing to look at is forums. Check how active this token’s community is on different forums such as Bitcointalk. You should also read as many threads as you can about it before you make any choice. Many people will have asked questions that you already thought of, while other will ask other very important questions. Moreover, you need to see how consistent the admin of the ICO are with their answers. Check to see if they answer the same question in the same way or whether they adapt to people’s backgrounds. There should be as much consistence as possible; otherwise, this would be a very clear indicator of a scam. We should point out, however, that some of these ICOs may take the audience’s feedback into account and may slightly change plans as they go along. Others may change because of some internal disagreements. For example, we at Cryptoways changed a bit of our structure after our developer abandoned us. Our members also suggested ideas to create a better user experience, which we adopted. Therefore, if you sense any inconsistency in forums which does not make sense, try to make sense of it. If you are unable to do that, it’s better to abandon ship.
3- Transparent community
Even though it is very difficult to file a lawsuit against a person who is on the other side of the planet, it is nevertheless very important for you to know who the person behind this coin is. Sure, the world of cryptocurrency is all about decentralization and anonymity, but when a person expects people to invest with him, they have a right to know who he is. It’s the same with ICOs. When you decide to invest in an ICO or buy a coin, check to see who’s behind it. The more information about that person is available, the more you can trust it. You can easily find out if the person is real or just made up by searching his name on Google. If you can’t find any info, he’s probably a made up person with some fake photo. However, if you do find enough information about him online, you need to check for two main types of information. First, check to find any information linking him to the ICO. This is to make sure that he truly is the person he claims to be. Some scam ICOs may use the figure of a person who has no idea his name is being used. The second type of info you should find is anything about other activities by that same person. This is to make sure that this person has not only been created to market this ICO. Usually, if you are able to find a real Facebook profile for this person, the ICO is also real because almost no one would like his name to be tied to an online scam.
4- Long term uses
This is one of the most important questions that need to be answered. You should be completely aware of what happens after the ICO is over and how the generated funds will be used. In general, if the community behind the ICO relies on mining in order to bolster the token or coin’s value, you need to think more than twice before investing because the age of mining is long behind us. Also, mining is becoming more and more expensive. On the other hand, if the whitepaper’s claims are very daring, you should also be weary. For example, if a company is claiming to use your money to create a space shuttle and open a base on the moon, just forget about it. I mean, think about the legal ramifications of such a project; just getting it legally approved will cost way more than the ICO will probably raise. In addition to that, if what they are proposing is too complicated or not well explained, this usually means that either they are not completely sure of what they plan to do with the money, or they just want to confuse people by creating FOMO (Fear Of Missing Out) and eventually run away with the money leaving you with a worthless token.
5- Value generation plans
What’s even more important than long term uses for a token or a coin is value generation. Let’s say this ICO was actually legit and did build a base on the moon. You need to know how you, as an investor, will benefit from that. Some ICOs out there propose projects with real value, however with no money generation potential. For example, let’s say that this ICO proposes to use the money raised to teach the poor people of Cambodia about cryptocurrency. Sure, this may be a very important and noble goal, but how will it raise the value of the token that you are purchasing? Simply being able to buy it and sell it on trading platforms is just not enough. If there is no income from the project you are investing in, then it isn’t really an investment, but more of a charity if not a scam.
Another important aspect to look at when participating in an ICO is how much money is involved. As a general rule, do not invest more than you can afford to lose. A great number of ICOs end up being scam, and even if you do apply everything we discussed in this article, there are never any guarantees. Also, if you are not sure about things, you can usually wait until the ICO is over and then buy from the market for a much cheaper price. For example, the Polybius Token was being sold for around 10$ during the ICO, and now it’s available on trading platforms for considerably less. So, unless you really feel that you need to support a project, just wait and invest after the ICO.
7- Wallets and Trading Platforms
The last thing to consider before investing is where you will be able to store and trade the tokens you are purchasing. While some platforms, such as the WAVES platform, have built in trading platforms, others, such as Ethereum, can more easily be traded on mainstream platforms such as Bittrex and HitBTC. The ICO community you are planning to invest with must be very clear about where their tokens will be stored or traded. Be very careful with ICOs and coins that allow you to only use their own wallets and trading platforms (such as TBC) because these are most likely scams.
In conclusion, while the new age of ICOs is filled with scams and false promises, there is still a lot of potential for a smart investor to make a lot of money off of it. By measuring the ICO against the guidelines we shared above, your chances of being that smart investor are much better.
About the Author (Visit my website)
Charbel M. Tadros has a B.A. in teaching English as well as a M.A. in Education with an emphasis on Special Education. He is also a published author and has been in the world of cryptocurrency for a while now. In addition to his various interests, he is also the founder and administrator of Cryptoways.