Helpful tips to detect the good and bad signs of an Initial Coin Offering (ICO)
The concept of Initial Coin Offering or ICO is a way to crowdfund new projects using cryptocurrencies and Blockchain technology.
A company intends to create a new project to build a product or service and will hold a ‘Crowdsale’ event with the intention of raising funds.
The company will make up a new cryptocurrency, token, and sell a certain portion of these crypto-tokens to investors.
The company issued cryptocurrency will be exchanged for Ethereum mostly. Allowing the ICO company to gain the capital investment required to develop the product or service. Investors will be tokenholders and possibly have some rights and power in the ICO project.
How to recognize the signs of a good/bad ICO?
You don’t always come across reliable projects in the search for an investment-worthy opportunity. But there are some clear signs to be considered and that it could help a good ICO project stand out.
However, here are some signs of a bad ICO;
- Unachievable goals
Projects set up for scams do not have well-researched material or ideas.
The goals set up for the project will be hard to achieve, mimics something on the market, or don’t need Blockchain technology.
Or the idea is just blatantly stupid.
A good project will clearly state the problem to be solved and the solution to be provided.
- Unclear descriptions:
The Whitepaper of a fake project will be messy with no proper structure or meaning. The details will be at a high level or not relevant at all to the project title. Nothing will make decent sense
A good project will have a properly structured whitepaper with a detailed description of the project plan and its implementation.
- Anonymous or undefined team:
Scammers do not like to reveal themselves in a negative light from the get-go.
An ICO team being put forward without any names or designations is highly suspicious and should not be relied on.
An ICO project that defines the people involved and their experience is a reliable project. Professional expertise along with objective-specific experience is vital for the success of an ICOs.
- Lack of trust and transparency:
The company looks unstable with continuous changes in the organizational structure, work progress not being demonstrated anywhere, no code repositories or any sort of communication are red warning signs of a fake project.
A good ICO will always keep the investors up-to-date, demoing the product and publishing progress reports or whatever outlets they see fit.
- Improper Team Token Handling:
Usually, team members set their tokens aside, freezing them for a specific amount of time. This is to show investors that they will not simply run away with their money and not do anything.
A reliable ICO will not hesitate to use a recognized Escrow service that is accepted as known by its investors or is reputable.
Thus, it is important to ensure the reliability of an Initial Coin Offering project before investing in it. Even though the warning signs of a bad ICO project are not visible at first glance, keeping the above facts in mind will help you analyze and filter out the good projects from the bad ones in the future.