What criteria does Verified ICOs use to make a proper ICO judgement?
Being one of the first to contribute to the Ethereum ICO, our team has learned a lot about the initial coin offering fundraising mechanism. Over the last 12 months we have witnessed hundreds of projects pop up, with very few catching our attention.
Let take a look at the 3 types of ICOs that exist.
#1. We have the Scam ICOs, you want to be able to identify these, stay away from them and warn others not to get ripped off. There is nothing worse than investing in project that full on steals your money.
#2. We have the Cash Grabs ICOs. These are the ones where the founders hype up their project and are the only ones to benefit from it. A lucky few might sell their stake in time but the majority of long term holders will be taking the hit. The project is somewhat legit but there is no unique technology associated and the team knows barely anything about blockchain.
#3. We have the Legitimate Project. This is what everyone wants to be apart of however, you can still lose money. People need to be aware that its still possible to get FOMO’d in too late and be caught holding the bag due to overvaluation, a massive amount of hype or even a mixture of both.
Note: Verifying if an ICO is legitimate and identifying one that has potential to be a great investment are two completely different things. In this article we will focus on figuring out the quality and legitimacy of an ICO.
To figure out if an ICO is a scam, one of the very first things we look at is the team and ask ourselves the following questions:
Are these real people?
You’re probably thinking, how can I tell? Well its actually not too hard, you can use Google to do a lot of this stuff. Reverse image look up, LinkedIn profile and connections, previous articles on the team members, etc. If you can’t find anything concrete on the members, its likely a scam.
Does the foundation/business have an office? If so is it real?
Any blockchain venture should retain office space prior to ICO, it shows credibility and motivation towards the project from the founders. Anyone seeking millions in funding should be registered and an address should be present if you dig deep enough.
Are there any false claims?
We have found some projects claim they have been around for years but never heard of them until recently. If an ICO claims to have been in progress for awhile, you can do a WHOIS look up and check when the domain was created. A scam ICO will usually be registered recently (within 60 days). You can also use wayback machine to see how the website looked in the past if the domain was owned for longer.
Are their partnerships verified?
We’ve seen a fair amount of ICO’s claim to establish partnerships with big names in the space to boost their credibility. Always be sure to look into these partnerships on BOTH sides. If you can’t find any information on the partners website, you should always question the legitimacy of the partnership!
Now that you know how to identify scams, you can ask yourself the following questions to determine the quality of a project:
Does the team have a successful background in technology?
Provided the team checks out as real, you can now dive into whether these people know what they are getting into. The last thing you want is to invest in is an ICO with an idea that was created by someone who has zero experience in execution or has never started a company before.
Is the whitepaper technical enough?
Its one thing to be a legit team, its another to know what they are building. Keep your eye out for fluff, a little is okay but anything more than a page is unnecessary and questionable. If you see words like “Secure, Fast, Decentralized” as the tag line for the project its likely going to be garbage. People are not going to adopt a random crypto that is straight forked and has nothing special about it.
Is the ICO offering a ridiculously high amount of bonuses?
Anything over 20% is a red flag and if its real, its going to create selling pressure as soon as the token hits the exchange. Think about if you put in $10,000 and it doubled the day it hit the exchange, that’s some amazing return for a very short hold. Heck if we saw gains that quick, we would definitely sell a fair amount! That’s free money.
Is the project using MLM type bounties?
If the project is endorsing spammy multi-level marketing strategies to recruit investors its most likely going to be a horrible project. It will be supported by people who have no idea what they bought into. Giving out free coins on an extreme level to spammers really exposes the project’s actual value.
What is the hard cap of a project?
Raising too much money screams overvaluation and is unnecessary. If there is no product built, there should be staged rounds of ICO/financing. Not only does this help investors, it prevents coin values from getting dumped as soon as it hits the exchange. What is the point of a token being traded when there is no product available for use? Demand goes down and so does the price of the token. Basic economics of supply and demand.
If you have any ICOs you are thinking of investing in, don’t hesitate to join our Verified ICOs Telegram community and ask the opinions of like minded individuals.
Stay safe investing and remember NEVER to go all-in!