Like every other investment, ICOs are prone to risk, even more than others. Still, so many people choose to invest in the ICOs because they are capable of producing huge returns on the investment. Do you know there are ways to avoid or minimize the risk factor of an ICO investment? In this article, we will talk about the 5 most important factors that can help you figure out whether an ICO is worth your money or not.
If you are any aware of the ICO industry, you must already know that all it takes is a whitepaper and a website to launch a token sale. Unfortunately, anyone can design and publish these things, which makes it even harder to choose a legit ICO project for your next investment.
Here are a few tips that can help:
Check the Team
A legitimate company backing an ICO will usually have no problem in sharing information about their team member. In fact, it only adds to the credibility of the project and improves the chances of more ICO funding. Be sure to check out the team, details of individual members, their skills and experiences in order to figure out whether they are capable of running and finishing such a project. At least some, if not all, of the members of the team must have an experience in the cryptocurrency industry.
The team information can be found either in the project whitepaper or on the website. If not present there, you can always ask by contacting the developers.
Activity on Crypto Communities
A good ICO company will be actively involved in major crypto and bitcoin communities, answering questions of their potential investors and sharing details about the project. If they don’t, they are clearly not serious about the project and are probably there just for your money.
Besides the major communities, you should also check out whether the company has an official blog and social pages and if they are actually active in these places. If they are giving answers to users’ questions, read these answers to analyze the company’s knowledge and seriousness about the whole project. Do not hesitate to ask your own questions about the project, the underlying technology, the process, etc.
Read the white paper
Even though it is way too easy for anyone to create and upload a white paper on their website, a professional white paper has its own unique qualities. For instance, a fake company will not have a real project or technology to show. Make sure that the company white paper contains the detailed description of the product or technology, which is either completed or in the process, for which they want to raise funds. Check out other things like the idea, the concept, the project roadmap, the token, when the token will be released and how it will be utilized.
The white paper should also include the risk statement, disclaimer, user rights and other related information. If the white paper is incomplete or contains wrong or shallow details, it indicates that the company is not serious or simply fake.
The Technology Behind
The success of a crypto project will depend a lot on the underlying technology. It is important to get an idea of the kind of blockchain technology upon which the project is being developed. Whether they are planning to create/customize their own blockchain or building on an existing one like ERC20 which is an Ethereum standard. Both options are good, depending on the type and needs of the project. You should also try to investigate whether the project team has enough knowledge and experience in the particular technology.
An ideal token will certainly have a limit on the number of maximum supply so that it can rise in value in the market, as the demand for the token increases. It is, therefore, crucial to know the actual amount of tokens the company is selling in the presale and in the ICO, and how many tokens are reserved for the team. How does the company plan to maintain the token circulation in the market? If the company is circulating billions of tokens in the ICO stage, then they probably do not have any realistic funding objectives.
Be sure to analyze all the things mentioned above before you choose an ICO to invest your hard-earned money. There are many great ICOs and new ones coming in 2018. Check out Ethx.co — a platform making it convenient for masses to adopt the blockchain.