4 Ways To Tell if an ICO is Legit or a Scam
ICO’s or Initial Coin Offerings, are public investments in Blockchain ventures and companies. Hundreds of ICO’s have been launched over the past year, bringing in billions of dollars in 2018 alone.
Unfortunately, not all of these Initial Coin Offerings have been legitimate. In fact, it’s been reported by Investopedia, among other sources, that over 9 million dollars a day is lost in cryptocurrency scams. This a ridiculous number to comprehend, whether you’re an investor or not.
Thankfully, there are several red flags that you can, (and should), look out for in every ICO project or company you’re considering investing in.
Red Flag #1: The Proposed Product Doesn’t Even Need Blockchain
For dozens of industries, blockchain is incredibly useful — Maximizing a decentralized payment structure can work wonders when applied to the right projects. However, there are an equal amount of industries, where it would be pointless, or crypto for the sake of crypto.
Next time you’re looking over a potential ICO project, think to yourself, “does this problem really require blockchain as a solution?” If the answer is no, then it’s best to stay away for two reasons.
The first reason being it could absolutely be a potential scam, and if you look deeper into their technical data, and Whitepaper, it may become obvious that it is. For example, if the use case that the company is presenting has no real need for blockchain technology, it could just be a pump and dump scheme. The second reason, is even if the ICO is legit and everything checks out, the coin (and company) won’t have any staying power if there’s simply no need or desire for their proposed solution.
Red Flag #2: Unqualified or Anonymous Team
With any company, whether it’s built on blockchain or not, the team behind it is the most crucial aspect. It’s the driving force of the whole product. When it comes to blockchain companies and ICO’s, a great team is even more important.
To be able to deliver on deadlines, build daunting technical structures, and deploy a real time product as well as a token, is a tough task, and needs a tough team behind it.
Most ICO websites will have a “Team” section where you can take a look at who they have in the different roles. Pay extra attention to the developer roles, as they can be make or break for most ICO projects.
Do your own due diligence on social media platforms like LinkedIn and Twitter to verify the background and experience of the team members.
Red Flag #3: No Roadmap
For legitimate ICO companies, a roadmap (typically in the form of a infographic or timeline) is how they present to customers the set goals and dates they have for the business.
From team foundation, to token launch, to product launch, and everything in between, they should all be included on the roadmap. If there’s no roadmap, or the details are severely lacking, then you can be sure they’re not looking too far ahead into the future either.
Red Flag #4: The Whitepaper
The Whitepaper of any ICO project is one of it’s biggest assets in convincing investors, and the public, that they’re a legitimate project that deserves investment.
Therefore, it’d be foolish not to take a deep dive look at a projects Whitepaper before committing any amount of money to it. With luck, you’ll find a heap of detailed, extensive explanations regarding their team, their product, goals, deadlines, and more importantly, the technology behind it all.
If the blockchain technology being explained doesn’t make sense, then go with your gut, as your gut is usually right.
Conclusion
It’s important to understand the difference between a project being undeveloped, and a project being a scam. However, if a ICO project is serious about their company (and their investors), they wouldn’t leave any stone unturned regarding their team, Whitepaper, roadmap, and especially their actual product.
It’s crucial that as an investor, you’re constantly performing your own due diligence before investing. Even staying updated on ICO talk threads such as Reddit or Telegram is a good way to keep in the loop regarding potentially misleading ICO’s.
By checking for these red flags in ICO projects, staying up to date on blockchain information so you can better understand the products being built, as well as keeping in the conversation loop, you’ll be doing yourself (and your investment dollars) a favor.
CryptoLaunchPad.io is a rapidly growing service agency for ICO’s and Cryptocurrency Companies, providing certification for ICO’s through an independent due diligence framework.
