Assessing The Teams Behind Cryptocurrencies And Blockchain Projects
Getting to know the teams who create ICOs is like online dating.
You’ve searched for a crypto project, you feel like it’s a match, and now it’s time to do a little digging to make sure you don’t get cat-phished.
One of the most common questions we get at Luno is why we don’t support more cryptocurrencies than Bitcoin and Ethereum.
We have strict criteria for any coins we list. Are they credible? Can we trust them to deliver the quality our customers deserve? Will our parents approve?
Ok, maybe that last one doesn’t quite apply…
When you invest in a young project, which is what an ICO (Initial Coin Offering) tends to represent, there’s usually no working product or service. This means you’re betting on the team behind the project.
If the team is strong, they have a higher chance of success — even if the idea isn’t groundbreaking — than an inexperienced team with a stronger idea.
Before making an investment, we always recommend assessing the team behind an ICO or Blockchain project.
Investing begins with education, not buying. Invest your time in understanding a project before you invest your money.
We hear of new ICO horror stories every day. Numerous people have lost money by investing in cryptocurrency projects created by teams that either lacked the know-how to bring them to fruition or never intended to do so.
In recent months, the team behind an altcoin (alternative cryptocurrency) called Pincoin vanished with 660 million USD in investors’ money. Another company, LoopX, disappeared with 4.5 million USD, and another called Confido took over 374,000 USD and ran.
These guys give the whole industry a bad name, syphon public trust from the cryptocurrency space, and all we can hope is that we can help educate people so that they don’t fall for these scams in the future. And that those altcoiners have eternally soggy cereal, and sit in heaps of traffic in the Lambos they (probably) bought with the money they essentially stole.
Here’s a guide to the questions we’d encourage you to ask about the teams behind cryptocurrencies:
Who are they?
In theory, it should be easy to find out who the team behind a cryptocurrency project is and what roles they play. Ideally, this information should be prominently displayed on the website or searchable on sites like Linkedin.
If the names and faces of the team aren’t forthcoming, it’s not a good sign. It’s also standard for ICOs to link their social media accounts on their website so check those out, too.
Another ‘bare minimum’ step is to check they’re all real people. ICOs have been known to use fake profiles to disguise their lack of a serious team — including one that used a picture of Ryan Gosling as its graphic designer.
If you’re unsure, perform a reverse Google Image Search to determine if pictures are genuine or if they’re stolen from another source. Any fake or suspicious profiles should be a huge red flag.
To triple-check, Craft.co lists the details of many major cryptocurrency companies, including the company history and names of leading team members.
What is their experience?
One Redditor commented that they personally have more faith in a scrappy, small team bootstrapping a cryptocurrency project through hard work, without extensive experience than they do in bigger crypto projects. While that may be the case, as an investor your priority is not losing money and hopefully making some.
Betting on the underdog is higher risk.
What about the breakdown of the team? How big is it and does the amount of money they’re aiming to raise make sense considering the team size? Do they have a reasonable split of technical team members and those involved in marketing, PR, customer support, legal? Do they have lawyers or former bankers on board, or engineers with experience in complex software projects?
From sites like Linkedin and bios on the website or social media, you should be able to find out about the team’s background and experience, as well as their track record in relevant areas.
Having uncovered their background, do they have experience working on cryptocurrency related ventures? Do they at least have experience in relevant areas, like cryptography and payment technology?
Do they seem to have been involved in the industry for a reasonable length of time? Are they active in the community, sharing their thoughts and insights to show passion? Are they working on the project full time?
Cryptocurrency projects will often list their advisors, in addition to the actual team members. While these people might not be involved in the practical side, they should provide guidance and support to the team.
As another trusty Redditor commented, ‘…having well-respected advisors indicates that those guys have confidence in the full-time team members and the project.’
The calibre of the advisors is a sign of the quality of the team members.
They’re risking their own reputations by backing the projects and are unlikely to take too big a chance on a sketchy team without first performing extensive due diligence.
Be aware that some ‘advisors’ will fake their experience to lend credibility to dodgy ICOs.
What is their track record?
In this day and age, it’s difficult to hide your dirty secrets from the world, especially once they’ve gotten out. Researching on social media and media publications should reveal any prominent scandals or controversies associated with team members.
Negative coverage in trusted publications or with strong evidence to back it up is a clear red flag. You wouldn’t want to invest in a cryptocurrency whose team members have links to financial crimes, for example.
Go with your gut feelings around any other inconsistencies or anything arising suspicion.
Are they going back on their word, breaking promises to the community, making false claims, or otherwise behaving in a less than trustworthy manner? It could be a sign of skeletons in their crypto-closets and you’d do well to avoid them.
Can you reach out to them?
Try directly contacting the team via social media or other channels like Telegram.
Are they actively posting and nurturing a community? Do they respond to questions and comments? Does the website list more than one contact method? Do individual team members have their own accessible social media?
Don’t get caught up by FOMO
If you’re adamant that investing in ICOs is right for you, remember that there are hundreds of them happening at the moment. You don’t need to jump on the first one you see.
It’s fine to take some time to research, watch a few crowd sales happen to test your intuition, then start small.
Do you have any ICO stories you’d like to share with us?
We always like hearing about your experience in the crypto space, so let us know how you do your homework on ICOs.
