3 Things to be Aware of When Selecting an Initial Coin Offering
The cryptocurrency market is an exciting place for investors, both old and new. While seasoned investors are constantly exploring how to make the most of this new market, new investors are hopping on the bandwagon and learning as they go. As with any market, there are pitfalls to watch out for; in the crypto market, due to the unregulated and electronic nature of transactions you must be on the lookout for scams. What is an ICO? An ICO is kind of like a crowdfunding campaign, where a token is issued on a blockchain to an individual or investment firm in exchange for fiat money or other digital money. ICOs should have a white paper describing what the money being raised is for, how long the campaign will run, when the project will be completed, etc. Scammers have started copying these white paper pages and running them like their own… when people buy into them they take the info down and make off with the money. Or, they pretend to be a legitimate ICO but then run off with the money. About 80% of Initial Coin Offerings, or ICOs, are scams. How does one safely buy into an ICO? Let’s start with the basics.
One Rule to Rule Them All
For any new investor, you need to know the rule to rule all rules: only invest what you are prepared to lose. Some couples are cashing out their retirement funds only to lose everything, leaving them in a panic and with no way to recoup the money. CNBC explains the considerable amount of risk involved with such a move here. Others have amassed fortunes, like this doctor and his wife. After you’ve come up with a number you’re ok with risking, it’s time to look for your first purchase. Daneel can take the information about the ICO you are looking at and help you with it.
Steps to Take
There are four questions to ask yourself when evaluating an ICO. The first is, do the project developers have a clearly defined goal or goals? Their white papers should be easy to read and understandable; if they aren’t that’s a red flag. The second question is, do you know who the developers are — can you research them independently of the ICO? Is there any way to verify they exist and where they are located? If not, look out. The third question is are there legal terms and conditions in the ICO? Do they outline any arrangements? Remember, there is no one regulating their claims so it’s up to you to do some research. The last and arguably the most important question is: Are the ICO funds being stored in an escrow wallet? An escrow wallet requires multiple keys, and it’s even better if a neutral third party holds one of the keys. This is a nice little protection from scams; if there are not multiple key holders, it may be a scam. Check out this website or this one by Forbes for further information on how to detect scams. Daneel can assist with evaluating whether or not an ICO is a scam. This smart-learning system will get better and better at evaluating these things. Currently, Daneel can provide you with a project score based on the amount of data available on the project, the market sentiment on social networks in relation to the project and the content produced on the Internet, whether by the press or in forums.
The Problem of News in a Volatile Market
The last thing Daneel can help with is sorting through news; purchasing any cryptocurrency in a volatile (read: unstable) market means learning how to read the news. There are huge crashes happening when people get wind of downfalls, usually prompted by the news or by fake news (read: people trying to manipulate the market). The crypto space lacks any verifiable, dependable source for news; when traders who watch the market receive fake news, they begin to trade immediately based on what they predict the market will do, causing either incredible upward trends or crashes, and effects on ICO fundraising result. Fortunately, Daneel can help. According to this article by Payment Source, “These problems can be solved by leveraging the power of token economics, gamification and machine learning in a crowdsourced, information-sharing platform specifically for crypto traders and investors looking to receive trusted and reliable information on cryptocurrencies, tokens, and ICO projects. Individuals can participate in the data validation and collection process in an simple and gamified way.” This is what Daneel promises to deliver. We are creating an artificial intelligence with learning capabilities that is able to predict which news stories are dependable and which ones are not, given the overall market trends and information.
Conclusion
While there can be incredible benefits to investing in ICOs, they are admittedly quite risky and there is no guarantee you are not getting scammed. It is up to you to do your due diligence, and not being lazy here is key. As long as you are investing an amount you are comfortable losing, do the research on an ICO, and be as aware as you can of what the news is surrounding cryptocurrency at the time you invest, so you aren’t choosing a time where you’ll see huge losses, you are on a somewhat solid foundation to make your first ICO commitment. With time, Daneel will make this process much less of a headache; with its integrated learning tech and feedback from real people in its hybrid version, the risk of running into a scam will be smaller and smaller.
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