How to choose? Signs of Scam projects in ICO (By Alexey Krol)
A huge holivar has recently appeared on the subject of ability to identify the signs of a scam of projects in the ICO. Popular theme by the way. Now wherever you spit — anyone starts to pear over the analysis of projects that he thinks is a scam.
1. Any innovation = uncertainty = inability not only to give, but especially to fulfill their promises. Accordingly, if in a serious innovative project you see promises of exact metrics — this is SCAM.
2. Uncertainty follows from the nature of innovation, when you solve a problem that no one has solved before you.
3. This is a typical scientific methodology — put a hypothesis, check, break off, again and so on in a circle.
4. How long? As long as the investor has faith.
5. Why do some invest in such a risk? Because if it happens, then profit from the exponential becomes an asymptotic vertical.
6. Who can afford it? Those who are capable to burn 4–5% of their capital on 100% R&D projects. And this is not a scum, it’s a sober calculation for the future, which is inaccessible to ones who are used to do simple things. Or those who shift risks to LP.
Thus, a really serious project for the ICO is about the intention to solve a problem that meets 3 criteria:
1. The task is absolutely socially significant, which means that it will not just give money, but possibly give market shift.
2. The problem solved by the project is obvious, i.e. if more than 10 lines are needed to explain it, it’s bullshit.
3. There is simply no existing solution in the framework of known technological approaches.
The very difference between the ICO paradigm is that a person decides to give money for several motivations:
1. He wants this problem to be solved, he is interested. He wants to be involved in the process.
2. He hopes to benefit from investment or support.
And now the ratio of these factors of altruism and greed gives the whole spectrum of investors ICO.
2–3% — those who can ratio 50 altruism / 50 greed — this is the psychology of traditional business angels Valley of the beginning of the century (now almost extinct …)
The rest — who has the ratio of 0 altruism / 100 greed in the form of a desire to catch a wave.
Conclusion: What will change.
1. As the stage of hype is going on, the share of investors of the second type prevails, but, IMHO, the share of investors of an altruistic type will grow with time, because at the moment this is the only mechanism giving access to financing for a huge number of enthusiasts. This is precisely the mechanism for financing the development of ideas.
2. Average investments will be significantly reduced, because such amounts simply are not necessary. Before ICO startups raised 50–100K and this was enough, sometimes to show a suitable prototype. And then suddenly such a startup gets 20 millions! And immediately the question of how to make a good product becomes into the question — how to justify / master this money. But the meaning of the startup has not changed. This means you invested 10 dollars or 10 millions — the risk is still 100%.
3. This means that there will inevitably arise rounds, for this is common sense. I collected 1000 dollars, took a step, reported, proved that I was not a scammer, collected 5000, and so on.
Therefore, all the estimates of the SCAM project or not the scam — are not adequate.
Listen, wise people, who are trying to show us SCAM projects here — what would you say about Tezos and, incidentally, Bancor, who started to experience certain problems. In fact, nothing can be said. As stated by Draper — we will wait 2 years. Do not want to wait? Impatient? Sorry, nobody cares. So you do not understand the nature of creating a new. What does it mean if these projects win? What does it mean if the projects fail? NOTHING.