How to Protect Your ICO Investment
Lots of hype these days is surrounding Blockchain technology, facilitating new ways for industries startups to raise funds.Since initial coin offerings (ICOs) and token generation events are not formally regulated by any financial authority, investors must beware of those trying to take advantage of the situation. Following are the few guidelinesthat canwatch over your ICO investment.
1. Examine the Company’s Website. A trustworthy company will dedicate resources to keep its website up-to-date, informative and professional-looking. Technically, linguistically, and visually coherent websites are key to attracting serious investors. Poorly written texts, fake looking pictures, or even stolen logos are a majorred flags.
2. Get Familiar with the Project Team. It’s important to determine whether team members have the credentials and expertise the project requires. ICOs that promise technological breakthroughs should have team members qualified to deliver those results. If there are no opportunities to communicate with ICO team members via Telegram chats, live channels, or other communication tools like BitcoinTalk.org, Reddit etc. this too should be a red flag.
3. Study the Technical Details of the White Paper. An informative ICO white paper in itself is the mark of credibility. If a white paper is coherent, detailed, and comprehensive with sections that include charts, calculations, and legalities, it signals that the ICO is worthy of consideration. In contrast, if the white paper is vague, contradictory, or incomprehensible, it could very much indicate to a scam or at least a poorly thought-out project. The white paper should give out clear objectives and outline how the ICO plans to achieve proposed results, what estimates they are based on, what is the token distribution model, and a realistic timeline and roadmap withpost-ICO plans.
4. Review Token Distribution. Token distribution should be clearly described. Check whether the percentage of tokens allocated to founders and the development team sounds reasonable. If an ICO distributes tokens disproportionately in favor of team members, this may indicate to a masked “exit” scheme.
5. Track the Roadmap. Clear timelines for project development benchmarks is an indispensable tool that shows investors the “big picture”. If the project lacks a detailed and logical roadmap, or looks unrealistic with suspect-looking dates and phases, you should trust your senses and start asking questions. If the white paper does not detail long-term plans, that is a warning sign. If there is a traceable roadmap, one should constantly monitor the progress of the project. The activities of trustworthy ICO projects should meet the stated goals.
6. Employ Etherscan to confirm Fundraising Claims. It’s not always possible to verify all of the claims an ICO project makes about the amount raised, but one of the great things about EthereumBlockchain transactions (which are used by many ICOs these days) is that those can be checked on Etherscan. Although this isn’t a guarantee that overall numbers are accurately reported, but it is a way to at least check transaction flow. It should appear consistent with an ICO’s overall claims.
7. Pay Attention to the Hard Cap and Total Token Amount. Projects should announce a hard cap and maximum token amount. Otherwise, token devaluation may occur and eventually compromise investor gains, especially if you expect your main earnings from a rise in the price of the token. Look for projects that create value instead of relying on token appreciation alone.
8. Be Critical. The loudest ICOs can become white elephants. Looking beyond slick marketing, it is essential to review the project’s documentation, strategy, event participations,active partnership announcements, and real-time updates on progress the project is making.
9. Be careful from Imposters. Always be alert and verify such claims with the ICO you want to invest in, and be sure you are communicating with official representatives of the ICO before committing any funds.
For ICO investment makes sure you have a spot on information on how promising an ICO projects is and purchasing its tokens is worth it. Also consider that token is the highly volatile form of investment asset. So trade safely and never invest an amount that exceeds what you can afford to lose.
Originally published at tokenasia.com.
