Are you considering an ICO as an investment medium? If you are, then care is necessary.
While many ICO investments promise substantial gains, many turn out to be scams. This is due to the newness of this investment medium…
Thus, you need a checklist to help you differentiate legitimate from scam ICO investments. This is something we’ll discuss here.
Below, we’ll mention 5 litmus tests for any ICO opportunity. Before placing your money in an ICO, ensure that the investment passes all 5 criteria.
One More Thing…
This article is dedicated to the detection of scam investments. But, it does not teach you how to find “profitable ICOs.”
After all, you may invest in an honest ICO company, and yet lose money. This is simply the nature of business.
Learning how to detect profitable investments is an art of its own. Also, this is something that requires serious study and experience.
A whole series of articles may be dedicated to selecting profitable investments. But for now, our focus will be on detecting scam offers, which are guaranteed losses…
1. Team Profile Branding.
Before continuing, understand that ICOs are elaborate sales pitches.
And with this sales pitch, you have a project led by a team of individuals. This will be your 1st review point when checking for scams.
You want the project team for the ICO to be lead be professionals. And information on such professionals should be readily available.
The project team of an ICO should be made up of experts. True experts will never shy from conspicuously presenting their credentials.
Such credentials may include anything from business accomplishments, to experience with cryptocurrencies.
Also, the ICO team must provide detailed social media profiles, listing those achievements. A lack of social media presence is a huge scam alert.
And if the project is not a scam, then it’s likely to fail. After all, if an individual cannot advertise themselves, then how will they advertise the products you invest in?
Failure aside, select the safest ICO teams possible. Ensure that the project team has at least 1 individual with verified success in cryptocurrency investments.
2. Escrow Releases.
After reviewing the ICO team, it is necessary to check escrow releases.
Here, it is much easier to determine whether an ICO is a scam or not. The reason is that ICO scammers are characterized by a rush to take your funds.
Basically, a legitimate ICO releases escrow funds slowly. As for a scammer, the escrow fund will be released instantly to the ICO team.
A proper ICO should release the escrow in many portions.
For example, 25% may be released after distributing tokens. A second 50% may be released after the beta starts. And the rest of the amount should follow with a product launch.
Portions may differ, depending on the company. Thus, the ICO you inspect does not have to follow the exact framework previously mentioned.
So seek an ICO that releases funds over a gradual period of time.
Always remember that a scammer operates on limited time before being suspected. And thus, they’ll usually not risk extended escrow releases.
3. Pay Attention to White Paper Details.
A legitimate ICO always puts well thought in the presentation of technical details. A scammer does not.
Scammer ICOs invest more energy into charismatic marketing, and less into detail. In fact, many ICO scammers lack legitimate success in ICO investments.
As a result, a common red flag is a lack of proper metrics and presentation of project information.
Always check operational and technical details. Also, make sure that the ICO white paper provides calculations, charts, and realistic projections of the business.
Speaking of reality checks, ensure that the business goals are realistic. A common way scammers attract prospects is by leveraging high expectations and wild dreams for the money.
As a shrewd investor, you should be able to spot realistic and unrealistic business goals. Also, you should be well-versed in checking for industry-related technical information.
Always be sure to ask the ICO team for clear information. And if the team refuses to provide the information, then this is a major red flag.
4. Is the Code Repository Available?
Since ICO projects are cryptocurrency based, it is managed electronically. Thus, there should be a code repository for the project.
If that is not available, then completely avoid that ICO.
The only exception is if the code isn’t available, but is provided upon asking. For that reason, be sure to ask the ICO team directly to provide the code to you.