How to Invest in ICO and Not Become a Victim of Scammers?
The risks of investing in ICO are quite high but there are rules for analyzing projects that attract funds in a cryptocurrency. Despite the depreciation of cryptocurrencies, interest in raising funds in them remains. How to choose a project that has a chance to earn, and avoid those that came to the ICO in the hope of collecting easy money?
An investment in ICO can be compared to crowdfunding or an IPO but the mechanism for assessing the profitability of projects and the risks associated with investing in them is different. Therefore, even if you previously invested in projects successfully, you should take into account a number of new risks in the case of ICO. This topic is very popular nowadays. Even students are interested in crypto entrusting cheap custom essays companies to write assignments on this topic. Do you want to learn more about ICO? Then, let’s get started!
1The Analysis of the ICO Projects
ICO is often associated with scam projects but in any industry, there is a risk to meet unscrupulous businessmen. The absentee and partially anonymous character of ICO increases the chances of intruders to get away with things. It is necessary to remember that among startups, 90% of companies do not survive, however, some become stars of the new world, for example, Google. Therefore, you can swear and turn away from the phenomenon, but it is more useful to analyze projects in order to eliminate those that don’t have any potential.
Let’s consider the classical model, known as 4T: Team, Tech, Theme, Token (token or coin).
- Team. First of all, you need to make sure that real people work on the project, who want to implement it, have sufficient experience and competence. To do this, study the profiles of the social networks of the project participants (their activity, when the first publications appeared, the topics of the posts, make sure that there is not a bot in front of you, and evaluate the experience in these areas (what team members did before the ICO). If you have any questions, ask them. Scammers do not respond at all or respond evasively.
Contact the project consultants, ask how they assess the prospects. The reputation of consultants is worth money, that’s why they will give you objective information about the project. Find out the company registration address, postal address, information on the official registrar’s websites, when and by whom the domain is registered. Check the addresses on online maps or send an e-mail – whether it will find the addressee or return. Contact the project partners, foundations, and associations listed on the project’s website.
- Tech (technology or code). If you are not a programmer, then technology will not be easy to evaluate. You can ask someone from the team a general question about the technology or ask where you can see the source code. Fraudsters most likely will manage with vague wording or give a link to someone else’s code – check the project name or account.
If you have employees or fellow developers, ask them to discuss the technologies that the team uses in the project. Evaluate the quality of the site and study materials, you can check the availability of SEO-optimization on the site – scammers rarely give it their attention.
- Theme (concept). Here you will need the skills of an entrepreneur and an investor. The main task in the study of the concept is to evaluate the commercial prospects of the project: the potential of the project, which market a development is aimed at, how to scale the project, what the financial model is, what the economic usefulness and relevance are, what makes the project better than the one competitors offer.
Scam projects can easily be distinguished by confusing, long and empty formulations, when, after reading, little becomes clear. Also, you should be alerted if the prospects are described in an overly optimistic way, unrealistic terms for the implementation of ideas are given and, in general, there are too big promises.
An extremely important element of the analysis of the concept of the project, emerging on the ICO, is the justification of using the blockchain technology for implementation. If the same tasks can be successfully solved on the basis of ordinary centralized solutions, and the blockchain does not provide any economic advantages, it is worthwhile to think about the advisability of investing in such a project.
- Token (token or coin). The main documents for token analysis are White Paper, an investment agreement (memorandum) and an agreement on the distribution of tokens (may be part of White Paper). First, determine whether the token is utilitarian or dividend.
3Rely on the Opinions of Experts
If you want to invest in an ICO, you can rely on the opinion of experts in the field of blockchain projects and ICOs. For example, specialized rating agencies will help to assess how high the rating of a particular project is. An alternative is to wait for an ICO to start and see how much funds the project will raise. Usually, investment funds and large private investors enter a project in the first minutes of the official start of the ICO.
At the same time, it makes sense to check whether the counters on the site are scrolled, showing the amount of the investment received. For this, it is necessary to find out the number of the investment purse on which the project collects the funds, and check in the locker whether there were transactions on this wallet.
Sometimes projects indicate on their websites the funds with which they have already agreed to cooperate. Before investing money, contact these funds. Find out if this information is true. Also, you can see the information on the websites of the funds themselves, what projects they have already invested in.