ICO scams are something that plague the cryptocurrency world. Their sole motive is to capitalize on the hype that cryptos still carry with themselves and somehow prey on it. In fact, 80% of the ICOs that were conducted in 2017, turned out to be scams and only 8% were able to fully launch. Thanks to this massive indicator, people started to completely avoid ICOs, meaning that the chances of a new coin succeeding, drastically lowered.
Every industry, no matter how good their product or service is, will suffer terribly if the customer base start suspecting everybody. Sure the already existing coins to would benefit from the lack of competition, but it would overall harm the mass adaptation for cryptos in general. Although some ways were developed to avoid ICOs, there are still people who fall for them to this day. Therefore, let me show you some handy tricks you can use to oust a scam ICO and save yourself the trouble of losing your funds.
Begin with the White Paper
The White Paper is basically the holy grail of information about the ICO. The fact is that every ICO has a cryptocurrency behind it, every cryptocurrency is a project, and every project has a company working on it. Therefore we need to get to the root of it all. The company and their business plan.
This can also be dubbed as research, since you’re actually learning more and more about the company. We will get to the individual team members later on, but now let’s focus on the White Paper.
You should be able to find the White Paper from the company on their main webpage. Usually it is a Pdf, but a slideshow is also quite popular. In most cases it is very long, but it pays off to read the whole thing. If you don’t have time to read it all, then you need to focus on only a couple of points.
- Where is the company located (This helps to determine if they can be licensed and if the local government will not intefere)
- How much they already have as an investment (Mentions the company’s capacity to field employees and maintain them)
- Why their project is being made ( Some projects don’t have a clear goal and are making cryptocurrencies just for the sake of making them and then listing them on the exchange for an income)
- What the coin is going to do (Today most projects focus on 1 singular industry and problem and try to solve it, for example the BAT, which was made to simplify the digital ad industry)
- How many coins are going to be made (This can signal the initial price of the coin and the market capitalization available at the starting stages)
- How many of those will be sold to the general public (The company needs to hold onto at least a little bit to have voting rights on their own project, if they hold more than enough, then you can expect them to manipulate the prices)
- What is their 5 year plan? ( Here you need to find out, what will happen to the funds gathered by the ICO, where will they be invested? What will they be spent on? How much will go to the team? The distribution of those funds should dictate the probability of the ICO being a success or a failure)
Those are pretty much the most important points you should consider. Furthermore, I found one small trick when reviewing White Papers as well. Most projects immediately say where the coin will be listed after the ICO. Therefore it makes sense to contact the Exchange and ask them if this is true. In most cases the ICO should already have the agreement before saying where they will be listed.
Furthermore, be sure to check if the White Paper is an original. Some scammers actually copy other successful ICOs and try to deceive people through that. There are numerous ways you can check for plagiarism on the internet. However, if the scammer did indeed put some effort into making the copy unique, then employ the support of Reddit. Most users there are very friendly and happy to lend a hand. So just upload the White Paper on one of your posts and keep track of the thread. You will have your answer in no time.
See other people’s remarks
There are numerous websites and blogs that specialize in reviewing ICOs. In all honesty, those websites are also a good place to get the summary of the whole White Paper, but there are some problems connected to the reviews, but more on that later.
Firstly, reading the reviews will help you see the project from a completely different perspective, furthermore it can also provide information on things you may have missed during your initial research, therefore the process should generally be beneficial.
HOWEVER, many websites abuse their power of influencing unsuspecting investors. They sometimes get paid by companies to review their ICO very positively, or the website just make a negative review by themselves, then approach the company and ask for money to change it. It quickly turns into a loop when you can’t find a middle ground. The same problem can be seen with KontoFX reviews, which have no middle ground, they either call the brokerage a scam, or a beacon of trustworthiness. So what should you do?
Nothing, yes that’s right, you should do absolutely nothing. Just read the review, make sure that the points you found out yourself during your initial research are the same as in the review, and then completely ignore every single opinion and recommendation. Use the reviews as a way to confirm your initial research and not a way to find a conclusion to your thoughts.
The team is everything
When you are reviewing the White Paper, looking at the team is un-avoidable, which is great. What you need to know is that the Project Team is the deciding factor if it will succeed or fall flat on its face. Therefore make sure to look into every single one of the employees to determine how experienced they are to actually handle such a project. Here’s who you should pay the most attention to:
- The CEO
- The Developers
- The Marketing Manager
The CEO is quite simply the most important member of the team. His or her reputation in the cryptocurrency should be one of the deciding factors of whether or not the ICO is a scam or is a potentially successful one. If they had some major controversies in the past, don’t throw them a bone, thinking they may have changed, try to avoid it immediately.
The developers are the second most important members of the team. Actually, they can even be considered as the most important as they are responsible to actually build the whole thing. Without them, there is no need for the marketing manager and the CEO will have nothing to be the CEO of. Therefore, you need to take a good look at these developers and make sure that they are top-notch. The best thing to do here, is to check their previous projects and their portfolio. All of this can be acquired through their GitHub page, which is a large repository for developers, a place they keep their projects so to say. If the developer doesn’t have a GitHub page, then you can immediately assume that he is either way too new to programming, or he’s just a fake.
The marketing manager is also very important for the project to succeed. It is his or her job to popularize the ICO, the more people know about it the better. Therefore, if you find out that this is the first that person is doing marketing, you can expect very small traffic, therefore low funds, a failed ICO and a loss of your money. Usually, ICO scams employ good marketing managers, in order to cover as many people as possible, but also make sure what other companies that person has worked for, if one of them had any type of shady history, you can expect that this person is ready to promote a scam.
Giorgi is a news reporter and financial analyst at www.forexnewsnow.com He has 3 years of experience in analyzing the financial markets of Forex and cryptocurrencies. He also likes making hidden jokes in his articles.