Initial Coin Offerings or ICOs have become the most popular fundraising method in the crypto world. Based on blockchain technology, these campaigns raise funds by issuing tokens or cryptocurrencies in exchange for BTC, ETH or fiat currency.
Users purchase these tokens in the hopes of selling them later on at a higher price. ICOs are a novel financial concept which is applied by start-ups to raise money to fund their projects.
Initial Coin Offerings are easy to implement because they are mostly decentralized and do not involve paperwork. Unlike other forms of investment, users are not required to provide detailed information about their identity or their financial past.
The market is currently flooded with thousands of ICOs, with every single one of them claiming they will be the next big hit for potential investors. Because of this, it can be extremely difficult to find the best ICO in 2018. You have to keep in mind that many, if not most of those projects have eventually turned out to be scams or have failed to survive on the market.
Our article for today will be focusing on helping you find the ICOs that show promise and are worthy of your money.
How to Assess ICOs
Before you start evaluating a prospective ICO, you should remember that the underlying technology on which all cryptocurrencies are based is still in its experimental phase. A high percentage of ICOs are based on Ethereum, and the platform itself is also still developing, making the project that is based on top of it also a venture under development.
A typical ICO will have a website and a white paper, in which are detailed various aspects of the project, such as the team and its experience, the idea and the roadmap of its execution, goals and how they intend of achieving them, and so forth.
Thoroughly Read the Whitepaper
It is only logical that you know as much as possible about the project before starting to make investments. The easiest way of finding out more about an ICO is reading its whitepaper.
As an ICO is essentially a crowdsale, this implies that they have to attract the attention and funds of casual investors. The whitepaper should describe the project’s goals, product, and technologies in clear and relatively simple terms. If a whitepaper uses only complex and technical terms, it could mean that their product is useless and they could just be hiding behind elaborate terminologies.
A good whitepaper should also feature the legal framework between the investors and the developers. The terms and conditions for the ICO should be laid out, along with the thorough description of token distribution, more exactly, when and how will the investors receive their tokens. A good whitepaper features a roadmap of its goals and it’s linked to token distribution, as some funds will be allotted to each phase of the project.
Another aspect you should look out for is if the ICO complies with the regulations imposed by its country of origin. When this trend took off, this market was largely unregulated, but 2018 saw many countries developing and applying laws for this new form of investment. Some nations are more accepting and lenient towards ICOs, while others outright banned them (for example, China).
That’s why you have to carefully check what are the laws in both the project’s and your country, regarding cryptos and ICOs as things might get unnecessarily complicated.
Keep in mind that no complete, functional product exists at this point. An ICO campaign essentially pitches an idea and asks the financial support of interested investors. It is up to you to decide if the campaign is worth your money or not.
What Problem Does the Coin Aim to Solve?
The coin or token of a project represents the true value of a project. What solution does the coin aim to be? The issue that it’s trying to solve should interest many people, or else it will not receive enough attention. This will lead to insufficient funding and ultimately to failure even though the project was actually a good one.
To find out how big the scale of the problem is, see what research the ICO team has done regarding the matter and how they presented its results in their whitepaper/website.
Is the Code Qualitative?
Even though a project might have the best intentions and ideas, if the code behind it does not work properly, then that poses a major problem.
If you happen to understand a bit of programming language, you should definitely go over an ICO’s code. Otherwise, enlist the help of someone who actually knows how to code. You can determine a great deal about a project and its developers by just going through their code.
How to Spot an ICO Scam?
Scour the internet and find whatever you can about the development team. Firstly, avoid any ICO that has anonymous developers. If they are, that usually means that they are not willing to assume responsibility for their project or they’re straight-up frauds.
See where the team members studied, what relevant cryptocurrency experience they had prior to this ICO and how their involvement affected the project. What you’re looking for here is to see if the members are capable of conducting a successful venture based on their past.
Even though the team members have links to their LinkedIn, GitHub or Twitter account on the ICO’s website, verify the legitimacy of these accounts by searching the creation date of the account and its activity.
It can be difficult to find a project that you can trust and hope that it will not run off with your finances but, in this sea of ICOs, there are bound to be a few good projects that are worth your investment.