How to Avoid ICO Scams

Not all ICOs will produce the desired results, many ICOs also turn out to be scams, how to avoid ICO scams, see the comments below

There are several ways to avoid ICO scams, below are some of these methods, see the reviews below

1 Find out all about the team developers in the ICO project

First, make sure the developer’s project is not anonymous. If it turns out the team in the project is anonymous, don’t believe in the project. If the name of each team member is included, then try to googling thoroughly, especially on the development team and advisory staff.

Many fake ICOs claim that there are prominent figures involved in their project

Like as Vitalik Buterin, check and recheck is needed to avoid ICO scam

Then confirm the education history of the team members, what they learned and where they went to school, and what their previous jobs were.

Find out whether their previous experience will succeed the ICO project that is being undertaken today.

The promising team usually will have the link of name team on their website, even Facebook, GitHub, Twitter etc.

Even so, investors still have to check the authenticity of their social media accounts by paying attention to how active the account is used and how long they have the account. Because today, making fake accounts on social media is very easy.

2 Check in the community and investors coin media

Always make sure that the ICO project has an open and supportive community. A Slack or Telegram group for investors, in general, is a good sign. Other sources such as Facebook, Twitter or Reddit can also be very useful in assessing an ICO.

Also, pay attention to discussions or posts that discuss bounty. Bounty is a common thing that the ICO does to ask for help from people to spread positive information about the project and then reward them.

This is done to increase media and public attention and awareness of the ICO project. The existence of a post about bounty does not mean that an ICO is a fraud, but indeed a promising project that has an experienced team and qualified promotional campaigns will not require bounty tactics.

They will send press releases to the media to cover and build the hype about the project. The existence of teams on social media platforms and interacting regularly with investors is also a good sign.

3 Check the stages of the project and Venture Capital investment

There is no universal rule on the stage at which a Project can implement an ICO. Often, there is only a white paper and a rough picture of the roadmap. Sometimes there is a beta version of a product or even a product that has been launched with limited functionality.

Of course, it is always safer to invest in projects that are as close as possible to the stage of the launch of the finished product that can function completely. As a general rule, investors tend to prioritize projects that have at least a few lines of code. That means there are many examples of successful ICOs without any code written at all.

Another convincing sign is the investment from Venture Capital (VC). The established VCs are usually big and experienced players, so they will not invest and trust projects that they feel are likely to fail. Even though everyone must make a mistake.

The ICO will most likely announce on their website clearly if there is a VC involved in the project, let alone VC is famous and related to cryptocurrency. But remember, check and recheck doesn’t hurt.

4. Read the ANN thread at the BitcoinTalk Forum

BitcoinTalk.org is the largest forum dedicated to Bitcoin and the other thing is cryptocurrency. When talking about ICO, this forum will be useful because there are announcements made and marked with [ANN]. If the ICO that Coinvestors is considering is not listed there, just leave it.

Make sure you have read the discussion about an ICO carefully, especially if you do not have the knowledge needed for the analysis of the technical aspects of the ICO. In essence, these discussions are a joint effort in assessing the legitimacy of a project.

In the cryptocurrency community and in this forum, the reputation of a user is the most important. Each post in a discussion shows the user’s rank and the number of messages that have been made. In general, the higher the ranking, the more users can be trusted.

The announcement thread is also a good place to review how responsive the project developers are. If they do not answer certain questions or are not active at all in the discussion then this is not a good sign. In addition, you can also try to send personal messages to developers to find out how responsive they are.

5. Read the white paper

All of these guidelines can be summed up in one sentence: know clearly what investors are investing. There is no better way to know a project from the white paper.

An ICO is a crowded sale, which means attracting funding from casual investors. So the project developers must be able to explain the purpose of the project and what will be done to achieve this goal in a concise and clear manner.

A good white paper must also contain an outline of the legal framework between investors and developers. The most important are the terms and conditions for ICO.

Then, there must be a detailed description of the distribution of tokens, when and how they will be distributed to investors. If the distribution of tokens is linked to a roadmap, this is a good thing, as some funding is needed for each phase of the project.

Another important question that must be answered in a white paper is why does the project need its own tokens? Why can’t existing cryptocurrency such as Bitcoin and Ethereum be used? The same question was also asked about the use of blockchain technology.

As mentioned earlier, a legitimate project will give potential investors a roadmap. Even better if in the roadmap there are details about how the actual use of funds collected, the pricing model and the value given to the company.

Finally, and perhaps most importantly, coin investors need to ensure that the funds collected are stored in an automatic wallet through Ethereum’s smart contract.

6. Check the quality of the code used

If you have become programming experience and knows how to read a code, then must see the code used. It could be a minus point if the code used is not open-source. You can find out a lot about the project and developers by analyzing the code used.

7. Learn from VC Investors

Investments are the livelihood of venture capital investors, meaning they are very picky contributors. They carefully examined everything about an ICO project and only had one question “how much profit would I get?”.

There is the consensus in the VC world that it is not good for a start-up company to get too much money in too short a time because they will be tempted to spend the funds without any important needs.

In addition, VC investors have very clear and strict provisions regarding refunds and benefits from the ICO project. So if a project cannot fulfil these conditions, then VC investors will not consider investing in the project.

8. ICO Legality

Before you invest in the ICO, make sure no rules are violated. The ICO is clearly prohibited in some countries, such as China and South Korea. Although currently the ICO is still permitted or even not regulated in some regions, the majority of local governments are trying to make regulations to regulate ICO in an outline and make restrictions for startups and investors.

Conclusion

In making ICO investments it does not always provide the expected returns, conducting research before giving ICO is very important to minimize the risk of buying an ICO scam

Read also about What Is Decentralized Autonomous Organization (DAO)

2 Responses

  1. November 21, 2018

    […] How to avoid ICO Scam […]

  2. December 12, 2018

    […] Especially in the world of online investment, there are many ICOs that scam at the expense of investors, so be careful when choosing ICO sites to avoid scams […]

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