ICOs constitute an interesting use case for crypto-assets through the disintermediation of fundraising it enables, nonetheless they also bring to light both the existing risks faced by standard users and the need for these to educate themselves prior to investing into these projects.
Numerous scammers manipulate and distort the market in order to raise the highest amount of funds for useless projects. In fact, an estimated 90%+ of ICO projects in 2017 are already considered to have failed.
In the likelihood that you are interested in participating in ICOs, we recommend following the below measures :
- Inform yourself and investigate the team that is leading the project. Who are they and what are their backgrounds and experiences? Consider their failures as much as their success rates. Do not be fooled by fake Linkedin profiles, always double check the authenticity of information!
- Which problematic does the project address? What need does this platform respond to? Is it truly needed or can we replace it with another crypto-asset already developed?
- What is the project's precise use case? Is it concrete?
- Consider the size of the community driving the project and the latter’s visibility. Beware of scams such as Onceoin or Bitconnect that managed to mobilize troops.
- Read the Whitepaper! Does it seem serious and innovative? Are its central components and its appealing side technical indeed, or do they reveal extensive marketing and commercial use to make people buy in?
- Crypto-assets are open-source protocols. Is the code available for consultation? Does the project come alongside its own Github (a public software development platform)? Can I, myself, participate in the project’s development? Are consultations and modifications brought to the project routinely?
With all of this, you’re all set! Nonetheless, always keep in mind the twofold rule for investing : Invest only what you are willing to lose, and do not foolishly trust what others are telling you : always double check the veracity of information.