There are many cryptocurrencies out there, just as there are many ICOs. Every one of these ICOs has one unique feature – a vast majority of them are reliant on the Ethereum platform. A typical ICO project will have a website and a whitepaper that contains the entirety of information about the project as well as its objectives.
The ICO market is very risky. As such, you need to do thorough research before investing in it and to protect your hard-earned capital. In the same vein, the ICO market is not regulated. Therefore, you can do little to gain back your capital if it falls into the wrong hands.
The popularity of ICOs is still out there. Little wonder then that ICOs are still really hot among traders in the cryptocurrency ecosystem. In fact, the market is ripe for the taking. Nonetheless, before you get carried away and you begin to send your money to every single ICO out there, you need to ensure you don’t become a victim of a scam.
How to Evaluate an ICO Investment
There are steps you can take to verify whether an ICO is legitimate or not. This guide discusses the factors you must take into consideration to evaluate an ICO investment. These are the vital checks and balances you should consider before throwing your money into the game.
1. Ensure They have a Reliable Development Team
An ICO development team shouldn’t be anonymous, they should list the names of their team members. These team and advisory board members are the ones who will receive your payments. So, you need to know who they are.
You need to investigate them by making a simple Google search about each individual in the team to know their profile and their accomplishments. Look up the team’s social media accounts as this can reveal a lot about them. Check how long ago they created their accounts and how actively they are using their accounts.
Remember that your focus as you investigate them should be on cryptocurrency experience, previous ICO projects they participated in, and their impact on the project. A serious sign is when the team members have links to their social media accounts on the ICO’s website.
2. Their Community Support must be Up and Running
An open, supporting community that is responsible to the members of the public, is a sign that the ICO is genuine. A public channel for either Slack or Telegram chat for all traders and investors is a good sign of a true ICO investment.
GitHub is both a social media site and the main launch site for blockchain projects. It allows developers from around the globe to work on the same open-source projects at the same time. So, any project that has a strong GitHub signature, will have support from the development community.
3. The ICO must have Venture Capital Investments
Venture capital investments are the heartbeat of many smart startups as they tend to support and invest in projects from the early stage. Regular communication with the development team is necessary as it will help you know the level of venture capital investment the project has reached.
Venture capitalists are well-versed experts who would not waste their money on investments that have no guarantee. They would rather put their money in investments they are sure that the team has the capacity to deliver on what they have promised. Although, nobody is above error!
Nonetheless, an ICO would likely receive legitimization if a well-known venture capitalist is really involved.
4. Get Insight about the Project from Well-known Platforms
When it comes to ICOs, the biggest forums (BitcoinTalk) for Bitcoin (BTC) and cryptocurrency play a great role. There, you can view information or announcements and updates (marked ANN) on the latest ICO, advice, and insights. So, if the ICO you are considering to invest in is not listed there, you better drop that idea for your own good.
It is your responsibility to read the thread dedicated to ICOs in a comprehensive manner to understand the technicalities involved in the project. This is especially important if you don’t have any information about the project.
If the members of those forums, such as BitcoinTalk, are not answering some questions about a particular thread or are not active in the thread, it is a sign of a potential scam. Furthermore, you can take some really helpful tips from the forum.
5. Read the Whitepaper
There is no better way to learn about an ICO project than reading its whitepaper. Know full well that an ICO is a crowd sale, meaning that it generates its funds from the public. So, the developers of the project should define in simple terms, the terms and goals of their project, as well as the means of achieving them.
A good whitepaper should have outlines of the legal framework between the investors and developers. The first thing should relate to terms and conditions for the ICO and a detailed explanation of the token distribution. This involves a detailed explanation of when and how the investors will receive the tokens.
A legitimate ICO project should provide its prospective investors with a roadmap. The roadmap provides detailed steps in clear terms on how they will use the money, the model for pricing, and the value they will assign to the company. Apart from the roadmap, the whitepaper will give an overview, technical specification, token information, and team membership of the ICO.
6. Verify the Quality of the Code
If an ICO project has no functioning programming code of any kind in place, and it does not have an open source coding, then that project has a red flag. You should not invest in such a project.
You can verify the quality of the code by asking the developers for the coding of their ICO project. Equally, you can tell them that you want to invest in their project and that you want to check their code to know if it is sound. Their response will tell you whether it is open source or not.
7. Learn from Venture Capitalists
Venture capitalists are investors that make a living of investments. As a result, they always examine every project they want to invest in, and the likely profit they will make before putting down their money. They have very clear and strict requirements, ones that you should adopt.
ICO’s Profit is Uncertain
No one can predict whether you will profit from an ICO project. However, you can guard your investment if you follow the right path when putting your money in ICOs. Now, you have a better understanding of the major factors to look at when considering investment in legitimate ICOs.
This article should not be taken as, and is not intended to provide, investment advice. Users are ultimately responsible for the investment decisions he/she/it makes based on this information. It is your responsibility to review, analyze and verify any content/information before relying on them. Trading is a highly risky activity. Do consult your financial adviser before making any decision. Please conduct your thorough research before investing in any cryptocurrency and read our full disclaimer.
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