Initial Coin Offerings have become a major way through which cryptocurrency startups raise funds for their projects. They have become so popular in relation to the expected returns that many people consider them as legitimate channels of investment. However, we know that investing in ICOs is a risky venture and you may easily end up losing all your investment. With that in mind, how do you pick the right ICO?
This article examines some of the fundamental criteria every ICO worth considering should fulfill. The aim is to help you pick on an ICO that at safeguards your initial input, even if it may not go on to be the next Ethereum, IOTA or Stratis. To help us explain the criteria, ensure you check each of the following for every coin offering you come across. A thorough examination of these aspects will help reduce the risk of joining scams or Ponzi schemes.
- The whitepaper.
- The team behind the ICO.
- What is the product?
- The kind of blockchain technology.
- The type of token on offer.
- The distribution of the tokens.
- Community reviews and opinions about the ICO project/team.
Read the ICO’s Whitepaper
It is paramount that you familiarize yourself with the content of the whitepaper, which at the very least will give first impressions about the ICO project. Find all the ongoing ICOs on comparison sites like coinschedule.com.
What’s a whitepaper anyway?
It is a document prepared by an individual or a company and which details the core project and what solutions or use cases it brings. It’s aimed at helping investors understand what the product/project is all about so that they can make decisions concerning whether to invest in the company or not. That’s why you need to get a copy of the ICO’s whitepaper.
But getting to know there is a whitepaper isn’t enough. You need to read it, paying attention to the following areas:
- The ICO project and why it is needed.
- Current/future world issues or problems the project intends to address.
- Current solutions to the issues and how the new ICO project intends to better them.
- The ICO project’s detailed description and a clear roadmap.
- Technical details concerning the project - are those explained?
- Information about the team behind the project - are they experts in their various fields?
- The ICO token sale- timeframe, token type, and amount earmarked for the project.
Why is the whitepaper important when picking an ICO project to support?
It’s important to pay attention to all aspects of the whitepaper to be able to grasp exactly what the project is and what you can expect from it after the ICO.
Therefore, a good reading of the whitepaper should entail focusing on the aspects listed above. The good thing is, if you read the whitepaper well, you would only need to factor in what the communities (cryptocurrency/blockchain forums) are saying about the project before drawing up your own conclusion.
Pay attention to the introduction.
The introduction – basically you should know the background information of the ICO, why the product on offer is needed, really judge for yourself whether there’s credibility or not.
What else should you focus on when picking an ICO?
The following aspects will aid you in deciding whether you can purchase tokens in an ICO or not.
The product -
Read about the product as described and explained in the whitepaper. Is it clear what the project intends to do? What use cases/solutions does the project promise and are they viable? You should find out how the product relates to the actual problems in everyday human life. The technical aspects may bother you a little if you aren’t tech savvy, but the explanation should leave you looking forward to its launch and not confused.
The team behind the project
If you decide you want to invest in an ICO, then one of the things you need to pay attention to is the team. Some of the leading crypto projects are defined by the members who make up the core team.
What you need to do here is to find out exactly how qualified the team members are for the roles they have been assigned to in the project. Researching each of them will help you get to know their past experiences, technical expertise, and suitability to the team as a whole.
Ask these questions as you assess the team:
- Who is the team leader? - is he/she accountable, honest and a person of integrity?
- Do the team members have similar past experiences? - have they worked on projects in the niche they represent on the team?
- Is the team well represented technically? – Developers, project engineers, and designers. It is important you find out more on this as it shows that the team knows what they are up to as indicated in the whitepaper.
- Who is on the advisory team? - Knowledge about who is on the advisory team will generally be an indication that the project has some seriousness. It may not be of great help, but at least a team with a well-known Industry player may not turn out to be fraudulent.
Research the technology behind the ICO’s project.
What will blockchain technology be built on? Is it open-source or privacy-oriented? Find out whether it is layered technology or Blockchain as a service. If you don’t understand some of these terms, find an expert to help you. A few bucks can be all you need to avoid picking the wrong ICO.
How is the ICO going to raise funds? What is the type of the offered token?
The basic concept here is that you should know whether there will be a presale and how many of the coins or tokens will be distributed. Also important is to know the type of token the ICO plans to use, e.g. is it ERC20 or not. (Read about the difference between coins and tokens)
How to pick the right ICO is not a science as there are so many interplaying factors that can determine the success or failure of a cryptocurrency project. What’s clear is that the proliferation of coin offerings necessitates that you take time to understand the ICO you wish to have an investment. But the bottom line in crypto investment is the following - investing in an ICO is a risky venture.