Any new investment opportunity is exciting. But often, it’s hard not to get ahead of ourselves. The prospect of financially backing what could become the next big thing is exhilarating and, at times, blinding.
While the ICO landscape has matured, it is not completely devoid of fraud. There is always risk involved when it comes to implementing and investing in new technologies, and these risks are especially prevalent among coin and token-based products. A 2018 Ernst & Young report found that 10% of the $3.7 billion ICO funds raised had been lost or stolen. This number may seem stagger to new crypto audiences, but for those who are entrenched in this sphere and have been following the journeys of past ICOs, this staggering lost rate should not be that surprising.
The loss also stems from multiple sources. As the E&Y report indicates, hackers across the globe are preying on these funds via phishing attacks that tricked ICO supporters into sending cryptocurrencies to fraudulent sites. Beyond phishing scams, part of this loss stems from sloppy projects that were able to lure investors, despite bad or incomplete coding.
Unfortunately past successful ICOs have created a false sense of security among some investors. As a general rule of thumb, when it comes to investing in a crypto-solution, conducting thorough research and due diligence is always needed.
If you’re thinking about supporting a coin offering or token sale, here are five things you must do first:
Check ICO listing sites:
Many ICO listing sites include more than just token sale date information, they also include summaries and assessments of the project’s entire structure.
But not every ICO list site is created equal. If you take the time to read reliable ICO lists you’ll walk away with a deeper understanding of the technology and team behind a project, as well as industry expert’s perceptions of it.
Read the whitepaper – Reading through an ICO’s entire white paper may not be your idea of a page-turning beach read, but the more information you can arm yourself with, the better equipped you’ll be to decide whether or not a specific project aligns with your investment goals.
From the white paper you’ll gain a better understanding as to how the product actually works and how it leverages blockchain’s decentralized technology to deliver. Furthermore, white papers also touch on a company’s vision and the ways in which it aims to fill a specific market void.
Assess the team – Team is everything. Even if a project sounds brilliant on paper, if the team is comprised of individuals with little to no experiencing launching a technological solution or programming blockchain, there’s a strong possibility that the organization will not achieve its desired level of success. Most ICO list sites include team members’ backgrounds and resumes, and if any listings are devoid of that information, it should set off shrill alarm bells. It’s also important to look for variation within a team.
Yes, developers and product designers are integral to the product success, but growth marketers and community managers also play important roles. If a team consists of just a few people, it may be that they simply do not have the funds to hire yet and will be using some of the money raised during the sale to expand. As a potential investor, you can ask the team leaders about their long-term internal expansion plans.
Survey the roadmap – Investors have the right to know how and when their money is being used. QUality ICOs compile comprehensive roadmaps that detail every company phase, from product development to beta testing and consumer outreach. If an ICO listing does not have a roadmap it may be a strong indicator that they have not thought next steps through yet.
Look at their social footprint – If an organization is distributing content designed for social media and interacting with followers, then you should feel assured that they will remain a community-focused entity. In the ICO world, community is everything. Additionally, it’s also worth checking out digital forums to see if the listing is involved in any trending conversations.
The more time you put into due diligence work up front, the more capable you will be of pinpointing the right token buying opportunity for you.