6 red flags of an ICO scam
Learn how to identify the fraud before investing!
1⃣Use case does not require blockchain. When evaluating an ICO, a good first question to ask is: “Do we need a blockchain or a native token for this project?” If the answer is no to both, chances are the ICO project is an example of solutionism — crypto for crypto’s sake — or a scam.
2⃣Empty repositories for open-source projects. One of the most obvious red flags for a scam project is the lack of detail on how the technology works. For nontechnical investors, it can be helpful to simply check if a project has any existing files uploaded to public repositories or if a project has a functioning product.
3⃣Mining structure disproportionately favors development team. In simple terms, a premine refers to when a portion of the tokens for a crypto project is made available to a small group prior to being made publicly available. At times, this can be a necessary vehicle to reward developers and early investors. However, if the percentage of total tokens supplied throughout the lifetime of the project reserved for a premine is high, there is reason for concern.
4⃣Anonymous team or team with weak experience. It is often a red flag if the team behind an ICO does not have any named full-time developers. Additional caution should be taken if none of the leadership team has any domain knowledge in the specific vertical.
5⃣Insufficient information on website/whitepaper. When you are unsure whether a project is a scam, it is better to err on the side of caution. While it is possible that the lack of well-designed websites and detailed information for a crypto project is because the project is still in its infancy, it can be hard to determine whether a project is underdeveloped or a scam.
6⃣No clear roadmap. The lack of a clear roadmap could indicate that the developing team has no long-term plan for the project, and as such is likely to be motivated solely by short-term financial gain.
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