Guide How To Avoid Scam ICOs
Source: BTCzilla
Crowdfunding has gained extreme popularity in the blockchain universe. Crowdfunding campaigns are usually carried out as ICOs (Initial Coin Offering), meaning project token offerings in exchange for Bitcoin, other cryptocurrencies or fiat money. Actually, ICO campaigns are such common occasions now that not a single week passes without a new one being launched on the market. Nevertheless, it may become a real challenge to tell the good campaign from a fraudulent one.
Meanwhile, as the Wings platform is still under development, and even after it is launched, many ICO campaigns will go on operating outside the platform, especially the dubious ones, we want to instruct our users how to see a worthy project among scam.
Surely, we won’t tell you whether a specific campaign is worth your penny or not, and we can’t tell you exactly what signs profitable ICOs feature. As a matter of fact, we are just going to draw your attention to obvious evidence that scam ICOs show and help you avoid losing your hard-earned Bitcoins, investing in them. To tell the truth, honest projects are not immune to a complete failure as well. So, when taking decisions, make sure you understand your actions and control them, remembering to invest exclusively as much as you can afford to lose.
People who are behind scam projects often make bold claims promising leading-edge ideas, though oftentimes, there is nothing new in such projects. They expect the blockchain community or people involved in the industry to notice their product. You can tell that the project is a fraudulent one if its founders claim that their blockchain platform or cryptocurrency asset will put an end to poverty, resolve the global warming issue, replace Bitcoin or even the World Wide Web, or increase its price by 100 times within a short period of time.
Buzzword salad
“Our decentralized blockchain-based platform will disrupt the landscape of cryptocurrency investment while building a trustless network of pseudonymous users that leverage swarm intelligence technology to provide real world financial services in a tokenized ecosystem.”
That’s the sentence! Sounds significant, doesn’t it (in fact, it doesn’t). That’s the essence. Though they look and sound convincing, there is nothing serious behind such claims. Whenever you try tasting buzzword salads and not just looking at them, they more often have a flavor of hollow promises. Reading a project description, try to see if there are some new ideas described in them. If there is none, small is the work that project developers have done.
Certainly, most developers try to use lots of buzzwords in description merely to make the advertisement more attractive and exciting. Though such ads include a certain amount of information on the project if you filter out some dummy words, most projects like these will be as interesting as watching grass grow.
White papers usually unfold the new platform’s mechanics both superficially and deeply. It often presents charts, specifications, simulations, calculations, etc. In case the ICO white paper describes the tech behind it like some kind of decentralized ledger or coin featuring new possibilities but, in fact, doesn’t explain in detail how it works, then just leave the paper alone. It’s not worth getting involved in the maze.
The deClouds ICO is a good example. It turned out to be a complete dummy with no product in the slightest. The white paper they presented was full of meaningless statements, but it was still able to fool around users who lack the ability to rigorously study the subject. Follow the link here to learn more.
You may have some doubts if the developers are anonymous. However, that doesn’t necessarily mean the project is fraudulent. Anonymous doesn’t mean unknown. Successful projects stem from anonymous developers. The perfect examples of this are the Nxt and SuperNet projects. Nevertheless, in case you see no earlier stories of an anonymous team in the blockchain community (not a single header on bitcointalk, reddit, or other media), you’d better think thrice.
People included in the team are oftentimes neither anonymous nor known. However, at least one known face is usually involved in serious projects and their teams, but if there is none, that doesn’t necessarily mean some kind of conspiracy. Just scrutinize the team members’ involvement credentials. Is it possible to come across some data on their involvement in something not closely related to the ICO? Can you trace their work in some other areas? Answering “no” means you’d better keep off the offering.
Just read the quote posted on steemit by moonjelly in “How To Create An ICO Scam in 5 Simple Steps” and you’ll be up to speed:
“You need to show the faces of the people behind this world changing project. So get some at uifaces.com, come up with some common names (so they are very hard to google) and add the most ridiculous resume you can think of.”
Social media profiles, belonging to their owner, will help you analyze the team members, and you won’t regret checking them all. Do you think they are real? Check the date when the profile was created and what activities the person behind it carries out. And be watchful – anyone can create a fake account on social media and level it up to look more credible.
A much easier task is to check ICO team members for their participation in the Bitcoin community, as Bitcointalk, one of the most popular cryptocurrency forums, provides a very handy tool. It allows tracing all password changes and account resetting by the network users. To do so you may follow this link here or you can inspect the user’s Trust page. The log keeps an account reset record for 30 days. With a password change, the period is much shorter – just 3 days.
Using this function, it’s easy to pinpoint if anyone’s account was hacked or sold. Fraudsters often buy Bitcointalk accounts featuring decent activities with a single purpose – to win confidence, so stay alert. We cannot rule out that such accounts are necessary for a mere promotion, but of that the team has to announce itself. Otherwise, that will be the sign that the team has some sort of scheme not so honest.
In the case of ICOs, an escrow service keeps the user’s assets while the ICO campaign is on and long after. These techs operate as multisig wallets with two or more trusted key owners, usually the community participants and one person representing the ICO team. To move the stored funds anywhere else, the team has to receive permission from the other two key holders. So, as you see, it’s essential to have at least two key holders who are known to the community and confirm their intentions to manage the escrow.
The deClouds scam ICO, we were talking about earlier, managed to pull the wool over “investors” eyes reassuring them that their escrow is secure with one community member, one person form the project team, and one third-party key holder allegedly being a neutral company. However, this company turned out to be the same scammer team in disguise. So, as the team had the majority of the required keys, they could move the funds with no effort.
The escrow type used by the ICO project is an important factor as well. As -Greed- put it in his “How to spot an ICO SCAM” publication on bitcointalk:
“Of course it’s more complicated. Like escrow releasing 100% funds towards devs on token distribution is bad escrow. Good release conditions is when parts of funds get released on development progress: 20% on tokens distribution, 50% on beta release, etc.”
As you see, you have to stay alert to keep your money safe even when the ICO campaign uses Escrow technology and learn more about the team and their Escrow conditions.
Are pictures also faked?!
That’s the most unusual occasion. Who would want to post faked pictures when the photoshopped images are now very easy to pinpoint even if it was done by an expert. The dedicated software, be it free and commercially distributed, will help you easily reveal forgeries.
Well, why worry then, if it’s the least likely occasion? As a matter of fact, there are still people who may attempt to do it anyway. So, we couldn’t help but warn you of all the fraudulent possibilities.
As for deCLOUDs, along with its tokens, the ICO also offered to purchase precious metals as a support to the tokens. That happened before. What was out of the ordinary is that the team claimed they partnered with the UBS Bank and promised to store the precious metals there. There was actually no partnership and the fraudsters photoshopped (or hired someone to do so) themselves (or who knows who – it still remains a mystery) into two genuine pictures with the bank authorities. This way, they tried to alleviate all concerns about their project. But watchful users quickly posted the original pictures and proved the deClouds ICO to be a fraudulent scheme.
Just have a look:
The cryptocurrency universe is hard to comprehend and navigate and you know it. However, it’s always possible to learn, be watchful, observe ICOs, slice and dice them to have an idea if it’s worth your effort. Nonetheless, naive users are not rare nowadays, and the deClouds scam lured around 300 BTC from them. That’s sad, isn’t it? Stay alert and circumvent the projects having signs of a scam!
