For a while now there have been more and more ICOs, initial coin offerings, being offered to the public , but many people are unaware of the risks that they carry. I am not completely against ICOs and I know people are going to invest in them anyway, so I want to warn you about what to look out for. I have some golden rules to follow if you want to invest in ICOs and make sure you aren’t being scammed. With record breaking amounts being raised weekly, you need to be on your feet and know what to look for.
Due to the rise of many altcoins like ethereum, many people who have had great returns are looking to diversify and buy into a few ICOs in hopes of getting a return. Because many of the ICOs are tokens being offered on the ethereum platform, it also makes it easier to understand and invest in. However there is a key flaw I am seeing with many of these ICOs that people are overlooking, they are more centralized than you think. One of the main reasons bitcoin has gotten as far as it has currently, is because it is extremely hard for a government or outside force to shut it down. If they could have shut it down when the market cap was a billion they would have.
With new laws being proposed for people to actually claim how much bitcoin and other coins they own and the Security and Exchange Commission pledging to crack down on unregistered securities, decentralization is important more than ever. Many of the ICOs that are being offered not only are completely centralized, but they are from organizations that have intentions of or are incorporated. This means that if the government decides to crack down hard on these ICOs they are going to go after these people and hard. While the tokens will still exist, the developers would most likely completely abandon the project, leaving the tokens worthless.
There is one thing the Security and Exchange Commission is good at and its keeping their monopoly on securities. They will do anything in order to make sure that if you want to raise money or assets you will have to go through the legacy system, which means that if you are going to raise money via an ICO, you better be decentralized on every level. No corporations, nothing that can be seized or shut down, completely and utterly decentralized. Many of the projects raising money are incorporating to get large sums of money and plan on blowing it over time paying themselves high salaries and brining nothing to show for it.
The next thing you have to look out for is if you are actually getting anything in return for your investment. This sounds stupid, but I have seen at least 3 successful ICOs that although they are offering tokens, if you read in the terms of services it states they don’t actually mean anything and don’t offer any type of ownership. While they might claim this is so it can be legal and above board, the actual raising of the money is illegal in itself and it absolves them of all duty to actually deliver something. Make sure you read the terms of services and see if you are actually getting something with your investment.
The third and final major red flag you should look out for is how anonymous the developers really are. There is one thing about wanting to keep yourself anonymous for your own privacy reasons, but if you are going to be a developer for, in some cases, tens of millions of dollars, you want to be damn sure someone is at least putting their reputation on the line. Ive been in bitcoin since 2012 and I remember many scams were people who were anonymous just walked away , cashed out and are now probably living on an island somewhere. Even people who put their names on the line ended up doing the same thing, but for the majority of them, they were held accountable. Don’t invest your money with a phantom because they will take it, claim it isn’t real money and run away.
Like I said earlier, people are going to invest in ICOs whether I warn them to or not, so if you are, just be careful and look for red flags. When in doubt do your own due diligence and make sure everything they are claiming checks out. I have seen everything from blatant lies to people impersonating others on offerings and sometimes a simple email or phone call saves you and many others, a lot of money. Be safe and make sure that what you are actually investing in is what it seems.
- Calaber24p