Get to Know the Team

Perhaps the single most important success factor for any ICO or cryptocurrency is the developers and administrative team behind the project. The cryptocurrency space is dominated by major names, with superstar developers like Ethereum founder Vitalik Buterin capable of making or breaking new projects simply by having their names listed on a development team. For that reason, it's increasingly common for scammers to invent fake founders and biographies for their projects.

The best protection against this fraudulent tactic is to thoroughly research the individual team members of a project before you invest. It's a bad sign, for example, if you're unable to find any information about a particular developer or founder on LinkedIn or other social media outlets. Even if profiles do exist, check to see if their activity seems to match up with the number of followers and likes they accrue. Individuals who rarely engage with their followers and yet have thousands of fans may not be real.

Beyond determining whether the development team is real, it's important to make an effort to see if their qualifications measure up. Do the founders have the experience they claim to have? Is it relevant to the current project at hand?

Pore Over the Whitepaper

A cryptocurrency or ICO whitepaper is the foundational document for that project. The whitepaper should lay out the background, goals, strategy, concerns, and timeline for implementation for any blockchain-related project. Whitepapers can be incredibly revealing: companies that have a flashy website may reveal they lack a fundamentally sound concept. On the other hand, a company with a website containing spelling errors may have a whitepaper that indicates a rock-solid concept and a carefully conceived implementation plan.

The first step toward analyzing a whitepaper is to read it very thoroughly. Check to see if the whitepaper has complementary resources as well, including financial models, legal concerns, SWOT analysis, and a roadmap for implementation.

Companies that don't offer whitepapers should be avoided at all costs. Still, it's possible for a fraudulent company to put forward a convincing whitepaper, as was the case with PlexCoin; this company managed to raise over $15 million before the U.S Securities and Exchange Commission (SEC) stepped in to shut it down. A whitepaper should answer all of the questions a potential investor might have about what sets this particular project apart from its competitors, how it aims to be successful, and the measures it will take to achieve its goals.

Look to the Token Sale

Any ICO will depend upon a token or currency system in order to facilitate the crowdfunding process. Legitimate companies and endeavors make the system itself and the progress of the token sale easy for potential investors to view. Look for the token sale figures as the ICO is ongoing. Better yet, watch the token sale over time to see how it is progressing. If a company makes it difficult for anyone to chart the progress of its ICO, this is a major red flag. Some scam ICOs will hide their token sale progress under the pretense of individual contribution addresses; this prevents potential investors from seeing exactly how much has been raised and how much time remains in the sale. In some cases, this might be an effort to generate a sense of urgency among potential investors, even if there isn't evidence of a successful sale going on at the same time.

How Feasible is the Project?

While it may seem obvious, ICOs and cryptocurrencies with the greatest chances for success are those that have the fundamental structure to outlast their competitors. Many launches, even highly-publicized ones, have sputtered after initial interest faded. Your best chance of a successful investment relies on a company having an achievable, feasible set of aims. The company should have a compelling concept for the time being, but it also must be able to carry that concept over into execution over the short and long terms alike.

Going along with the question of feasibility is the issue of transparency. Companies that have outstanding concepts and models are more likely than others to want to be as transparent as possible with the broader community. Look for companies that aim to keep potential investors up to date with regular, detailed progress reports on a company website or on social media. It's also useful to look if a company has a timeline for what has taken place in the development process as well.