Dear Reader,
What is the single most important thing you look for, when investing in an ICO?
There’s a diverse selection of companies in this scene with competing offerings. Our options seem almost limitless, while our resources are finite, so we must act economically in where we place our trust.
There are innumerable factors to evaluate about an ICO: team, Whitepaper, product, disruptive potential, and more. Many companies lacking in several aspects have still delivered huge returns to investors. And many companies which seemed to tick all the boxes have failed to deliver.
Potential for success is a complex question, and in many cases can hinge on unpredictable factors such as market forces or legislative changes. So how do we know with whom to place our trust?
Personally, when investing in any company, there is one question that is the most important in my mind:
Can I trust this company?
If I can’t trust the company whom I’m sending my funds, then all other aspects of my analysis are irrelevant. The greatest idea in the world, with the flashiest website, is meaningless if the team behind the project don’t plan to deliver.
When scrutinizing the trust factor of an ICO project, there are some subsequent questions which naturally arise:
Does the Whitepaper make sense?
If you can’t understand the Whitepaper, then the project has no business handling your money. The Whitepaper should be clear, meaningful, and describe every important facet of the business. It should contain relevant information on the market, the competition, and how the ICO will find a place within it.
Avoid Whitepapers that seem intentionally complex, or purposely vague. If you have a burning question in your head that isn’t covered - it’s likely the author had the same question but avoided answering it. If the paper is so technical it can’t be understood by a layperson, then ask yourself how an investor prospectus benefits from being written in such a fashion.
And if the company outsourced or plagiarized their Whitepaper, then stay the hell away! Don’t place any trust in a team that can’t even properly conceptualize their own ideas.
Is the team comprised of real people?
When you click on the LinkedIn profiles of the team (if they have them), do the photos and people look legitimate? Does a Google search lead to Facebook profiles or other media? Does their work history match real companies?
This seems obvious, but a surprising number of nefarious ICOs go to great lengths to create fake identities for team members. Verifying that these people actually exist in real life is a necessary step before any further consideration is merited.
Does the idea lend itself to tokenization?
It’s probably a great idea - but does the idea need to be a token? Could it be created outside of the Blockchain more effectively?
If not, then it’s more likely to be a quick grab for your money, rather than a polished concept worthy of a Blockchain business.
How feasible is technology behind the project?
Does the company explain how everything is going to work? Do they release source code or technical explanations for Blockchain concepts they use?
With so many questions surrounding ICOs it’s important that you have as much information as possible about the internal functionings of the proposal and how the decentralised aspects will be implemented. Lots of Blockchain concepts sound incredibly visionary, but if the company can’t explain the mechanics of how the idea will be programmed then you have no proof it’s technically possible.
A relevant example, is companies advertising a decentralised concept that requires high scalability, or concurrency on the Ethereum network. The EVM is a single-threaded processor, and no development team (as of writing) has delivered a affordably scalable or concurrent decentralised protocol which is proven to work. Many ICOs promise to deliver great ideas which are simply not possible with current decentralised network protocols.
At LocalCoinSwap, we value openness and transparency in all facets of our business. The LocalCoinSwap Whitepaper is readable and comprehensive, covering all aspects of the platforms business strategy and a market analysis backed by statistical research. Our team is open and transparent, and the idea we are implementing is technologically straightforward but can only be performed through tokenization. We hope that we can work together to bring a new standard of honesty to the ICO sphere.
If you have any questions you think we need to answer, shoot us an email at [email protected] or post a comment, and we’ll respond to them in a future article!
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