Steps to Avoid an ICO Scam
ICO stands for “Initial Coin Offering.” It refers to a process used by institutions for raising funds. The process involves selling ofdigital coins to general public without following a rigorous process that conventional banks or public sector companies follow for raising capital. Some people confuse ICO with IPO i.e. Initial Public Offering, which is not correct. There is no resemblance between an ICO and IPO. In IPOs, public subscribing or buying shares of a company may receive dividends in perpetuity, while in case of ICOs people buy tokens for using the platform’s services.
We are aware that cryptocurrencies are becoming increasingly popular these days, investors from all around the world prefer investing in cryptocurrencies rather than fiat currencies because of certain reasons. Keeping this rising trend in view, different corporations around the world came up with an idea of creating decentralized platforms based on blockchain for offering their services. This consequently led to the rise of ICOs.
The world of cryptocurrencies has been flooded with more than 1200 ICOs, many of them are nothing but total scam, that is the reason why you need to be very careful before investing your hard-earned money in any ICO. Today, we discuss how to Spot an ICO scam.You can follow our simple and comprehensive guide to avoid scam ICOs and stay safe.
- Always Check the Project’s Website
Like any other business, ICOs need to create their website so people can know what an ICO has to offer, when it is going to be launched, some ideas about its funding target, funding cap, supported cryptocurrency and starting price. The ICO may also need to state their objectives, funds distribution & allocation, and bonus offers etc. A legitimate ICO states its solid plan, scheduled launching dates, description about its members etc. All these details are supposed to be mentioned on the official website of an ICO. Similarly, a whitepaper detailing vital information about an ICO should also be available on the official website of an ICO. What we want to emphasize here is that you must check out the aforementioned things on ICO’s website before investing your hard-earned money in any ICO.
In addition,you need to make sure that the project’s website is being updated regularly and there are no outdated statistics on websites. For example, with reference to scam ICOs, we often noticed that two different dates are mentioned on website and whitepaper for the ICO’s launch.
By visiting the project’s website, you should be able to read objectives of the project in order to guess how likely the project is going to succeed. You should also be able to find their funding targets on website to know how realistic they are to achieve. By looking at figures concerning funds raised during the pre-sale period if already has been concluded, you can assess how successful ICO’s operations have been so far. You may also wish to know its token’s starting price to compare it with other ICOs. In Short, if you feel contented after closing the ICO’s website, then it means you should give it a try for once. Else, don’t even think to put your money in the ICO, because diving inside a blind well won’t bring you any good for sure.
- Assess the Project’s Feasibility
A legit ICO always tends to pursue a feasible project. They research and analyze the requirements of people, create an idea, devise a plan and follow a sound strategy to make things happen. They develop a website havingall details that potential investors might require. Objectives to fundraising targets and delivering services are supposed to be available on the official website of a real project. If you plan to invest in any ICO, we suggest, do check its website in full, have a detailed overview and try to spot anything unusual. You must be assertive in your approach to find a logical answer to any doubt that pops up in your mind.
For an ICO to be successful in future, it is very important that the project is feasible. Objectives of the project should be achievable. The ICO shouldn’t be making unrealistic promises. The ICO should be useful for a large number of people because the more it is useful for people, the more is the chance for its success. People would definitely buy its coins and it would turn out to be a successful venture.
- Check the Legal Entity
It is not uncommon for companies to mention false information about their presence on their official websites. Companies tend to play safe. They may set up their webpage quite well. You will notice everything being properly organized when you visit their official page. You may read some juicy promises pushing you to make an investment. What you need to look is the “contact us” tab with great care. Often fraud companies don’t mention their address on their websites. Some of them even don’t mention their contact number. They just try to make you happy by asking you to leave your number and the company may contact you shortly.
It is very important that you always cross check each information concerning the legality of the project. Always make sure that the company’s official address does exist and belongs truly to the company. Google the address and telephone number of the company to make sure that you are being redirected to the company’s official page. Don’t invest your money if you find any information that is misleading. Think for a while, why would ever a company try to conceal their real address? It is quite obvious, the company is looking to commit fraudulent activities and therefore doesn’t want you to reach them later.
- Tokens
The ICO tokens are usually based on cryptocurrencies, mainly on Ethereum. Each ICO, when launched, offers their tokens to general public for subscription. This is how the ICO raise funds to fulfill its objective. Tokens are sold usually in two phases. One is known as the pre-sale phase and the other is called the main ICO sale. The pre-sale phase of the ICO represents the time when ICO is just about to kick off. Buyers are often offered bonuses by the company in a bid to persuade them for buying tokens and become early subscribers. The second phase is known as the main ICO sale. It starts from the date when ICO is launched. Buyers subscribing the ICO tokens can also claim bonuses for subscribing tokens in early days of the ICO launch.
The project you are looking to put your money in must have its own tradeable tokens. There should be a starting price of the token that must be mentioned clearly on website or whitepaper. The holder of the ICO token should have exclusive rights to sell or exchange the tokens. Always make sure that the token is supported on major exchanges. Read the whitepaper of the ICO thoroughly and look for the ICO distribution section, in particular, to find out the likelihood of the expected increase in token’s price. Try to avoid investing your money in an ICO whose tokens are not supported on major exchanges. Obviously, you would need to sell tokens in future and if those tokens are not saleable then there is no benefit in purchasing them.
Unrealistic Goals
Every company that comes into existence have some goals to achieve. Businesses are incorporated to make profits and expand their sharing in the market. Hospitals are formed to help patients in getting their treatment. NGO’s are inaugurated for the social wellbeing of general public. You can see all type of companies that have some kind of goals that are achievable. But what if a company has just been formed and it starts saying that they are about to start offering residential apartments on moon? Seriously? Would you believe? Surely, the objective doesn’t sound rational. Everyone knows it is quite unrealistic. So try to avoid investing your money in the ICO that seems to be pursuing such juvenile objectives.Fake Pictures
All ICOs have some team members including founding members, engineers, developers etc. You may find a brief description of each member of the ICO on an official webpage of the ICO. Sometimes, scam ICOs just post pictures of some fake actors from fiver and other freelancing websites. You must double check if the member has real picture being displayed? Along with the pictures of team members, you must also check the monogram of the company to know if it is original or copied from some other website.
In case you find any picture, image or monogram being falsely displayed, we suggest you refrain from investing in that ICO. You never know what else they might have concealed. It is always better not to invest in a suspicious ICO than crying over spilled milk.
Research the Team
As discussed above, you may find brief details about the team members of the ICO on their official webpage. Often these details include their name, designation and images. You can google their name to find out evidence that supports the assertion made by the company to be true. It is very unlikely that you couldn’t find any clue about the person which is being claimed to be a president or CEO of the company. In worst case scenario if nothing is available over the internet, you can try searching their profile ids over the social media platforms. We are sure that you would be able to find some details. Do invest in the ICO only if you are satisfied with your search results. Else, please don’t.Look for a Whitepaper
ICOs need to publish their whitepapers before they are officially announced. This is because, it is a kind of authoritative report or document that describes the agenda of the project and outlines the objective, formation of the ICO, fundraising campaigns, team members, proposed funding target and services to offer. By reading thewhitepaper of the ICO, you can easily find the viability of the project and make a better decision whether to invest in the ICO or not. The whitepaper can be accessed by visiting the official website of the ICO.Benchmark Their Progress
Investing in an ICO that has already been launched is better than investing in an ICO which is not startedyet. We say this for a reason and that is you can easily analyze and assess the performance and progress of an ICO that is already launched. By looking at the funds raised so far, you can estimate the confidence level of investors on the ICO. Funds distribution and allocation can give you an idea of how far the ICO is concerned about meeting its objective. Either the ICO is only concerned about making profits or it also aims at making extra efforts in facilitating its stakeholders. You can also compare the objective that has been achieved so far with the planned schedule of an ICO that can be found in the whitepaper to benchmark the progress of the ICO.
Conclusion
Investing in crypto based ICOs can be a great way to make quick profits but only if the ICO you invest your money in, is legitimate. We suggest, whenever you plan to invest in any ICO, do some research work before you come up with a final decision. Try to follow above-mentioned steps to avoid any inconvenience. Make sure that the ICO you’ve selected for the investment purpose has been reasonably recommended by other investors. Try to find out news and information about the ICO as much as you can – so you might not regret your decision later.
http://cryptoorders.com/articles/spot-ico-scam/
For more news,ICO news visit:http://www.cryptoorders.com/