The popularity of ICOs continues to grow among investors in 2018. According to a Coin Schedule report, ICO projects have gained 200% more in the first 5 months of the year than in 2017 — nearly $ 10 million. Investors can make good money. A Boston College Carroll School of Management expert found that an average of 82% profit goes to those who support an ICO project. Analysts predict that there will be a new record in 2018 — the record is currently held by EOS, which raised $ 4 billion.
The ICO flow is also growing. It is obvious that many fraudsters are entering the market as a result of such demand. It is estimated by consulting firm Satis Group LLC that 80% of analyzed ICOs are scams and only 8% of projects manage to be listed on a cryptocurrency exchange. So how do you recognize scam projects?
“You are just as smart as before?”
It does not matter how much you believe in people, you have to start with the “soulless” documents. The most important document of any ICO is the white paper. Here are the team’s plans to collect millions with their tokens. The project, its use and plans, its business plan and its market analysis should be included in the white paper — it should be a decent presentation for the investor. It’s an advantage if the whitepaper contains parts of the code, links to a repository, and technical details of the project.
The easiest way to find out if the project is not right for you: you have not understood anything in these documents and you are just as smart as before. Do not think that as a non-techie, you do not have enough background to understand the project with complicated technical terms and calculations. Quite often, there is a scam that hides behind clever words.
“Bam! and you have started “
Review the dates and goals of the project while reading the documents. There is the second important document for this — the Roadmap. It should contain detailed information about further actions and appointments. First and foremost, they should be consistent in all documents and appropriately evaluated. Do not expect to publish the project one month after the fundraising phase, if there is not even a prototype. And yes, the prototype is a good sign for a fair project. If the project promises you a super fast timeframe, it could be a scam.
“What is the address…”
Read the documents further. Check the registration of a legal address, its existence (quite simply in Google Maps). Check the domain and in which country the website is registered. How long has you been? Was it created just days before, just for the ICO purpose? Ideally, the project should have some success and a community around it. You can check the ICO ratings on icorating.com or on tokentops.com/ico/scam.
“Who are these people”
When the documents are in order, it’s time to review the team and its past. The website should have information about at least part of the team. This is not the time to be humble — if you do not see the list of people’s references, their portfolio (preferably in the same area) is a reason to doubt what they can actually do. Google names, contact information, addresses, check out social network profiles are also a good sign. You can also contact project advisers and other investors (for example, at bitcointalk.org) — it’s more fun to take a risk together.
“Where did I see that?”
The laziest scam producers simply copy other websites, project descriptions, and other information. Check the website for plagiarism.
“Money, a lot of money”
There are no miracles — if you feel like “Now my life will change completely!” After reading the information about the project — I’m sorry, but then it’s very likely to be a scam. Reasonable ICOs offer no tremendous profit, cosmic recommendations and assure you no minimal risks. Do not fall for the classic Ponzi scheme — a promise of high profits and guarantees.
“Half the Kingdom to it”
Take a close look at the project — what do you get for your investment? Learn more about the token — how the currency works, what blockchain it uses, why the tokens could gain value, if there are bonuses for token holders. Most importantly, what value will the tokens represent after the end of the ICO phase.
The team usually offers a share of the profits, discounts for services and products of the project, tokens can also be used as internal means of payment. There should be no problems with the payout. The currencies should be issued with publicly available codes (open source). This does not mean that the project becomes a fraud if the code does not become public, but sometimes it turns out that a non-public code means its complete absence.