Initial Coin Offerings were almost as popular as bitcoin trading a while ago. Every crypto enthusiast was eager to buy tokens from a startup offering them to support it. Truth be told, most of the investors were actually in for the money, which is also completely fine.
Cryptocurrencies made every person who owns them an investor of a sort. Suddenly, people were totally into ICOs back in 2018, but few of them had enough technical knowledge to profit from it. This resulted in a wide range of unsuccessful coin offerings where a lot of people lost their money. In fact, some ICOs were outright scams.
That’s why its vital to understand how this type of investing works. Although the element of luck plays an important role, you could still learn a couple of things to avoid all the pitfalls on the way. Therefore, let’s look at five essential things to pay attention to when investing in ICOs.
People are the most important aspect of every project at its infancy. Almost every ICO will give you a list of team members working on the project, and your job is to research every person presented on the site. Why should you do that?
First of all, you want to see who these people are. If they have a history of running successful projects in the past, that’s a huge advantage. Ideally, most team members should have some experience working for successful startups in the past. Even if they don’t have a huge portfolio, try learning more about their proficiency. You can do that by checking out their LinkedIn posts, activity, and more.
The other reason why you should check the team is to make sure they are real people. There were plenty of scam ICOs in the past creating a completely imaginary team. They even made LinkedIn profiles with made-up biography and work history. Luckily, there’s a way to check everything if you invest more time in research. If they are real people, you should be able to find other traces on the web outside of LinkedIn.
Check Forum and Social Media Activity
A serious team behind a serious ICO will do all they can to promote their idea and explain it to potential investors. That’s why you should check their activities on forums and social media. Follow their Twitter account, Facebook page, and connect with them on LinkedIn. The team should post frequent updates about the development of their project and help you be up-to-date with what they do.
This is another great way to determine whether an ICO is a scam or not. Real ICOs will post frequently, and you’ll have an in-depth insight into their activities and their team. On the other hand, scam ICOs cannot do that, as there’s nothing to give in-depth insight for since everything is made up.
You might be wondering whether you’ll be able to tell a true ICO from a fake one. Believe us – it’s easy to spot them.
Pay Attention to Details in the Whitepaper – Fact-Check It
The whitepaper is the most important part of an ICO. It’s a document where you can read all about the project. The startup will present a problem that currently exists in the world and then their solution for it using disruptive technologies.
Even if you don’t have a technical background, you shouldn’t have too much trouble understanding the whitepaper. Just make sure to read it thoroughly and not miss any vital pieces of information. These can help you decide whether the idea presented in the whitepaper is possible to pull off.
Besides that, you’ll learn whether you want to invest in such an ICO or not, and many things can put you off. For example, you might want to earn a quick profit, but the startup will need several years to begin working. Moreover, you might disagree with some of the ideas presented in the whitepaper, and so on.
Ideally, you should also fact-check what’s presented in the whitepaper to make sure that the information is not false. If that’s the case, maybe you should take the whole ICO with a grain of salt, and there’s a possibility that it might be a scam.
Learn More About the Underlying Technology
What all ICOs have in common is that they use blockchain technology as a basis for further development. You probably already know what blockchain is, but it’s always wise to learn how it works in practice so that you can know how these startups are going to use. One thing to start with is to see whether the ICO will build a blockchain network of its own or not. Some platforms, such as Ethereum, allow startups to use their tools, including ERC20, to build their networks.
Why is this important? By learning all the intricacies of blockchain and other technologies that are used for ICOs, you’ll be able to determine whether the ICO is really worth investing in or not. Moreover, it will help you discern the good ones from scams, as scam ICOs often provide promises that are still not within the scope of technology.
Analyze Tokens
Finally, tokens make an important part of the ICO’s ecosystem. You want to know how you’ll be able to use the tokens you buy via ICO once the company starts working. There are all kinds of tokens out there, including utility tokens, stock tokens, credit tokens, and even combined tokens.
To sum up, choosing the right ICO to invest is not an easy task and requires a lot of research. Apart from investing in ICOs yourself, make sure to check out other people’s opinions about it. Ideally, you’ll read opinions by successful ICO investors who already have a lot of experience in this field. Once you choose the right ICO, you need to decide how much to invest – but that’s a topic for another article!
