You must at one point the other heard of the word Initial Public Offering (IPO). An IPO is the biggest event in the life of any business. It is what made Fortune 500 companies and it is what is making many banks and investors stupendously rich – just by selling or buying shares in publicly listed companies.As popular and good natured as IPO seems. it has also been as means to pull scams. Some of scams were so big, that they had to make movies out of them. Go see Wolf of Wall Street and Gold. ICOs or Initial Coin Offerings are similar events. Like IPOs, they are funding rounds for a start-up cryptocurrency. Essentially, the public is allowed to fund the development of a cryptocurrency by purchasing the coin typically with either Bitcoin or Ether. The aim is that the coin’s values will eventually sky-rocket due to constant and widespread usage.A lot has happened in this area since Bitcoin was launched about a decade ago: from the tremendous high of 2017 to the heartbreaking drop of early 2018, ICOs have surely had their moments.But these events are not slowing down. Every day, a new coin appears with a digital solution and those who missed out on investing in Bitcoin or Ethereum are ready to throw their money into ICO quickly with the hope that the new coin might be another Bitcoin/Ethereum is in the making.However, just like their offline counterpart (IPO), ICOs are not immune to scams. As a matter of fact, it is believed that 99 percent of ICOs are scams and just about 52 percent of coins will survive the long haul anyway. That does not mean there aren’t credibly solid ones. But the experience with Onecoin and Plexcoin has taught regulators and investors a tough lesson.So, the question is: how do you identify a scam ICO? How do you identify the one waiting to run away with your precious money?Remember that many of them are very professional and it takes critical scrutiny to identify which is fake or original. To help you stay safe in your interaction with cryptocurrencies and ICOs, I have outlined 5 red-flags to look out for in an ICO.Lets dig in.
The first and probably most important indicator of a credible ICO is, the team behind it: the developers and the executive members who are running the show. Usually, they are active on social networking sites like LinkedIn Facebook and Twitter, and have a well-curated website where they engage with the public.What to do: take time to understand investigate the names of the team members. In past we have see ICOs scams that framed faces of actor Ryan Gosling and French actress Sabine de Poncins. Not just that. I was even shocked to see a 30-year-old that has 20 years working experience in Blockchain. How is that even possible? I am still as shocked as you are right now.It is also important to check the online following of the personalities involved in the ICO. Check their online profiles to see what they have contributed to the technology in form of research papers, conferences, partnerships and even hypothesis. Their level of engagement with their followers will also give you insight into their credibility.
Every available cryptocurrency has a particular problem they solve digitally. Ethereum has smart contract; Siacoin provides decentralised cloud storage and Bitcoin is the fiat for online buying and selling. So, every coin has a specific use case that is reasonable and absolutely achievable. If you stumble on any coin that is seeking ICO in a field that is unachievable with the current technology, suspect it. If a coin is replicating another coin without a visible modification and improvement, run from it.A coin that is useless has no use for your money. Be open-eyed and conscious.
If you have been hearing of bitcoin then you also must have been hearing about whitepaper. A whitepaper is basically the blueprint of how a coin intends to achieve its set objectives. It states clearly and realistically the steps the developer will take to actualise the goals of the coin. It is very fundamental and inevitable. Before a coin will call for funding rounds, their whitepaper must precisely spell out their aim, benefit, return on investment and exit strategy. If all these are missing, it’s no good. Also, note that the whitepaper can be plagiarised. Look out for blatant errors, match their whitepaper claims with what is on their website (which by the way should be top of the class), and scrutinise for their deliverables. Don’t be fooled by high-sounding, technical terms. If you find anything fishy, Google it or ask an expert. In any thing you do, get your hands on the whitepaper. It is vital.
The logic in investment is that if it is too good to be true, it probably is. So as a rule of the thumb and as permitted by regulators, companies are constrained to state in specific terms how much their investors will likely make. The reason is no one is dead sure of how the business will turn at the end of the day. Therefore, it is fatal to promise and not match up the promise.Hence, if an ICO is promising you will receive an outrageous return on investment, don’t go near it. It might be a Ponzi scheme. Simply put, it is a fraud.
Perhaps, there is nothing that will guarantee your safety more than educating yourself on investment and cryptocurrency. There is no substitute for it. An uninformed mind is a magnet for scammers. Already, the Security and Exchange Commission (SEC) has an outstanding web material on ICOs and how to protect one against scammers masquerading as developers and executives.
A time with us at the AchieversKlub School of Cryptocurrency and Entrepreneurship will help to shed more light on cryptocurrency investments. Particularly ICOs – the real and the fake. Your investment should be important to you. Don’t take it lightly. Good luck investing!
About the Author
Dr. Edson Pindza