The number of Initial Coin Offerings (ICO) projects exploded in 2017. Then again, so has the number of fraudulent projects. You will have to do your due diligence and research deep into the company and people behind the project.
Luckily, we have a list of 5 signs that are red flags in an ICO scam.
The ‘sky is the limit’ doesn’t apply when you’re referring to fundraising goals. ICOs are created with a capital in mind to fund their project and escalate its growth. You can find a legitimate ICO’s goal (hard cap) clearly stated on their website or whitepaper.
An ICO with no specific fundraising goal is a huge red flag that the team is using the project to deceive investors as much as possible.
Dubious companies tend to not communicate well with their supporters. Their focus lies in making fast profits and leaving the project. With the market getting smarter, people will ask the teams a lot of technical questions which is easily avoided when they don’t have a direct communication channel.
Before you join an ICO, be sure to get in their telegram or WeChat group. Ask yourself whether they have an active LinkedIn page, Facebook Page, etc. You can even go one step further to connect with the founders on their LinkedIn’s profile and get to know them better.
When researching into an ICO project, you will likely read the whitepaper but that is not enough to garner facts. Whitepapers can easily be plagiarised and modified from other projects in the similar sector. It is best for you to establish multiple face-to-face conversations with the founders and advisors before jumping into the project.
Companies usually plan online and offline outreach programme to raise awareness regarding their project. Offline events work best as you get to meet the team and engage with them. For example, Bountie has been a part of multiple events from pitching competitions to panel discussions, where we educate, raise awareness and clear any doubts about our project.
When a project claims to be using blockchain in its operations, you need to research and learn the underlying use case of the technology. Unsuccessful projects often do not have a solid foundation for blockchain technology and do not use the technology in their product/services.
Again, you will need to communicate and interact with the founders to learn their use case scenarios and decide for yourself whether the project needs to use blockchain technology. Will blockchain help or hinder the product growth?
The beauty of ICO allows anyone to raise funds and bring their ideas to light. Even if the whitepaper seems powerful and the project is legitimate, the team behind the project might lack the experience to carry it out. You should always do your research on the individual team members and developers to see if the project is within their capabilities.
If it’s the first time they are doing an ICO, are there reliable advisors to back them up? If the team looks shady, the project is most likely improbable.
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