If you have just read the previous article, you now know what are ICOs and how to participate. Congratulations! You’ve already taken a step forward. If you came here by chance or don’t know what ICOs are, I strongly encourage you to read “What is an ICO ?” which is the complementary article to the one you are about to read. Now, if you know how to participate in an ICO, but don’t know where to invest for fear of running into a scam, you’ve come to the right place. The purpose of this guide is to teach you how to successfully invest in ICOs.
Commandments of investing in ICOs
1) The project team in charge of the ICO
This is the golden rule of this article and not following it would be the worst mistake you could make as an analyst and future investor. Indeed, by evaluating the profile of team members behind the ICO through social networks such as LinkedIN or Twitter. If you have some time for yourself, don’t hesitate to check the profile of each member on Google in order to find if they match with their speech. In addition, you will be able to find out from your small study if they have already participated in the development of another project and if their involvement contributed to the success of the fundraising.
2) Through the white paper the usefulness of the project
Reading the white paper is essential for anyone who wants to invest in a project because it simply tells you where you are going to put your money. This document testifies of the transparency and seriousness of the project, knowing that if the project does not have one, it is the only product to sell. The more justified the information is, the more you can trust it. In a context of a “gold rush”, many people take advantage of the enthusiasm for the Blockchain to want to sell projects in their most beautiful forms but without any real added value, to the great displeasure of the investors. The whitepaper would help you to understand whether the token set up by the ICO responds to a recurring problem in our world currently governed by currencies. Indeed, many tokens do not need to be created. This document also indicates which type of blockchain the tokens will respond to, which is also important to know because some blockchains are more recognized than others.
Simply put, after reading the whitepaper, you should have the answer to the following questions:
- What is the project about?
- Does the amount needed seems consistent with the goals of the project?
- Does it meet a need in the market?
- What is the project team’s action plan?
- Is there a finished product or prototype?
- Are the actors of the project serious and credible in their speeches?
- Does the project deserve the money I want to invest?
3) The community’s opinion on the project you’re interested in
Now that you have done your little investigation on the ICO development team, I strongly advise you to do some research on blockchain-specific forums like Bitcointalk.org for example. This forum benefits from a very active community and is full of information on all existing projects. It will therefore be easy for you to read some feedbacks on the project that caught your attention, but also relevant answers to the questions that project members, if they are serious, should be able to answer. This is another important criterion in assessing the reliability of a project. In general, serious projects communicate through several channels, especially on social networks or through collective messaging services such as Telegram or Discord, to name a few. Composed of several thousands of people in most cases, the active communities reflect the good health of an ICO, investors will be more likely to flock because of the enthusiasts of people interested in the project.
4) On the type of investors you want to inquire
It is also a good idea to provide information on investors to find out if investment funds or incubators are involved in financing the ICO, which can give credibility to the project and reassure individual investors.
5) The quality of the code you want to evaluate
It is often difficult to assess the solidity of the code, especially for most investors who do not have a programming background. However, you can rely quite safely on certain points such as audits that may be validated by trusted third parties, or community opinions on Github through comments associated with the code in order to provide explanations on the features. Indeed, most cryptographic codes are open source, which allows community developers to suggest areas for improvement. If the project is honest, you should easily find out who the project developers are and how long they have been developing the code. Through this information you can form an opinion on the legitimacy of the project, even if you can never be too careful and the most inventive scammers will always fall through the cracks.
6) The legal aspect you want to analyze
Due to their recent nature, the ICOs are undermining jurisdictions wishing to regularize the cryptocurrency sector, which is too unstable in the eyes of governments. Therefore, it is advisable to keep an eye on articles dealing with the law on cryptocurrencies.
Today, some countries do not allow ICOs, as is the case in the United States and China, for example, to cite just a few examples. Fortunately, the French still enjoy this right.
Concerning ICOs, the presence of legal experts within a project team or in external intervention is a real plus, making it possible to strongly legitimize the decision to participate in the financing of the project. On the other hand, the non-existence of general conditions of sale should alert you!
The CIA’s word
ICOs have evolved so rapidly that regulatory authorities are really struggling to find the right solution to protect investors. Even if their popularity in 2018 is not as strong as the previous year, ICOs or other financing methods like these will experience a new craze that may reverse the current downward trend. In the meantime, you must be properly prepared for a new race towards cryptographic success.
Hopefully these commandments will help you board the next rocket ready to join the moon! Until then, I’ll see you in the next article!