Introduction to the concept of ICO
Ever since Satoshi Nakamoto launched the world’s first cryptocurrency back on 3 January 2009, the Bitcoin, its underlying technology, the blockchain, has proved to be a very disruptive technology with an immense potential to change how most of our systems work.
With the appearances of cryptos and blockchain, start-ups soon discovered a new way of raising money for their projects. In the early days, prior to cryptos, start-ups had to rely on investors, IPOs (Initial Public Offerings), and even their own pockets to get a project off the ground.
Nowadays, if a start-up wants to raise money for its project(s), then they simply do an ICO. An ICO is a new form of crowdfunding where companies create tokens which are then bought by other people (using popular tokens or even fiat currency), in order to raise money for the project at hand. In short, an ICO can be regarded as a combination of a classic IPO and a modern Kickstarter-project.
And, sure, over the years, we have seen tons of ICOs out there, every single one of whom promised huge returns and usefulness for their potential investors. However, before you jump right into investing your hard earn money to every single ICO out there, it’s important to remember that most of these ICOs will inevitably fail (and most are scams, to begin with).
ICOs are considered by many thoughtful investors as being high-risk and high-reward investment ventures. That is why we have created a list with some of the best tips to help you find only the best possible ICOs to invest in.
How to evaluate ICOs – Tips
1. Aim for disruptive projects
The first and probably most important tip is to always try to find ICOs from the most innovative and groundbreaking projects. Holding an ICO is not at all difficult nowadays, and it allows many startups to basically copy an idea and pretend to offer a better, cheaper, and faster version of an already existing service.
A product or service (which is still very much conceptual in the ICO stage) needs to address a real-life problem, it needs to come up with a revolutionary solution – in short, to disrupt the status quo of a particular niche, industry, or field by harnessing the potential of the blockchain. Unless the project behind the ICO is unique, then there’s a good chance the ICO won’t reward you any winnings.
2. Nitpick the whitepaper
A whitepaper is probably THE MOST IMPORTANT aspect to be aware of before deciding to invest in an ICO. A whitepaper is the company’s pitch to potential investors. That is why a whitepaper should be perfect. It should be well-written, well-documented, and it should reveal relevant details on how the proposed solution works, what areas it is addressing, and enough compelling arguments to make you (the investor) trust the company with your investment. As a future investor, remember that fact-checking is one of your most important skills. Hence, be on the lookout for fake information, for impossible deadlines, unrealistic roadmaps, exaggerated facts, and anything that promises chances of 100% to “score big.”
3. Learn as much as possible about the dev team
As mentioned before, the key to successfully investing in a good ICO is research, lots and lots of research. Another very important aspect is finding out who is behind the project. Needless to say, projects and ICOs who have anonymous developers should be ruled out from your mind by default (the chances of them being scams is just too great).
Make sure to check everything from who are the developers behind the project, to what are their backgrounds. The quality of the team and their expertise is usually directly proportional with the chances an ICO has of being a success. A project developed by a team of inexperienced developers is definitely a red flag. Usually, try to go for ICO with teams that have substantial expertise in their niche of business (in this case, cryptocurrencies and blockchain)
4. Thoroughly analyze the project’s website
The website is the face of a company, and it’s also one of the best places to host a whitepaper. As a general rule, a serious company will always have a top-notch website. There have been countless ICO scams where hackers simply cloned a website and used it to interfere either with other legit projects or directly to steal the investors’ money through various ruses.
Check the website’s design, it’s user-friendliness, and more importantly, try to ensure that the website itself is unique and it’s not a clone.
5. Don’t be afraid to dig up more information online
For an ICO to be successful, it needs to have exposure. That is why ICOs will usually be marketed on various digital currency forums, as well as on various social media platforms such as Reddit, Facebook, and even Instagram. When deciding if to fully commit to an ICO, it’s also important to read what other people think. That is why it’s not a good idea to rush head-in-first when you see a good opportunity and, if possible, wait to see what the crypto community has to say about it.
6. Pick projects with long-term use for their tokens
As an investor, it’s important to consider the long-term value and potential use for the tokens you are about to buy. You never want to buy tokens which are sold for the sole purpose of raising money. The tokens you want have to offer some extra advantages, or additional benefits (they have to offer some sort of function within the platform’s ecosystem) apart from the resale value.
At the end of the day, it’s important to realize that ICOs can be a somewhat risky venture. However, that doesn’t mean that you can’t actually score big even by picking to invest in a less than ideal ICO. Keeping these tips in mind will most likely lead you to make smarter investment decisions.
To end with, don’t be afraid to listen to your gut. If the things promised by a company or an ICO seem fake or exaggerated, then you’re probably better off. If your gut tells you something is not right, then it might be a good idea to either take a step back to reanalyze everything or to look for other investment choices.