Honest ICOs are transparent on how their funds are used and more
In the meteoric rise of Initial Coin Offering’s (ICO), few make it to posterity. Thousands are fraudulent, according to both Joseph Lubin, co-founder of Ethereum, and Brad Garlinghouse, CEO of Ripple. So, how do you know which ICO to invest in? Read its white paper. Few investors do so, but that document is the silver platter, as blogger Michiel Mulders put it, to investing wisely.
Items to consider when reading the white paper include the following:
What’s In It for Me?
Initial Coin Offering’s (ICO) are catnip for scams. On top of that, says Terrence Yang, founder of Yang Ventures, a Bitcoin angel investing startup, “The vast majority of ICO-related tokens – past and current/pending – are going to zero in five years if not five weeks.”
Possibly the best questions are: Can any layman understand this ICO? What is its value proposition? Does it help me in any remarkable way? Why should I invest in it – what will I get from it, or put another way, why and how should I persuade a family member or friend to invest in it?
Powerful questions that dig to the root include: Each ICO has its own token: Why should I buy yours? Or why should I use your platform rather than Dodge, Bitcoin, Ethereum, and the like?
Take it like this: Slock helps you rent bikes. Blockverify identifies counterfeit goods, stolen merchandise and fraudulent transactions. Experty allows knowledge experts to be paid securely and instantly for the time they spend on a call.
Each of these decentralized platforms stand out.
ICO WatchList shows the best ICOs to invest in 2018.
How does yours compare?
Who Are Your Friends?
According to Blockchain Development Company, BCDC.Online, “a legitimate white paper will list everyone [italics mine] behind the project, along with links [to] their social media accounts and relevant experience.”
Check the LinkedIn profiles of the development team and the advisory board. Google the experiences of each and every team player to confirm it matches their descriptions. This includes each person on the marketing team, web development, and so forth – each name should be accounted for. Track their background histories: Which projects were they involved in? What was their impact? Do they come across as hardworking, reliable individuals?
If a VC is supporting this ICO, that’s all the better. VCs tend to jump on in early stages. Look for this information on the ICO’s website. Famous names like Vitalik Biturin are incredible.
David Friedman advisor at RealeCoin, a blockchain real estate investment fund, suggests you ask the following: Who are the core committers? How strong are they at development? Are there experienced engineers?
Roadmap – Where Are You Going?
It’s not enough to have a reliable team. The company needs to have a plan in place, too. When did the company start? Where is it going? Has it progressed since its launch? What does the company plan to achieve each quarter? Are its plans specific and clear? Is it overly ambitious or misguided? How long do these goals take to implement? And what will this implementation look like?
If you understand the tech, dig deeper to validate: Do items like their funding goals and tech stack make sense? Do they have a strong eco-system, like Bitcoin, Ethereum, C++, Golang, Node.js, JavaScript, in place? What are their potential challenges? Is there a blueprint or beta version you can test?
The Milestones section – see BCDC’s white paper as example – will give you the answers.
There’s something else to look out for: Aesthetics. Typos, poor user interface, unclear images, sorry website quality indicate the company is investing too little time and money in smart marketing and web development, according to William Paester of Blockonomi, a blog on cryptocurrency.
If that’s the case, this trend will likely continue once the ICO has launched.
Tokens – How Do You Want Me To Spend Your Money?
A red flag is where tokens are sold just for raising money for the ICO. You’ll want to use that token in the long run for some real benefit. Questions to consider include: Can I sell that token to someone later on? Will he or she want to buy it and gain some real benefit from it? Or is the token going to flunk with the ICO?
How’s the team going to spend its money? Honest ICOs are transparent on how their funds are used. Questions include: What’s the total token they plan to release? How many will be sold during the pre-sale and the coin offering? When are your tokens going to be listed on your exchange? (No answer or an answer that exceeds 30–60 days is unacceptable, according to Chapin). What percentage will go to the team and brand ambassadors? How’s your money going to achieve its core goals? One of the great schemes in ICO-land are organizations pledging money to “industry consortiums, non-profit arms, or event series to benefit the industry” says Chapin. This may be cynical, but such activities usually waste your money.
Percentage allocations should be clear. Inc. lists Rentberry as one of the top ten ICOs for 2018. See how its whitepaper clearly illustrates how the company allocate its funds to marketing, employees, project development, future investments and more.
Am I The Only Lemon Who Likes You?
David Freidman nails it: What’s the response of users to the product or service? Check how many people use the company’s blockchain ledger, how often they do so, and how they use its code.
BitcoinTalk keeps a running commentary of opinions on its project’s announcement (ANN) thread. Although I have come across cases where people maliciously condemn to derail an ICO, watch out for experienced writers’ comments. It’s a bad sign, too, when developers don’t respond.
Bottom Line
White papers make burdensome reading, but it’s not for naught that BCDC.Online strives to rescue its white papers from white lies.
Says the blockchain development company: Ultimately, the future success of blockchain projects and the reputation of the blockchain more generally, will be down to the creativity of those involved to come up with robust solutions to legitimate societal and business concerns.
You want to invest in ICOs that work towards the future.
Their white papers will tell you whether or not they do so.
