What I look for in an ICO
ICOs — or Initial Coin Offerings is a way for companies / organizations / entities to raise money in exchange for tokens or coins, before they go to the public. This might be similar to the stock market.
I want to write about what I do when looking into ICOs, which includes some mistakes I did in the past, as well as advice from highly interesting people (in my opinion).
My other articles related to blockchain:
Podcasts and People I follow
- Crypto 101 (english)
- Die Kryptoshow (german) — Dr Julian Hosp (TenX Co-Founder)
- UnChained (german)
And of course people like Vitalik Buterin.
The question is: Why do you want to invest in something? It’s either for the money or the idea. But if the answer is ‘because everyone is doing it and I expect a 100x return in investment (ROI)’ — that’s probably not a good sign. Do you want to invest long-term (more than 1–2 years) or do any kind of trading?
Note: As for now, the crypto market is highly speculative and you should only ‘invest’ what you are willing to lose.
#0 Does the project solve a problem where a blockchain really makes sense?
This may require some technical knowledge, but in general you should ask yourself if there is a problem to be solved, which needs a blockchain. Many projects just want to put a system on the blockchain just for the sake of having a blockchain. This is a good indicator, to see if the team knows what they do and what the potential is.
#1 Read the white paper
If you are technical, this is mostly easy part. But if not, you should consulate someone who is. It’s just a piece of paper, but a good indicator to see if a project is basically feasible from a development perspective.
Regarding scams: You can buy people who will write a white paper for you.
#2 Analyse the Team
This is a very important step in many peoples opinion. Even Warren Buffet said, that he invests in the team and not in the product. If they are not fully engaged and motivated to bring the best performance, it’s not good. You could reach out to them via Social Media, or even meet them in real life (especially if you intend to invest a lot of money).
Regarding scams: You can buy people who will play the team for you.
#3 Check out the advisors, if any
Some ICOs have advisors, which are not directly working on the project, but kind of support the team or act as a consultant. You could think of a project which aims to put medical data on the blockchain. In this case, the team does not necessarily need to be medical doctors, but they may need advisors who are. Same applies: Do your research about these people.
Regarding scams: You can just put anyone you want on that list, like big companies.
#4 Does a clear road map exist?
This might be an indicator, too. You should have a right to know what the milestones of the project are.
#5 Is there a product?
In case that the project does already have a product on the market, which may also be used by people, you could test that. Some projects come from the ‘non-blockchain’ world, where they already have a product. This increases the likelihood of the project to succeed.
#6 Check out their Twitter and other Social Media accounts
This is also obvious, but having no or not much social media presence is a red flag, too. But even if they have a Twitter (or whatever) account with hundreds of thousands of followers, this does not necessarily mean that there is a community engaged. You can buy Twitter followers — so called ‘Bots’, which do this work for you. So you additionally need to check the comments at least.
Many projects have Telegram channels where the community engages, which you really should consider to join. If you are technical, you could have a look on their Open Source activity (probably GitHub), if they have any.
#7 How big is the hype?
If you missed the ICO and want to buy ‘right after they hit the exchanges’, you should rethink that and have a look at the ICO pre-selling rounds. This means that people who participated in that ICO could have gotten a huge discount, which may indicate that they will sell right after it hits the exchanges.
These tips should help you to at least to minimize the risk of running into an ICO scam, but you never know.
Please let me know if I missed something important that I should add here.
My website: https://mariusreimer.com
My LiteCoin address: MPRYSFfjySNY6KT9DU8BcEWR4P8zQUodCD
My BitCoin address: 34MibXQg1L99Ee3XcrB3V2kPrgiA6tn9NH
My Ethereum address: 0x8064333AeC9b801a8d128113A9D9d332FcA1A734
