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There are a ton of ICOs out there, with every single one of them promising huge returns and useful perks for potential investors. But before you get carried away and start sending your hard earned money to every single project out there, remember that many, if not most of those projects will inevitably fail or will turn out to be a scam.
Keep in mind that all cryptocurrencies and the Ethereum platform, in general, is basically an experimental technology. A vast majority of ICOs are reliant on Ethereum, and they themselves are a very experimental mechanism. It’s an experiment on top of an experiment.
A typical project holding an ICO will have a website and a white paper, containing as much information about the project and its goals as possible. Those will describe the team and its relevant experience, the idea and the roadmap of its execution, approximate goals and means of reaching them, and so forth.
One thing the project won’t have is a finished, functional product. So, essentially an ICO campaign is a “so, here’s an idea, and this is roughly how we’re gonna try and do it, send us some money please” type of situation. It is up to you to evaluate every possible aspect of a campaign and decide for yourself whether you’ll be putting your funds at risk by taking part in it.
Nevertheless, it’s important to mention that in some cases that risk pays off. For instance, EOS held an ICO campaign without any form of a working product or even a platform but still managed to raise over $185 mln in just five days. Moreover, their token started trading at $0.925 and was trading at around $5 for a few days after an ICO. At the time of writing, EOS is trading at $8.3, so if you were an early investor and decided to sell your tokens now, your profits would’ve been almost tenfold.
Every single guide on anything even remotely related with cryptocurrencies will give you this one simple advice: don’t commit more money than you can afford to lose.
But don’t take our word for it, here’s what the mastermind behind Ethereum and perhaps the most prominent figure in the crypto world VItalik Buterin had to say about it:
First off, make sure that the developers are not anonymous. If they are, that is as red of a flag as it can possibly be. If there are names listed Google them thoroughly, focusing especially on the development team and the advisory board. Many fake ICOs will claim involvement of some sort of a prominent figure, more often than not it’s Vitalik Buterin, make sure to always triple check that information.
Make sure to check where the team members went to school, what they studied there and what kinds of things they have worked on before. Focus on relevant cryptocurrency experience, previous ICOs they took part in and the impact they had on the project. What you’re looking for here is whether their previous experience will be sufficient for this particular project to succeed.
A very promising sign is when the team members have links to their LinkedIn, GitHub or Twitter account on the ICO’s website. Even then, make sure to check how legitimate the linked accounts are by looking up how long ago they were created and how actively the team members were using them. It really isn’t hard to fake social media accounts.
