“The ICO graveyard is starting to fill up — How to avoid investing in bad ICOs in 2018?”

In 2017 we saw a massive craze amongst investors who left no stone unturned to make it to the private sales of popular ICOs. While an unprecedented surge in prices of popular cryptocurrencies and Bitcoins, in particular, was making headlines all over, the popular ICOs were not much behind in promising lucrative returns to their investors. By the end of the third quarter of 2017 over $3bn were already raised by 200 popular ICOs. But that’s not all. What was lost in all the hustle and bustle of the rapidly evolving ICO market is the fact that 2017 saw some of the biggest ICO scams and hacks where real investors lost a good deal of real money.

Millions lost to Scams and unverified security breaches

Not all that glitters is gold and not every ICO investment is worth a fortune! One of the biggest scams in the history of ICOs is Onecoin which duped its investors for over $350mn. Without a Whitepaper or any viable business structure, this ICO exploited the vulnerability of the investors. While Onecoin was a typical copybook scam, Droplex, another ICO scam ripped off several investors before being busted. It is not only the scams which did cost investors but the hackers too made off with huge sums of money and the burden of which was solely on the investors. Be it the hacking of Coindash’s system where the hackers made off with over $10mn or $8mn lost to hackers because of a technical glitch in Verisateum’s fundraising mechanism — the investors were at losing end with no compensation whatsoever. Stats suggest that over 50% of ICOs have been a massive failure.

Identifying scams and making secure Investments

Whether you are a crypto enthusiast or an individual investor in ICOs, it is important to know what you’re getting into before making any investment. While the ICO graveyard is starting to fill up, here’s how to avoid investing in bad ICOs in 2018:

  • Unrealistic promises: Before making any investment make sure you understand what is being promised by the company or the startup conducting the ICO. Any unrealistic promise which could not be verified or backed by convincing logic is a red flag. A genuine ICO has well-defined deliverables coupled with an evidence-based plan to achieve those deliverables. No matter how profitable it sounds, keep away from such ICOs which cannot prove how they will keep their promises.
  • Social presence: A genuine company trying to raise funds through a genuine ICO will undoubtedly have something to verify their claims on popular social media platforms and Telegram in particular. Make sure you verify their social presence and also check their activities in popular groups on Telegram. It is extremely important to look for social proofs and know what others think about the ICO. Instead of disregarding negative opinions and concerns you should try to understand them.
  • The White Paper: Every ICO has to have a detailed white paper which it must make available to its investors and potential investors. Always go through all the details in the White Paper of an ICO and see if there are any discrepancies in the claims they are making in their White Paper or otherwise. Also, make sure that all the details regarding the token sales and the investments are duly mentioned.
  • Know the people behind: You must know the profiles of the people behind the ICO and should also independently verify the same. The excuse of anonymity on their part should be your cause for concern. If the identity and contact details of the people raising the ICO is not mentioned in the whitepaper it is very likely that there is something to hide.
  • A roadmap is a must: Every ICO should have a proper roadmap of events detailing how and why they are conducting the ICO and also about their future plans. If an ICO doesn’t have a detailed roadmap explaining the journey of the members and their organization, it is very likely that it is a fraud. It is very important that a blockchain startup before raising an ICO shares the details of how and why they decided to conduct the ICO in the first place.

While it is extremely difficult to track or control frauds given the nature of alternative currencies, one must understand that prevention is cure. There have been several instances of frauds and scams and there is little to no security for investors in this mechanism. Having an eye for details, not falling for unrealistic promises, and becoming an educated investor is the key.

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