Cointelligence’s ICO Rating System
Here at Cointelligence, we feel that there is a growing need in the entire crypto community for an impartial and accurate ICO rating system. The rating system must be one that is not influenced by ICO makers and advisors or bribes. Moreover, the rating system must be as accurate as possible in order to gain trust from the crypto community. The rating system, developed by our team of pre-screened and fully vetted crypto experts, offers an impartial rating system designed to give an accurate view of the project and its underlying ICO. Click here to see this system in action in our new ICO list.
What makes our system impartial and which measures do we take to keep it as such?
Current ICO rating systems contain weaknesses, including the impartiality, validity, and potential for corruption of the raters. To counteract these weaknesses, Cointelligence is taking the following steps:
- Impartial Raters – Our experts are thoroughly vetted, and we have a second layer of paid employees that go over ratings as well as makes sure the raters are not connected to the projects in any way. Additionally, the identities of the raters are kept anonymous in order to prevent solicitations or other actions, which may adversely affect the impartiality of the raters.
- Valid Raters – Another issue with ICO rating sites is that almost anyone can become a rater. At Cointelligence, we thoroughly vet our applicants and test their knowledge and understanding of the crypto ecosystem and blockchain technologies prior to bringing them on as a rater.
How do we determine the rating?
We measure the quality of each token using the following criteria:
- Data Integrity– We look at the website and the whitepaper of the ICO to check the validity and the quality of the information provided in both.
- Team Identification – Each member of the team is researched via their social media accounts and activities. We also look into the team members’ past experience with other projects (GitHub for developers and social network profiles for other positions), as well as recommendations each member receives from the crypto community.
- Vision – Our raters look into how well-defined the vision of the project is, how realistic it is, and the long-term plan that outlines how the vision will be realized.
- Product – The product is examined to see how well it aligns with the vision as well as how mature it is (POC/MVP/Working Testnet/Mainnet).
- Marketing – The marketing efforts for each project are examined for both quality and quantity of publications on social media and news websites.
- Social Engagement – This part focuses on the quality of the community members who follow the project on different social networks, as well as their level of engagement and sentiment.
- Legal Entity and Company Registration – Confirming that there is a legitimate company behind the project.
Each of the above segments is given a score of either 0–10 or high to low. These criteria also help to determine the risk score our raters give each project.
Below is detailed information regarding each criterion we look at when rating an ICO:
1. Integrity and Complete Data:
As a foundation, an excellent crypto project must have both a decent website and a decent whitepaper. The website must contain the general vision of the project, details about the investor offerings and different stages of the token sale, and the team behind the project.
The ICO’s whitepaper must contain an in-depth vision of the project, a step–by–step long–term execution plan of that vision, technology overview, product use cases, a detailed explanation of the token economics and investor offering, a token distribution plan, and the future use of proceeds.
Together, these two parts are worth up to a total of 7 out of 10 points in the ICO rating criterion. The other three points are devoted to data validity.
Having a full website and whitepaper doesn’t mean that the data written within them is authentic. This is why the authenticity of the data must be validated. The data validity score is given after an evaluation process occurs, consisting of checking for plagiarism and false statements, as well as checking for old and irrelevant data.
The point division for this criterion is as follows:
- The quality of the website – 0 – 3 points
- The quality of the whitepaper – 0 – 4 points
- Validity of information – 0 – 3 points
The Team criterion is divided into two parts: The team’s level of anonymity and the team’s professional qualifications.
- Anonymity –This field is worth up to four points in total. When seeking to raise capital, a project should want to publish the people behind it. Having a published team on either the website or whitepaper is crucial for the process of assessing the team’s skills and experience. Hiding the team’s or individual member’s identity, or not having links to their social media accounts, can cause our raters to give an ICO zero points for this entire criterion. An anonymous team is one of our biggest warning signs that an ICO might be a scam.
- Skills and Past Experience – This field is worth up to six points in total. One of the main factors in estimating the project’s potential is the team’s qualifications and level of expertise. In order to evaluate this sub–criterion, we go through each members LinkedIn page, GitHub, professional sites, and blogs, in order to see their past experience and recommendations, as well as how relevant their experience is to the ICO.
The point division for this criterion is as follows:
- Publicly presenting a team with social media links – 0 – 4 points
- Skill level and past experience – 0 – 6 points
The vision is the idea behind the project, the future token, and the product. This criterion also refers to the long–term plan that details how the project will fulfill and realize the vision.
Simply having a clearly defined and well-explained vision is worth up to two points. However, a vision must also be achievable. We evaluate the “achievability” in two aspects:
- Theoretical – Basing the vision on logical and relevant market assumptions, as well as whether the technology needed exists today or will exist in the near future, shows how achievable the vision is.
- Practical – It is important to also define a vision based on the occurrence of certain market characteristics, geographical aspects, and regional politics.
An excellent project must have a long–term plan that has execution details for at least three years post-ICO.
The point division for this criterion is as follows:
- The quality of the vision’s definition and explanation– 0 – 2 points
- The likelihood the vision will be attained – 0 – 4 points
- The long–term plan – 0 – 4 points
This criterion is meant for both “first versions” and the main product that the project intends to release. Some projects are still raising funds to create the first product while others already present a working product. Our raters use the following sub-criteria to score the actual product:
- Vision Proximity– We evaluate how close the product is to the vision, as it is explained in the project’s white paper.
- Maturity – A project that can already present a product has many advantages. One advantage is increased credibility due to the fact they that they have invested in the creation a product. Additionally, having a created product brings the ICO closer to fulfilling their vision. A working product can also be a measure of the team’s ability to execute.
The point division for this criterion is as follows:
- Proximity to vision – 0 – 4 points
- Product and project maturity – 0 – 6 points
Here, both the quantity and the quality of the project’s marketing efforts are tracked. The quality and quantity of the marketing efforts are determined based on all the posts published on Twitter, Facebook, LinkedIn, Reddit, and news websites across the web.
This is something that is difficult to score numerically, as each product is different than others and uses different channels. As such, we made this criterion qualitative and rated from low to high.
6. Social engagement
This criterion concerns the volume and flux of the response from the crypto community to the project and to its publicity.
We rate this criterion by calculating the sum of the followers, comments, likes, and subscribers the project’s official page has on Twitter, Facebook, LinkedIn, Reddit, and digital newspapers. We keep the numbers for rating this criterion hidden from the public in order to prevent “like buying” and “follower buying” as methods of increasing the Cointelligence Social Engagement Score. A project needs to maintain their level of engagement across the different social media platforms in order to achieve a high score in this field. Being popular on only one of the social media platforms is insufficient.
This criterion appears on the ICO profiles under the title “Community”.
This is something that is difficult to score numerically, as each product is different and uses different channels. As such, we made this criterion qualitative and rated from low to high.
7. Legal entity and company registration
Every ICO should have a company behind it. The first step in examining this criterion is determining whether the company name and company registration number are available and visible. Ideally these should be present on the website, the whitepaper, or both.
The company should ideally be registered in a jurisdiction with regulatory guidelines in place for ICOs. Malta, Gibraltar, and Switzerland are the three countries with the most favorable regulations and guidelines for ICOs. Registering your company in a country with unfavorable regulation is obviously a poor move, but a company registered in a jurisdiction without any regulations in place is putting their future at risk. Should the country enact unfavorable guidelines down the road, the ICO could fail.
We cross-check this information against the public databases of company registrations provided by each country.
Although this criterion is not given a space on our rating metric bar, it is taken into consideration when reviewing ICOs. Any project which did not have a legitimate legal entity behind it would be considered suspect.
How do we determine our risk score?
The Cointelligence risk score is not an indicator for the project’s quality, but rather it is an indicator of the probability that the project will or will not be realized.
The risk score is calculated as an aggregate score of several sub-criteria. Dividing the total score by the following sub-criteria allows the origin of the risk to be better understood. The final risk score includes an aggregate score comprised of each of the sub-criteria and is presented on a scale of ‘low risk’ to ‘high risk’.
Our sub-criteria include:
1. Team-originated risk:
- Not presenting a team or presenting a fully anonymous team
- Presenting a team with little or no social media presence, or seemingly fake social media presence (fake profiles photos, amount of connections, profile creation date, and more).
- Lacking important team members or divisions, such as a development team or professional experts
- Having an inexperienced team with little or no past experience
- Having team members that were involved in past scams.
2. Technology-originated risk:
- The technology on which the vision is based does not yet exist or is very advanced.
- The project is open source, but doesn’t have a GitHub repository, has a lacking GitHub repository, or a badly maintained repository.
- Being a clone/fork of another altcoin or token without a noteworthy difference.
3. Market-originated risk:
- Aiming for a relatively small market
- Number of competitors, level of maturity, and existing market share.
- Aiming for a market that is well-known for scams or that is notorious for other crimes.
- Vision/Market fit.
4. Token sale-originated risk:
- Disproportional token distribution that does not correlate with the projects goals (for example, having a large portion of the tokens or funds raised going to the team/advisors).
- Having a very large difference between the soft cap and hard cap.
- Existence of a valid lockup plan for team (at least three years) and investors.
Creating a complete picture
Taken together, all of these criteria create a complete picture. We feel that this is the best way to create an impartial and accurate ICO rating that is easy for anyone to read and understand.
Publish your ICO on Cointelligence to attract new investors today
Legal Review and Rating of Nauticus ICO
As part of our continuing mission to serve as the data layer of the crypto community, we are presenting this legal review and rating of the Nauticus ICO, provided by Brian Konradi, Co-Founder and Director of Legal, Decentra Group.
REVIEW AND RATING
FROM LEGAL PERSPECTIVE
The summary of legal issues below has been prepared based on a review of the Nauticus ICO Agreement and Whitepaper available at www.nauticus.io as of June 26, 2018 and does not constitute legal advice in respect of the Nauticus ICO, nor does it provide any advice as to the legality and regulatory compliance of the Nauticus ICO in any specific jurisdiction. This summary does not address and is not based upon the laws of a particular jurisdiction.
The purpose of this summary is to provide, from a legal perspective and based on the Nauticus ICO Agreement and Whitepaper, an overview of high-level risks arising in connection with the purchase of Nauticus Coins. As this report is a summary all legal risks associated with Nauticus ICO are not described herein. Purchasers should consult independent legal counsel and conduct a thorough legal analysis before making purchase decisions.
Unless otherwise specifically defined herein, all terms have meanings set out in Nauticus Whitepaper and ICO Agreement.
From a legal perspective, the most fundamental issue is that Nauticus does not have any contractual obligation to purchasers of Nauticus Coins to develop and implement the project as described in the Whitepaper. The key obligation of Nauticus under the ICO Agreement is to issue Nauticus Coins, but the rights associated with Nauticus Coins are not defined. Nauticus’s commitment to the purchasers of Nauticus Coins is further undermined by provisions in the ICO Agreement and Whitepaper giving Nauticus the right to amend the ICO Agreement and Whitepaper any time at its sole discretion.
(0 – 10)
|How Score Could be Improved|
|Commitment in Whitepaper and ICO Agreement to the terms described therein||Nauticus has the right to amend the Whitepaper any time (according to paragraph 1 of Overview in the Whitepaper).
This creates uncertainty for purchasers of Nauticus Coins as to how Nauticus might further develop and implement Nauticus Platform and other Nauticus’ products (described in the Whitepaper) and what, eventually, the value of Nauticus Coins might be.
|Nauticus has the right to amend the ICO Agreement at any time (according to paragraph 2 of the ICO Agreement).
|0||Restrict the right to amendment so that key elements of the Whitepaper cannot be changed.|
|Conclusion: Ultimately, Nauticus’ amendment rights with respect to Whitepaper and ICO Agreement mean that purchasers of Nauticus Coins have no guarantee as to what they receive in exchange for the price paid.|
|Issuer’s obligations to accomplish the proposed business model||As is typical in ICOs, the Whitepaper is not a legally binding document and intended for the purchasers’ informational purposes only. The Whitepaper contains a clear disclaimer that information in the Whitepaper “may be not exhaustive and does not imply any elements of a contractual relationship” (paragraph 2 of Overview of Whitepaper).
|The ICO Agreement does not incorporate any portion of the Whitepaper and does not contain any provisions covering even key business elements described in the Whitepaper.||0||The ICO Agreement could incorporate the Whitepaper by reference or describe the key business undertakings as covenants to buyers.|
|Conclusion: Nauticus does not have any contractual obligation to purchasers of Nauticus Coins to develop and implement the Nauticus Platform and other products as described in the Whitepaper.|
|Organizational structure and founder commitment||Whitepaper provides no information as to the ownership structure of Nauticus nor does it set out any assurances for purchasers as to the commitment of Nauticus’ owners/founders for the duration of the proposed business projects.
|The ICO Agreement contains no provisions that would indicate commitment of Nauticus’ owners/founders to the project.
|0||Warranties regarding the ownership structure, the ownership of the founders, and non-compete obligations from the founders.|
|Conclusion: Commitment of Nauticus’ owners/founders to the project may not be considered secure.|
|Nauticus Coins attributes and benefits||The Whitepaper provides significant information on allocation, distribution and other attributes of Nauticus Coins.
The Whitepaper provides that the users of Nauticus Coins will receive a 50% discount on trading fees in the first year (section 2.0 Executive Summary of Whitepaper).
|The ICO Agreement does not mirror the provisions of Whitepaper regarding allocation, distribution and other attributes of Nauticus Coins.
The ICO Agreement does not specify what benefits that Nauticus Coins will have. It provides in general for “reduced fees for transactions conducted using Nauticus Coin” (section 1 of ICO Agreement).
|3||The ICO Agreement should include relating to token allocation, distribution and other attributes of Nauticus Coins.|
|Conclusion: There is inconsistency between the Whitepaper and ICO Agreement regarding the benefits that Nauticus Coins will carry. The token attributes are not well defined rights of purchasers.|
|Soft and hard caps||Whitepaper provides sufficient information on soft and hard caps.
|ICO Agreement does not contain any soft cap provisions. However, this now a moot point, as the soft cap of USD 8,000,000 has reportedly been exceeded.
The ICO Agreement provides for a maximum total public allocation of 2 billion Nauticus Coins during Presale Period and ICO Period. Unsold Nauticus Coins will be destroyed. However, ICO Agreement does not provide for a hard cap of USD 88,000,000 (provided in section 8.2 of Whitepaper) or limits in any other way a future issues of Nauticus Coins.
|2||Specific covenants should be included in the ICO Agreement.|
|Conclusion: Nauticus does not have a restriction against the issuance of Nauticus Coins in future. If all of 2 billion Nauticus Coins are sold in the course of the ICO, the proceeds would exceed the hard cap provided in the Whitepaper (based on the current rate of BTC/USD).|
|Closing mechanics||The Whitepaper does not provide for a return of funds to the purchasers in the event if the issue of Nauticus Coins does not happen.||ICO Agreement does not contain a sunset close whereby Nauticus would be bound to return to the purchasers the amounts they paid for Nauticus Coins in the event if the issue of Nauticus Coins does not happen as provided in the ICO Agreement for whatever reason.||0||The ICO Agreement should provide for a return of funds in the event of unreasonable delay.|
|Conclusion: The purchasers of Nauticus Coins are not protected in the event of unreasonable delay in closing.|
|Disclaimers||The ICO Agreement contains provisions purporting to exclude, in substance, any liability of Nauticus to the purchasers of Nauticus Coins in relation to purchase, sale and/or use of Nauticus Coins and/or Nauticus Platform.||3||The disclaimers should be limited to reasonable limitations of liability.|
|Conclusion: The disclaimers are unreasonably broad and seek to limit all responsibility of Nauticus.|
|Transfer restrictions||The Whitepaper provides for certain restrictions on transfer of 8.5% of Nauticus Coins to be issued to the Nauticus team (section 9.0 of Whitepaper).
|The ICO Agreement contains nothing regarding transfer restrictions applicable to its developers, employees and advisors that would protect the market from being flooded with Nauticus Coins.
|3||The transfer restrictions described in the Whitepaper should be included within the ICO Agreement|
|Conclusion: Nauticus is not legally bound to restrict transfer of Nauticus Coins issued to Nauticus’ team, despite assurance otherwise in the Whitepaper. This creates an additional factor that could affect the value of Nuticus Coins after the ICO.|
|Regulation||While the Whitepaper does mention local Australian regulatory registrations, it does not address the risk that the Nauticus Coins may be deemed securities in certain jurisdictions, nor does it describe whether regulatory compliance is required in other jurisdictions.
|3||A description of regulatory risks and how such risks have been address should be included.|
|Conclusion: Regulatory risk is significant in the exchange sector and should be addressed and considered by all parties.|
|Information rights||ICO Agreement contains no provisions that would guarantee the purchasers of Nauticus Coins information rights as to an update on the progress of Nauticus Platform and related products.
|Conclusion: Nauticus has not obligation to keep purchasers updated as to project status.|
|Termination||The ICO Agreement contains a broad provision allowing Nauticus to terminate the ICO Agreement if a purchaser breaches any term of the agreement. In such an event, Nauticus may terminate all rights of the purchaser regarding Nauticus Coins, the purchaser’s account and other rights granted in accordance with ICO Agreement. It is not specified if and how Nauticus would compensate the purchaser for the funds paid for Nauticus Coins and/or funds held on the purchaser’s account otherwise and related to Nauticus platform.
|0||The ICO Agreement should require compensation in the event token rights are terminated.|
|Conclusion: Nauticus may strip away the rights of purchasers for immaterial breaches of the ICO Agreement.|
Broadly speaking from legal perspective, Nauticus’ team is not legally bound to develop and implement the Nauticus Exchange as described in Nauticus Whitepaper. In other words, the Nauticus team may not be held liable to purchasers of Nauticus Coins should it choose, for any reason (including regulatory risks): a) not to proceed with the development of Nauticus Exchange, b) to change the rights attributed to Nauticus Coins, or c) to alter in any way the business model of the project. Given the lack of regulatory framework in general and the absence of enforceable obligations on the part of Nauticus’ team, purchasers of Nauticus Coins largely rely on the integrity of Nauticus’ team.
Legal Analysis provided by Decentra Group.