What to check before investing in an ICO

ICOs are the hottest trend these days, as investments worth billions of dollars keep pouring in. Startups and small sized companies from all over the globe are using ICOs to raise capital. Initial Coin Offerings (ICOs) are just another technique of crowdfunding and have gained considerable popularity in the tech sector.

In this article, we will be discussing a few details that an investor should check before investing in an ICO. This form of crowdfunding is unregulated, which means that the ICOs can be used for illegal activities as well, including money laundering. Investors need to be extremely cautious when investing their money in ICOs. Checking the requirements that are mentioned will help investors differentiate between a scam and a viable investment.

The ICO should have a capped sale point. This means that the company launching the ICO should clearly communicate their goals. ICOs should be backed with a unique solidity code that exists on GitHub. This will ensure that the ICO is being launched only after the company has performed the required research and development. All of the non-standard code that is being used by the ICO should be authenticated and audited by trusted auditors, such as Zeppelin Solutions.

All ICOs are generally accompanied by whitepapers that explain the ICO, its purpose, and the technology behind it. The investor should carefully check the references provided in the whitepapers. The whitepapers should not make unfounded scientific claims.

ICOs are highly complex and often require a high level of technology. Investors should check that the ICO is not just a ponzi scheme. Be sure to check that the blockchain project the ICO is funding contains the pertinent technology.

Check that the team behind ICO provides a clear insight on its effectiveness. The developers working on the ICO should have an adequate digital presence. This means that they should have active GitHub accounts and an authentic LinkedIn profile. The owner or advisors associated with the ICO should not have, for the past five years, held positions of CEO/CTO in companies that went bankrupt. Moreover, every name and trademark associated with the ICO should at least be three months old and include an ENS-Name ownership that can be proven with signed keys and certificates.

In order to check whether the developers, owners, and advisors associated with the ICO are active in the crypto community, it should be noted that their Reddit postings on the Ethereum channel should date back further than 30-8-2017. This will effectively set a threshold and separate inexperienced individuals from the genuine, professional people who have been following the crypto market for a long time.

If an ICO does not meet the stated requirements, then investing in it would be considered unwise. This is because the chances of its team being a scam are too high. When investing your personal money, you should carry out ample research and be sure of the quality of the team that is behind the ICO. Only if everything checks out, and you are sure that they are professionals who know what they are doing, should you invest.