Detection of Scams in ICOs
The focus of this piece of work is to prepare the reader against scams and frauds in the cryptocurrency space and also advise on the needs to be vigilant towards some indicators.
With the boom of cryptos, ICOs (Initial Coin Offerings) have become extremely popular as a fundraising method and many hope that they will replace venture capital in order to promote innovations. But as any new and growing field, there still are risks. Investments made in ICOs usually carry risks and it is common to see scams as well. Oftentimes, one can be misled in determining which projects end up having problematic features.
As a defense mechanism, here are some warning signs that you need to pay attention to. Once you understand how to identify them, you will be sure that your money is in the right hands attracted to legitimate projects.
Have You Taken the Time to Understand the Project?
In all your activities including investment in any opportunity, always ask yourself if you have an ideal understanding of that particular project. Is it pragmatic such that you would not have a problem explaining it to other people? Or is the project vague and lofty with the use of overused phrases and words such as, “AI,” “blockchain,” “decentralized,” and “revolutionary”? These questions should allow you to analyze the project in a critical manner. Projects that do not articulate their objectives well should not be pursued, not even for you, as it usually creates even more perplexity. This is also true for hardly explainable projects – best pass on such investments.
Will the Project Provide Real Value?
Consider if the project has the capability of providing a real value. Does it address an actual market gap or come with novelty? If these two factors cannot be affirmed, then it will be hard to make headways. These days, property owners only buy shares to prospective firms that they consider to have value. There is a strong question mark on the very rationale of a project if a project appears to have not much from it.
Trust Your Instincts: If It Looks Fishy, It Probably Is
There is absolutely no point in continuing with something like, for example, an elk capital project, and upon visiting its website, watching its video, and reading its white paper, you do not understand what the project intends to do, abandon it. The ‘duck test’ is a classic that you may employ here: ‘If it quacks like a duck, swims like a duck and looks like a duck, then it is probably a duck.’ In some instances, things are as they are presented – when all is said and done, wading in waters that do not make sense is not advisable.
Blockchain Developer: Why?
For starters, it is necessary to find out whether the project genuinely requires a blockchain, or it can be done otherwise. Any sane project should give a coherent answer on what purpose of the blockchain is and how it contributes to the development of the overall product. It is better when it does not happen with projects that are aimed at conferring a blockchain placard without elucidating it’s the purpose. The real game-changing projects should seek to execute their token or blockchain technology within a short period of time after their ICO.
Who is Behind the Project?
As far as the teams or groups are concerned, it is e asimilo for anyone regardless of whether they are known or not to possess great ideas, however, more often than not, definitely scams are carried out by people who are unknown or lack a reputable source to vouch for them. It is imperative to look for teams that have proper and authentic exposure, especially those people that have already been there and done it. It is a supporting fact, if the founders have something to showcase, such as accomplishments or good businesses. The site attributes each member of the team and depicts them as well as their biographies.
The one exception to this rule is Bitcoin, created by the pseudonymous Satoshi Nakamoto. There are exceptions but this is not the case in most situations.
Do Your Own Research
Do not trust random views and perspectives in the web, especially through the blockchain. Try, if possible, to ignore the typical plain blockchain – make your own effort. Study the whitepaper of the project in depth, look up articles published over the medium, and in general, try to be involved in their discussions like a telegram or a discord channel. Make sure you have absolute knowledge in order to make a solid conclusion.
Are “Dark Periods” of Particular Projects Built In the Roadmap?
Any properly executed project should have a reasonable roadmap that contains each of the its phases of development as well as details of previously completed stages and intended future ones. Such situations advocates the impact of the leave. It is certainly not good for any serious project if such a roadmap is not available. Stick to your guns regarding your research to ensure you do not get fooled by the veil of some such projects.
Have the Founders Established A Connection With Members of the Community?
Active involvement with the community is another possibility of determining whether a project is genuine or not. It is common for owners or founders to focus on many tasks but genuine owners are able to get and remain in touch with the people behind the project. With any worthwhile project, the engrossed community of its supporters should not only expect – but receive updates on a regular basis from its sponsors who can be achieved via social platforms such as Telegram. If their sponsors, founding family or anyone prominent is really hard to find, If social media contacts are apparently dormant, there is definitely something wrong.
Final Thoughts
There is no guarantee that a project will be successful even when all potential factors of success are satisfied. Nevertheless, a strong caution and knowledge of common fraudulent techniques can help avoid the vast majority of scams. Recognizing scams early helps you steer clear of ICOs that are largely hype driven and enables you to concentrate on those projects that are actually worth your attention and investing effort.
