Hundreds of new flanged digital currencies arrive in the cryptocurrency market space, and with these latest digital coins, the frequency of initial offering scams increases. Initial Coin Offering (ICO) is a form of crowdfunding by releasing a new digital cryptocurrency or token to fund project development. You may visit bitprofit.software for better trading calls and a profitable trading journey.
In the ICO process, someone interested in the new cryptocurrency can purchase crypto coins with an initial funded smart contract. Unfortunately, initial coin offering scams have made many cryptocurrency investors, traders, and even miners lose their money. Due to such reasons, china banned the entire notion of initial coin offering scams way before it became popular.
These initial coin offering scams lure people with magnificent profits they can make if they invest in their project. Although, undeniably, no one can confirm whether an initial coin offering project is legitimate or fake, here are some steps that can help acknowledge whether an ICO is a scam or not.
1. Lack of trustworthiness
The first step to determining whether an initial coin offering is a scam is verifying the identity of the company’s founders behind the project. If a company has no identity documents and background, you cannot trust it for any investment. In addition, the absence of explicit information about creators and their business models is a bad sign for those considering these projects.
2. Lack of a whitepaper
Every new cryptocurrency has its whitepaper. This document is contemporary for investors, and it explains the concept of the project, its goals, and how investors’ funds will have a use case. In addition, there should be some explanation about tokens, their purpose, means, and utility.
3. Lack of transparency
ICOs should have clear information that can provide clarity and communication between developers. If a coin has no information about how the developers will use rewards, then it’s not a feasible idea that you can invest in this ICO.
4. The absence of a community
Every cryptocurrency has an active community – such as Telegram, Slack, or Reddit. Not having a community or a few people in their community can be considered a scam.
5. No updates on the project’s development
ICOs in the process of raising funds should provide updates on their development and the projects they are working on. Having no information at all can make investors flustered, and they may tend to avoid such coins. If an ICO cannot provide any information about their project, then that’s already a red flag for you not to invest in their currencies. These are a few indications you should look for before initiating any investment in an ICO.
6. A confusing and unstructured website
If a company’s website is too confusing, lacks content, and is formless, you should avoid investing in the project. A helpful and easy-to-navigate website will always have enough information about the cryptocurrency, its goals, mission, and vision for future updates on its projects.
Has an ICO got a whitepaper? Are there updates from developers on their projects? Is the official website user-friendly? These are a few questions that will help you avoid the initial coin offering scam. Every coin will have a different purpose, but scam ICOs fail to satisfy every criterion shown here.
7. Every ICO has to have a team of strong people behind it
The ICO team should have at least a ten-member strong leadership, and their members should be well-known in cryptocurrency. Also, you can visit thousands of users’ websites and social media accounts daily.
Other infamous reasons
Hard cap (cap): Some Initial Coin Offerings do not provide hard hats or raise too much money, meaning they don’t have enough funding to launch their projects. It is NOT good because if an ICO does not comply with these criteria, it may become fraudulent.
Team members: A big plus point is if the team members are well known and communication is open to the public. If there is no information about the team members and they are not well-known in cryptocurrency, then it’s a big red flag to stay away from that coin.
Blockchain: The blockchain behind every project must be compatible with other cryptocurrencies. For example, Ethereum has its blockchain, so any ICO with an incompatible blockchain will be a no go for investments.