So I thought with the recent ICO craze going on, I would share a couple tips for people to keep an eye out for when looking into investing in some of these ICO's. I would like to preface this article by saying there are numerous warning signs or "red flags" that should be looked for and these are just a couple of the ones that I tend to check for first. If the potential ICO cannot provide this information, it does not mean they will close shop and run with the funds raised, it just means be careful when investing and never invest more than you can afford to lose. Otherwise known as Caveat Emptor.
As of late there have been a ton of new ICOs (Initial Coin Offerings) hitting the market which is a drastic shift from a couple years ago when coins/projects got shunned for having more than 1 to 3% pre-mined coins. Essentially, an ICO is a complete pre-mine. Some projects allow for mining or coin production after the ICO ends but by participating in the ICO, you are purchasing pre-mined coins.
So... lets hop right into a couple things to look for to try to avoid some potential money traps or as often referred to in the crypto-community, "SCAMS".
1) Conduct a WhoIs search of the ICO domain name to see who it is registered to.
Best case scenario, you will see all the company data that matches up with the team leading the ICO. If you see information that is registered behind a proxy, be wary. Why would a start up company hide their information? There is no reason to do so when you are asking being to invest money in your project.
There are a ton of WhoIs domain tools that came be used, just do a quick google search and you will find them. I have listed a couple of the top search results below.
https://whois.icann.org/
https://www.whois.com/whois/
https://www.godaddy.com/whois
2) Read the whitepaper.
A white paper is an informational document issued by a company to promote or highlight the features of a solution, product or service. READ THIS DOCUMENT THOROUGHLY. I cannot stress that enough. I have participated in several ICO's now where I see investors throwing money at a project and then asking a ton of questions after the fact. In most cases, if the white paper is well written almost all of you questions should be answered by reading it. Look for a well planned launch and detailed product specifications. Many projects have a grand picture they are trying to achieve but if there is not any technical detail on how to achieve that grade scope, be wary.
3) Review github code if available.
A lot of the current ICO landscape is or will available as open source projects. Even if you are not that well versed in code or really know nothing at all about coding, still lurk around the github code. There will be people who know that they are looking at and make comments. Don't be shy to ask questions even if they are not super in-depth. Review the code publisher and see if they have any commits to other open source projects in the past and review the performance/outcome of those other open source projects. Remember, a fool is soon parted with his money. Ask questions, ask questions, ask questions. If there is no source code and no previous github projects, be wary.
4) Research the team.
On top of just reviewing the team's previous open source projects, research them on LinkedIn, Facebook, Twitter... anywhere you can find them. I have noticed that people with experience in start up businesses or entrepreneurship tend to fair better when it is game time and comes to formally launching the project after the ICO. If you cannot find the team members fairly easily on social media sites, be wary.
5) Join the slack channel and communicate with the team.
Join the slack channel, forum, BCT thread... anything you can. See how the team interacts with the community and how they handle skepticism. You have a right to be skeptical when it comes to investing your money. Again, ask questions if you cannot find the answers you seek reading the white paper or reviewing the code. If the ICO team does not respond to questions, they ignore or bash doubts about the project, be wary.
6) Look for a well planned roadmap.
Do some research and evaluate the ICO's roadmap layout. Have they already started on the project and have something to offer or are they going to be using the ICO funds to build something for the first time? Look at the timeframe of the roadmap and see, will they have a product this year, next year, 10 years from now? What is their plan and what are the steps to achieve it. If there is no roadmap, be wary.
There are ton of other red flags to look for. If you liked this post, I will follow up with a Part #2 to this series. Please let me know your feedback and I look forward to sharing some more information.