Nobody wants to feel like they've been taken for a fool, yet that is how some of these ICOs leave people feeling. How could I have fallen for that!?!
You see the problem is, that there are some good investments out there, so we don't want to dismiss every ICO just because it's an ICO. This is why I have written this quick guide for you, which if followed will at least help you sort the promising investments, from the complete rubbish.
If you haven't read Part 1 of this 2 part article, then you can do so quickly here.
The Confusion Conundrum
Can the whole point of the project, and why it will make money, be boiled down to a single (easy to understand) sentence?
This is another important question on the checklist, and a really easy one to answer if the project is genuine, and/or well thought out.
Remember, not every bad ICO exists just to con you out of your hard earned cash. Some will cause you to lose your money simply because they are poorly thought out, and a dev team that struggle to answer the simple question above, spells trouble.
For example let us use the wonderfully frivolous gift of hindsight, and apply the rule to some successful tokens we know and love today.
Ethereum:
What is the product, and why it will make money?
*A platform whereby anyone can create a smart contract based token. It will make money because the Eth token needs to be used in order to use the platform.
Steem:
What is the product, and why it will make money?
A blogging and social media platform. It will make money because the token is used on the platform to pay people rewards for content.
XEM:
What is the product, and why it will make money?
Among other things an investment platform allowing people to buy, sell and rent shares in international companies. It will make money because it is aimed at Chinese investors who are restricted in what international shares they can buy conventionally, and you need the token to use the site.
* * *
The reasons given for why any particular coin will make money, may not lead to that token increasing in value, but at least it's an indicator that you can reliably use.
So the rule here, is if the developers of the project can't explain to you simply, so that you yourself can go away and explain it to a 10 year old in a way they can understand. Then the project is either a scam, or poorly thought out, either way, you don't want to be a part of it.
####### *Disclaimer: I am an investor in Steem and XEM
Team Play
OK so if the answer to the previous question is yes, then you can ask this the next, if no, then please, for the love of Satoshi, don't even bother with this one, just bin the idea and look at something else; if yes, then by all means, read on.
Is/are the developer(s) prepared to show their face(s)?
There is a classic video out there, I can't remember the coin, it was shot a couple of years ago, and it was a developer in a Vee for Vendetta mask (also used by anonymous), telling us that even though he didn't want to show his face, that his coin was completely legit.
Listen, even if it is a lone developer, there will still be clues as to if the person is honest.
Take me for instance, I have a great rep on Steemit, it is easy to find pics of me and I'm connected to many people via this site and others. In other words, it wouldn't be too hard to find me if I ripped you off.
So yeah, buy my coin when the ICO hits, coz it'll be amazing!!
Can you find the code on github?
OK, you've got a whole bunch of yeses now, the new Whizz Bang nose trimmer, really exists, people are using it right now, and each time they use it they buy a bit of the WhizzBang Coin, linking it to a real world action.
The next thing you want to check, is if the code is on github. This is pretty much the standard, and all devs put their stuff on github for others to see, test and scrutinise.
Do you believe in the project?
The project has answered all your questions, they have a token that is related to a real product that exists. There is an excellent developing team, and the code has been checked and tested independently.
Right so go ahead and jump in! Well no, the fact is, electric nostril trimmers just don't float your boat, you just don't believe in the product.
Of course your belief won't change whether this is a good investment or not. However in life we take risks to try and further our lot, and sometimes those risks pay off, at other times they don't.
If you have invested in something you don't believe in, then when the going gets tough you'll exit, which might mean you'll exit early. Plus if the investment does fail, you'll hate yourself for getting involved in something you didn't really believe in in the first place.
Last but definitely not least, you may not believe in it because despite the easy-to-understand whitepaper, and the ingenious way they have bootstrapped Whizz Bang nose trimmer use to WhizBang the coin, you just don't think the product is any good; and you may just be right!
ICO Go!
So that's all folks, you now have the basic rules for investing in an ICO. Of course there are many projects out there, and some are more complex than others. If you follow these basic rules, you will avoid investing in complete lemons!
Now and again one will come along and break all the rules, and still be great, oh well, you'll miss that one, but you'll also miss the thousand crappy ones as well.
Happy hunting!
WHAT ICOs ARE YOU LOOKING AT RIGHT NOW? HAVE YOU LOST OR MADE MONEY IN PREVIOUS ICOs? WHAT IS THE MOST RIDICULOUS ICO CLAIM YOU HAVE EVER SEEN!?! AS EVER, LET ME KNOW BELOW.