Hi Everyone,
Today on Ninelives we are going to delve into the wonderful world of ICOs, Initial Coin Offerings. ICOs are a relatively new concept and should not be confused with IPOs which are related to stocks. There is nothing secure about an ICO, they have very little regulation at the moment and are often illegal to participate in. They are extremely risky and more often than not you will lose all the money or tokens you contribute getting nothing or very little in return.
This series is called #ninelives because cat's are said to have 9 lives due to their amazing ability to survive; I will share with you 9 criteria to help you choose a coin that will survive beyond it's ICO phase. I do not recommend you invest in ICOs and following the criteria listed below will in no way guarantee you success or ensure a positive return on your investment. Proceed at your own risk and obey the law!
Nine Questions to Ask About ICOs
The Team: A project will rarely succeed without a great team. Check the team members history, look at their Linkedin accounts, Google them, research their GitHub activity. Double check the CEOs, developers and advisors. Make sure they are credible, competent, accomplished and they are actually on the team! Ensure it is not just some make believe paid endorsement or outright fraud. Experience counts! Be like a cat use all your senses 😸
Is a new token necessary? Most projects can just use a existing token and make an app to work with Ethereum, Bitcoin or some other crypto. Why do they need their own coin and your money? Is a unique blockchain necessary and does it need to be decentralized? If they don't have a strong need for a unique decentralized ledger, I would probably find another project to support.
Quality of the project: Is there a Minimum Viable Product (MVP) You can often look into the code of the project as many are open sourced. I don't know much about coding so I read people's opinions on the code and ask friends in the industry if it looks good. I also READ THE WHITEPAPER! and the expert opinions on it. If you can't understand the whitepaper or see a useful product, do yourself a favor and don't invest in it.
The community and media: Is the marketing and community team professional? What do third party websites have to say about the project? Promoters are lost always paid and people saying good things about an ICO are just in it for bounties (free tokens). Yeah should join a project's Telegram channel and see how it is managed. Follow them on Twitter, Facebook, Steemit, periodically check their website for updates and subscribe to their emails. Search for them on ICO ranking websites. If they have no presence or run a poor campaign, they may fail, even with an excellent product. They could just be a pump and dump scheme so evaluate the quality of the marketing and customer service.
Competition: In marketing terms, do a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. Evaluate their competitors, are there similar coins that do the same thing? Other coins may copy them as there are few patents and projects are open sourced. What is the first mover advantages? The size of the market they intend to capture and the possibility of saturation or number of competitors?
Soft and hard caps: How much money do they need to raise and is it enough (softcap)? What is the maximum amount of funds they plan on raising (hardcap)? How many tokens will they issue and what is the maximum amount that can be issued? If they don't reach their hardcap will they burn (destroy) the remaining tokens? If they burn the tokens they don't sell, will they also burn other tokens in even proportions? ie. tokens meant to compensate the team. Some projects need more funds than others. Look at the structure and timing of how they plan on raising the funds and how much. Don't get tricked into investing because of lucrative bonuses and avoid projects that generously reward first movers and insiders.
ICO proceeds: What do they plan on doing with the money they raised and any tokens held in contingency? How much of the funds are going to the developers, marketing, bounties and being held for future uses? Ensure the compensation for the team and founders is not too generous (i.e. more than 50%) Does the compensation of management align with the token holders best interests? Are they giving away excessive amounts of free tokens? Do they tie expenditure of the ICO proceeds into the project's road map?
Current and future stages of the project: How far along are they and what have they achieved? Do they have a working product or have they even started working on a product? Does the white paper outline realistic future goals or is it vague? I want to know if a project is achievable and if the cryptocurrency will have a future demand. You should also check if the project has the support of any blockchain venture capital companies and if they are talking with exchanges. If the token is not compatible with an existing token (eg. ERC20) do they have their own wallet and main net?
Redflags: where there’s smoke there’s fire, if you hear a negative professional opinion take it seriously. If there is a promise of spectacular returns, drawings that look like pyramids, get rich quick plans and intense urgency, steer clear! Is the project concerned with laws and KYC (Know Your Client information)? Is their content and whitepaper original or plagiarized? Do they answer concerns and constuctively respond to criticism? Do they have an actual office and a registered business? Do they have a license for what they are doing? Is it legal and what are the restrictions? Do they plan to have an audit? If a company just wants money and has no consideration of the law, buyer beware.
Thank you for taking the time to read the Ninelives of ICOs. I hope you learned something and wish you luck in your future endeavors. ICOs are as risky and complicated as investments get. Please exercise extreme caution.
I do not recommend investing in ICOs. If you invest in ICOs ensure you have a hard wallet like a Trezor or Ledger S Nano to safely store your coins in, you cannot use an exchange wallet. If you don't understand 95% of what was written above, I recommend further educating yourself before even attempting to take part in an ICO. This is not financial advice and is for your informational purposes only.
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Bye for Meow 😺 mRrrrrrrrrr......