How an Investor Get to Know if the ICO Is Legitimate?

Lately, there has been a lot of confusion about what is ICO? What kind of companies can use ICO? What goes into launching ICO sales? Are there any regulations? Etc.

Initial Coin Offerings (ICO) is a smart way for startups or companies in need of funds. ICO offers quick mechanism for raising capital which otherwise seems to be a tough job with venture funding.

Given the fact that blockchain technology is new, so you won’t find much of information or useful facts required for clear understanding. With ICOs coming every day, companies are getting better insights on do’s and don’ts checklist.

Last year, we have seen boom of blockchain and ICO where around $4 billion was raised by startups. This stirred excitement and also opened doors for scammers.

Although you may have technical knowledge of what is blockchain and how the ICO sales work. But, there are certain preventive measures which you can take as a contributor or an investor.

There are few things which you can ask yourself to differentiate between a legal ICO and a scam.

1- ICO team members experience

Do seek proper details of the team members and their respective fields experience. ICO teams are comprised of developers, lawyers, designers etc. you need a solid chunk of your time for vetting the team members’ profiles. While in the process of digging, there are chances that you will find some red flags.

LinkedIn and Twitter are good places to search for the team members. Don’t just rely on their Twitter accounts. Go one step further and check their LinkedIn profiles. Read comments, follow threads and scan the content they share and the people they follow.

Over LinkedIn, do check past experiences, recommendations, connections, and activities. Fabricated online personas are common these days if you find anything suspicious it probably is.

2- Funds Utilization - Whitepaper documentation

A clear outline in the form of a whitepaper is provided along with the project before an ICO sale initiation. This gives an investor overview of what company does, how it operates and if it’s stable enough. Smart contracts and type of token are also listed in the whitepaper.

If an ICO delivers little information about allocation of funds, that’s another sign of ambiguity and scam.

3- How blockchain will solve the problem?

ICOs provide information in the form of use cases that how blockchain will propose a solution for a certain problem. After reading use cases, an investor can identify why blockchain was needed for a particular venture.

If you can’t find any reason blockchain or the tokens of any help, this is sketchy.

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