It’s late on Christmas eve and the Insider Chaining team are preparing for a day of feasting and a night of food coma’s. So we thought what better way to welcome Father Christmas than a look into ICO’s to find out what they are all about and which ICO’s are worthwhile.
What Is ICO?
ICO is the abbreviation of Initial Coin Offering, meaning that someone is offering investors some units of a new cryptocurrency or crypto-token in exchange against cryptocurrencies like Bitcoin or Ethereum. Around since 2013, ICOs are often used to fund the development of new cryptocurrencies, just as Initial Public Offerings are for businesses on the stock exchange. The pre-created token can be quickly sold and traded on all cryptocurrency exchanges if there is demand for them.
ICO is a tool that has revolutionized not just currency but the whole financial system, and ICO token has become the securities and shares of tomorrow.We will discuss in this article about what makes a good ICO and what makes a wrong ICO, so you know what to look for when investing.
What Makes A Good ICO?
Founders, partners, and developers with relevant experience in cryptocurrency/blockchain technology
A team is the most critical part of the backbone of a successful ICO, and you can examine this easily through several steps/places. Start by reviewing their website, and looking at the team, then Google them; find out more about them. Check their LinkedIn profile or Twitter accounts, are they well-documented with an extensive network of relevant connections?
Documented success with past projects
Successful past projects are good indicators of potential future success, but since cryptocurrency is such a new field, it is not necessary to have direct plans relating to the market. Many of the ICO’s core team members have a range of backgrounds including engineers, programmers, and marketers. Again, their social profiles and online presence should give you an indication that they are a reliable professional with a reputation of some verifiable “wins.”
A well-documented offering that meets a clear market need and fills a valuable and ideally unique niche.
As you would in any investment, you want to be sure that the product on offer is needed and desired in the marketplace. In many cases it is inevitable that there will be similarities with other products, so beating the competition on features and possible dates of release are essential; thus the offering does not have to be unique. If there is no demonstrated market need, it is going to be hard to make a case for substantial growth, therefore be aware of vague or confusing language in the offering. You will see some ICOs using words like “smart” very often without making clear what that means for their ICO or brand. Overly vague descriptions are a sign that the developers themselves are unsure of what they are doing. Moreover, also, If you cannot follow what they are saying with a fair amount of understanding, then you might want to reconsider that investment.
What Makes A Bad ICO?
Structural issues within an ICO
Having matters within an ICO can make a difference between it being successful or a flop, obviously. Moreover, because of that, some red flags can appear directly through the structure that is set up, such as a language barrier between the investor and ICO if it is too technical (for example.) Another red flag is when an ICO says they will revolutionize specific industries/processes by using blockchain, without firmly describing their process in detail in the whitepaper.
No Trust Or Legal Presence Set
Also, there is absolutely no legal mechanism that prevents an ICO entrepreneur from cashing out all of the money raised. An ICO with no moral compass or legal presence is extremely dangerous and makes it hard for an investor to find a trustful relationship to start and build.
The Difficulty of Performing Future Raises.
While the typical fundraising model is gradual and based at each step on the current performance, the standard ICO process is a one-step process, with no apparent path on how future fundraising can be performed.
General Security Issues
Typical crowdfunding and venture capital (VC) fundraising methods lack the automation of ICOs but perform better from a security perspective. It is much more difficult to “hack” a crowdfunding initiative, or VC round, mainly because it is manual and based on signed contractual obligations.
With ICO’s that is not guaranteed, as they are notorious for getting hacked. So be smart with your investments, take precautions and be sure to keep an eye for upcoming Insider Chaining tips and advice.