In spite of all the shortcomings of the crypto world, you may still want to take a deep breath and invest in an ICO. In this case, it is important to follow some clear steps and educate yourself if you want to avoid risks that you don’t want to take, like getting ripped off.
First of all, make sure you read the white paper of the project; there is always one, and it is almost always written in English and sometimes translated into different languages (maybe even into your native language).
You must understand the company’s goals and understand what the project wants to develop or improve. If all that isn’t explained well enough and clear enough for you, if you’re in doubt, it’s better that you take a step back and reflect before investing. However, if the project reveals itself to you, that’s a good sign it’s time to move on to the next logical step.
Also, the white paper has to describe how the startup will use the raised funds, or even offer a detailed business plan for the investors to know its need to raise the tens of millions of dollars it requires. Again, if it sounds exaggerated, be careful; otherwise, proceed to the next step.
You must be able to understand the usefulness of the tokens that will be generated during the operation. For example, it could be a new cryptocurrency that potentially has new features that do not exist in others.
The funds raised have a particular purpose, and this point must be described: the way in which they will be allocated to the investors, to the project promoters as well as to the advisors. In the same way, it must be specified if there could be a new issue of tokens beyond the ICO because this will have an impact on the potential success of the token they propose.
The smart contract is extremely important since it is the technical realization of what is described in the white paper, but that’s not always the case! Yes, there are several possibilities for a startup to receive the requested funds and transfer you the tokens you own.
Check if the startup already has any interesting results to the present day with its current project even before the fundraising takes places. In some cases, the company is already experienced and already has customers. Just to reassure its investors, it can present a turnover to demonstrate the value of the product or service sold. In this case, if there is an undeniable proof of success, yes, go for it!
Evaluate the team that carries out the project; it is necessarily critical before you start an investment: understanding how the team is composed, who is the CEO, who are the developers and what is the professional background of each member of the company is the key to ensuring the success of a project. Please don’t be disappointed and don’t lose your faith in the project if the team has fewer members than you might have expected.
Educate yourself via social media or learn from more experienced investors if you know any. Nowadays, the information you need is very easy to find, so, for example, if you do not find anything about the CEO, or about the proposed advisors on the Internet, then something is probably fishy about the project.
We don’t want to frighten you, just to make sure you are cautious before investing. It is very easy to set up an ICO and just as easy to falsify the information presented to you, if you add good communication and excellent marketing, you have the keys to a potential scam. It is, therefore, best to take the necessary precautions to secure your investment, just as you would do if you invested in the stock market or on any other financial market.