ICO 101: tips to know before investing in any kind of crypto offering

Crypto ICOs, short for Initial Coin Offerings, have become a popular but often risky way for new cryptocurrency projects to fundraise. Here’s how an ICO typically works – the startup behind the project releases a whitepaper, which explains what their concept is supposed to do and why it’s useful. The goal is to generate hype and get people excited enough to invest in the ICO by purchasing the project’s tokens. Owning the tokens allows investors to access the project’s features and by holding them participate in projects achievements and making profits when goals are reached and token price goes up .

On the surface, ICOs seem like a great innovation to help legit crypto projects launch and get off the ground. But they’ve also become a magnet for scams and shady behavior, unfortunately. Scammers have caught onto the hype around ICOs and created bogus whitepapers for made-up or exaggerated crypto projects just to rip off investors. They make unrealistic promises about returns to pump up demand. Once they hit their fundraising targets, they take off with the money raised, leaving hopeful investors who got these worthless tokens.

Since ICOs aren’t regulated properly by now in us and almost all other countries , these scams have exploded. Investors often get excited about crypto and forget to do their research on ICO projects before buying tokens. The temptation of getting rich quickly also clouds judgment. While not every ICO is scam or fraudulent, they are super risky. Investors should approach with extreme caution , do tons of due diligence, watch for red flags, and remember :There is no elevator to success, you have to take the stairs.

Now let’s take a look into some of these new tokens and see whether we can detect their legitimacy with simple research and just by checking easy facts but critical about them 

The very first thing we should always check and consider when we are going to learn about these projects is their whitepapers. 

Analyzing new cryptocurrencies and their whitepapers:

A whitepaper in crypto is like a detailed document, usually a PDF, explaining a decentralized project like a digital currency or blockchain network.

It basically introduces the project and describes the problem it’s trying to solve.

Whitepapers can be about anything, not just crypto.

When you find a new crypto token or coin , especially in social media and from large followed accounts and influencers, which is doing an ICO fundraising round, reading its whitepaper should be your first move to analyze it.

The reason that projects release whitepapers is to give a clear statement about the future plans and vision for that crypto they’re offering.

It explains what this project is and how it works, talks about the issues it’s trying to address, gives details on its technical information , etc. It usually introduces the development team and project timeline, among other important stuff.

A good whitepaper usually includes these sections:

Introduction – Explains basics of blockchain, crypto, and the market the project wants to enter. Gets you interested to keep reading.

Problem Definition – Here, we take a closer look at the challenges the project is trying to solve. Explains why current solutions are insufficient.

Product Description – Details what the platform, product, or service does and how it will solve the problems outlined.

Technical Details – Explains the technical side of how the product is built and functions. Includes specs, development methods, etc.

Token Details – Focuses on the project’s coin or token – its purpose, distribution method, and benefits to users.

Offering Details – If public offering, gives info on timing, eligibility, fund use, project roadmap, etc.

Team Background – Introduces founders and developers, their experience and roles. A strong and experienced team is one of the keys to reach success in any project.

Conclusion – The conclusion ties everything together. It’s like summarizing the main points of a story. If there’s a public token offering coming up, we’ll make sure you don’t miss that crucial detail.

Look Beyond the Whitepaper – While reading the whitepaper is important, it shouldn’t be your only research. It’s written by the project team so may be biased. We will dig other sources to get a complete view before investing.

The whitepaper aims to explain the project’s vision, technology, and value proposition. But you should dig deeper to fully evaluate the opportunity and risks.

Now we know that reading whitepapers carefully before investing is critical.

Because it helps us find out quite a few things about what they offer to us. 

First, it lets you understand what the project is about and why they need to fundraise for it.

Then, reviewing the whitepaper allows us to identify the problem the project wants to solve and realize if it can provide a real solution or it’s just a hype and has no real use cases.

Finally, analyzing the whitepaper before making any decision gives us a clearer view to judge if the token they’re offering seems legit. With this insight, you can make smarter choices about your investment.

Second place to look up after whitepapers is team and their social media presence

When researching a new crypto project, the team and online community are very important points to check. Here are crucial factors to examine:

Team Backgrounds – The founders and core developers behind a project should have relevant backgrounds and experience. Look for expertise in blockchain, computer science, engineering, economics, etc.

We should verify that persons introduced as project team are real and we can find the backgrounds of team members.LinkedIn profiles can be helpful for this. Lacking credible teams is a red flag , scam projects usually try to hide their identity and use fake information instead.

Advisor Board – Many projects appoint advisory boards of experts to guide strategy. These advisors should have strong credentials and accomplishments in the crypto/blockchain space.

Good projects cooperate with other known project team members and use their vision and experience. 

Previous Projects – Research the track records of the team members. Have they delivered successful projects in the past? Consistent failures or shady ventures should raise suspicions.

Team Transparency – Legitimate projects will be transparent about the identities and roles of the individuals involved. Anonymous or fake team profiles indicate potential scams.

Social Media Activity – Active, organic social media communities suggest strong engagement. Inauthentic follower growth or lack of chatter warns of minimal interest. The imbalance between project followers and real people activities and posts about the projects is always a red flag.

shady projects buy tons of fake social media engagements and followers to look more real.

Reactions  – Gauge reactions to project announcements/milestones on social media. Does the community respond positively or negatively? Enthusiasm shows active users.

Proceed With Caution – An impressive team and community provide confidence, but additional research is still essential before investing.

Vetting a project’s team expertise, track record, transparency, and online following helps determine true development and community strength .

Evaluating a Crypto Project’s Development Activity

When researching a new crypto project, looking at its code and roadmap progress is key. Here are tips to assess development status:

Review the Roadmap

Compare stated roadmap goals against actual progress
Are milestones being met on time?

Significant delays or missed deadstones are concerning and may indicate poor execution.

Some projects just focus on hypes and write a roadmap that you can easily determine they can fulfill later or not .

Beware of projects that focus too much on listing on exchanges or price calculates.

Reliable projects focus on development progress and solving issues and not in sales and trading detail

Check GitHub Activity

Github is always a good place to look while researching for new projects:

Frequent code commits indicate an active, ongoing development process.

Diversity in code contributors is a positive sign more people are developing.

Well-documented and organized code suggests higher quality.

Quick fixes for bugs and issues signal a responsive, engaged team.

Minimal GitHub activity is a red flag that development may be stagnating.

Follow Development Communications

The team should provide updates on progress through Medium articles, YouTube, Reddit AMAs, Discord, newsletters, etc.

Lack of regular communications likely means delays or inactivity.

Celebratory announcements when roadmap goals are hit further validates progress.

By comparing roadmap objectives to actual development output and tracking communications, you can better evaluate true progress.