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How to Identify Cryptocurrency and ICO Scams

Dozens of new cryptocurrencies launch each calendar month, and alongside these new tokens and coins comes a series of initial coin offerings ( ICOs ). The appetite among a broad consortium of investors for these opportunities has grown, even in hurt of the fact that cryptocurrencies were battered in 2018. All of these factors combine to entice scammers. After all, if investors have proven that they are volition to throw money toward a highly notional cryptocurrency, they seem to be equally likely to invest in deceitful tokens or ICOs .

For the cryptocurrency investor looking to make the most of the host of modern investment opportunities while remaining safe from deceitful ICOs and sketchy coins and tokens, the candidate can be daunting. Blockchain and cryptocurrency technology is developing at a rapid pace, and even experienced investors may find it hard to keep up with the terminology. While there ‘s no guarantee that any cryptocurrency or blockchain-related startup will be legitimate or successful, the steps outlined below can help you to be deoxyadenosine monophosphate sure as possible that you ‘re not falling for a scam .

Key Takeaways

  • Fraudulent ICOs and sketchy coins and tokens abound, but there are many ways to help ensure that you avoid these potential scams.
  • One of the best ways to protect yourself is to thoroughly research the individual team members of a project before you invest.
  • A cryptocurrency or ICO whitepaper is the foundational document for that project. Companies that don’t offer whitepapers should be avoided at all costs. Make sure you read and analyze the whitepaper carefully.
  • Any ICO will depend upon a token or currency system in order to facilitate the crowdfunding process. Legitimate companies and endeavors make the system itself and the progress of the token sale easy for potential investors to view. Watch token sale figures for the ICO over time.
  • Overall, be extremely cautious as you look for new investment opportunities in the ICO and cryptocurrency spaces.

Get to Know the team

possibly the one most important success factor for any ICO or cryptocurrency is the developers and administrative team behind the project. The cryptocurrency space is dominated by major names, with ace developers like Ethereum founder Vitalik Buterin capable of making or breaking fresh projects just by having their names listed on a development team. For that reason, it ‘s increasingly common for scammers to invent fake founders and biographies for their projects .

The best protection against this deceitful tactic is to thoroughly research the individual team members of a project before you invest. It ‘s a bad polarity, for model, if you ‘re ineffective to find any information about a finical developer or founder on LinkedIn or other social media outlets. even if profiles do exist, check to see if their activity seems to match up with the number of followers and likes they accrue. Individuals who rarely engage with their followers and even have thousands of fans may not be real .

Beyond determining whether the development team is actual, it ‘s crucial to make an attempt to see if their qualifications measure up. Do the founders have the know they claim to have ? Is it relevant to the current project at hand ?

concentrate Over the Whitepaper

A cryptocurrency or ICO whitepaper is the foundational document for that plan. The whitepaper should lay out the setting, goals, scheme, concerns, and timeline for implementation for any blockchain-related project. Whitepapers can be incredibly revealing : companies that have a flashy web site may reveal they lack a basically sound concept. On the early hired hand, a caller with a web site contain spelling errors may have a whitepaper that indicates a rock-solid concept and a carefully conceived execution plan .

The first step toward analyzing a whitepaper is to read it identical thoroughly. Check to see if the whitepaper has complimentary resources ampere well, including fiscal models, legal concerns, SWOT analysis, and a roadmap for implementation.

Companies that do n’t offer whitepapers should be avoided at all costs. however, it ‘s possible for a deceitful ship’s company to put forward a convert whitepaper, as was the event with PlexCoin ; this company managed to raise over $ 15 million before the U.S Securities and Exchange Commission ( SEC ) stepped in to shut it down. A whitepaper should answer all of the questions a potential investor might have about what sets this particular project apart from its competitors, how it aims to be successful, and the measures it will take to achieve its goals .

look to the Token Sale

Any ICO will depend upon a token or currency system in order to facilitate the crowdfunding summons. legitimate companies and endeavors make the system itself and the advancement of the token sale easy for likely investors to view. Look for the token sale figures as the ICO is ongoing. Better yet, watch the nominal sale over time to see how it is progressing. If a ship’s company makes it difficult for anyone to chart the advancement of its ICO, this is a major crimson flag. Some victimize ICOs will hide their token sale progress under the guise of person contribution addresses ; this prevents potential investors from seeing precisely how much has been raised and how a lot time remains in the sale. In some cases, this might be an campaign to generate a common sense of urgency among potential investors, even if there is n’t tell of a successful sale going on at the same clock time .

How feasible Is the project ?

While it may seem obvious, ICOs, and cryptocurrencies with the greatest chances for success are those that have the cardinal structure to outlast their competitors. many launches, even highly-publicized ones, have sputtered after initial pastime faded. Your best chance of a successful investment relies on a company having an accomplishable, feasible set of aims. The company should have a compel concept for the time being, but it besides must be able to carry that concept over into execution over the unretentive and farseeing terms alike .

Going along with the question of feasibility is the publish of foil. Companies that have outstanding concepts and models are more probable than others to want to be arsenic diaphanous as possible with the broader community. Look for companies that aim to keep electric potential investors up to date with regular, detail build up reports on a caller web site or on sociable media. It ‘s besides useful to look if a caller has a timeline for what has taken stead in the development summons, ampere well.

exercise circumspection

even the most successful ICOs and cryptocurrencies are slammed for being fueled by notional invest. The mind of getting deep quick on an investment in a hot new project is tempting enough to draw season investors and beginners into hazardous areas. Keep an eye toward caution as you look for new investment opportunities in the ICO and cryptocurrency spaces. Be mindful that projects sounding besides well to be true likely are. spend time scrutinizing every detail, and assume that the absence of a piece of all-important data may be an attack to hide an fallacious model or concept. Look for outside sources to verify the legitimacy of any visualize before making an investment, and always ask questions that you ca n’t already find the answers to. The cryptocurrency and ICO spaces offer enormous opportunities for investors who have done their homework and are able to make good investment decisions. They besides feature pitfalls, which can lead to boastfully amounts of money being lost due to scams, frauds, or even legitimate businesses that are plainly ailing designed and improbable to succeed .

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