Crypto On Point: What to Watch out For Before Investing in ICOs

What Is ICO: This is an unregulated means by which funds/cash are raised for a new cryptocurrency startup. Initial Coin Offering which is the full meaning of (ICO) is usually implored by startups looking to go into digital asset business to avoid the rigorous and regulated capital-raising process required by banks or venture capitalists. In an ICO campaign, a percentage of the cryptocurrency/token is usually sold to early backers/investors of the project in exchange for legal tender or other cryptocurrencies, which in this case could be Litecoin, Ethereum or Bitcoin.

In 2017 alone, more than $6 billion was raised in through the process of Initial Coin Offerings ICO. It simply means some companies created digital tokens and investors bought.
However, ICO is like two sides of a coin, this is because not all ICO project make it. When an ICO project succeeds and its up and running, it gets listed on exchanges, becomes useful and people can really exchange for value and the value rise over time as a result of the value it brings, we can say they project was a success. On the other hand, the project may never pass the first stage and will not even be listed on exchanges. Some may also be hacked and carried away. This will result in failed projects.
Although ICO may end up becoming much more valuable and even worth more than the initial investment, it may also be risky because you may not know which side the project may go.
So haven’t said this, how then do you determine if an ICO is worth investing on or not? Here is what you need to do

TEAM RESEARCH:
As an investor in any business, before investing your money in businesses, you should always check the team behind the business. It could be a physical or online business but do well to check their team and know who the team members are. In the case of ICO, it is best to start with the founder and CXo-founders of the project, then to the development team and any other involved. Read their biographies and histories. Look them up on LinkedIn and other social medias. Also find out their past experience and if any has been involved in any project before, was the project a success or not, do they have relevant experience that qualifies them for the project? Have they worked with cryptocurrencies before? Have they worked with blockchain before? Etc. ensure to make these findings for yourself because it truly helps.

THE WHITE PAPER:
The cryptocurrency whitepaper is prepared by a party prior to launching a new currency or token. The whitepaper details everything you need to know about the currency before making up your mind if you want to invest, purchase or use the coin/token. This includes commercial, technological and financial details of the new coin/token in language that can be understood by someone who is not an expert in the space. It also serves as a pivotal component of Initial Coin Offerings (ICO). SO as an investor or cryptocurrency user, you must ensure you go through the whitepaper, understand all terms of services and make sure to grasps every important details in it before making your conclusion weather or not to invest because this is the document that every company presents during ICO describing the technical underpinnings of the project, how the tokens will be distributed, and how they’ll be used.

TOKEN DISTRIBUTION:
This is the proportion or ratio at which the token or coin will be distributed. It is always imported to look at the distribution ratio and find out at what percentage of the token will be held/reserved by the team or developers. In most cases, if most of the tokens or coins are being reserved for the development team, they could be more motivated to maximize their own profits than to really build out a viable network thereby making the project suffer and putting investors funds at risk. Also, if the value of each token/coin is very high and there’s a large number of them in circulation, the company is probably being unrealistic as too many circulations may cause the project to lack value.

USE CASE:
Every good project should a good use case. Use cases are what makes a token or coin valuable. So before you go in on investing, know what their use case is and if it is really a great one. In ideal, it is a token’s use case that mostly drives and gives the token its value over time. If the uses of the tokens are unrealistic, it is better to stay away and look for projects with good use cases.

In conclusion, I always don’t advice people to invest more in ICO, but if you must do, you should put in what you are willing to lose in that way, you are sure of not killing yourself should the project fail. However, I do keep an eye on good ICO projects and follow them through until they launch on good exchanges like Binance, Bittrex, Okex, etc then I know the company is not joking.

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