How to Identify ICO Scams
There are certainly numerous scams embedded in the current ICO ecosystem as more and more people seek out novel altcoins hoping to hit it big. People are literally throwing money at a whole host of new tokens without a second thought.
This is the anti-thesis to smart-money, this is dumb-money.
Those who missed out on the rise of Bitcoin and Ethereum are falling over themselves to invest in the next big thing, unfortunately, many of these fine folks don’t even have a grasp on the basics of blockchains, crypto-markets and have no concept of how to determine the value of new offerings.
The current crypto currency landscape is being inundated with ICOs seeking funding for blockchain based altcoins. They're popping up in various economic fields promising to revolutionize the way business is done.
I think there’s little doubt that crypto-currencies have awesome potential to transform our understanding of money and how we'll be using digital assets in the future. Yet, just as important and perhaps the true transformation that is taking place is the underlying blockchain technology that will enable innovation and empower individuals across all walks of life.
ICO Scams
With new coins being launched at an accelerated pace, it’s becoming increasingly difficult to identify legitimate coins worthy of investment from elaborate hoaxes designed to capitalize on investor FOMO.
With initial coin offerings all the rage, raising hundreds of thousands of dollars for projects with little more than a basic concept, a flashy name and some fluffy marketing and packaging has never been easier.
To be sure, a certain percentage of these projects will likely become success stories but we can also be certain that many of these blockchain based tokens are pure smoke and mirrors and nothing more.
Scanning the ICO landscape, one is particularly struck by the sheer number of ICOs that are currently underway and followed by another wave of new ICOs preparing for launch in the near future. Even though government regulators in China and Korea are clamping down on ICOs, there’s still no end in sight when it comes to novel token offerings.
Avoiding ICO Scams
In such a saturated market, many are rightfully becoming wary of ICOs that are promising to deliver a revolutionary product without even a modicum of proof. Even so, many are willing to invest in obscure tokens with the dream of striking - black gold or should we say – block gold.
Knowing what to look for when evaluating the potential viability of a brand new ICO is key in avoiding scams aimed at defrauding investors. Remaining calm in the midst of the ICO storm and doing your own research is paramount. Be critical and ask yourself a lot of questions.
Be critical, use common sense and explore any new venture from different angles . This can help you avoid getting swept up in the moment, making poor decisions and help you determine whether a project is legitimate or not.
Above all - ASK QUESTIONS and then ASK MORE QUESTIONS!
The Team
Are they real people?
Investigate the core team behind the project. Find out if the team members actually exist.
Do they have a track record or experience that is relevant to the project that is verifiable?
Searching social media sites is a good place to start but perhaps more important is establishing if the individual in question is involved with any other projects or discussions related to the project’s development. If the person presented to the public seems too generic, their profiles have little social activity or if their association with the project is unclear then this should arouse suspicion.
The Technology
For the more technically inclined, check whether the project’s code is open for scrutiny on github.
If it appears to be cloned/copied from another token/app then it is likely to be a scam.
For many people, investigating the technology behind the project may be a daunting task. But you need not be a technical geek in order to gain some insight into the proposed endeavor. (Like many of you, I’m not well versed in code, at all. So, it's even more important for us to investigate other areas for potential clues).
Another place to look are forums dedicated to discussions about the project or similar projects. Put questions towards the project team and draw conclusions from the types of responses you receive or discussions you read in these forms.
Are the project developers open to dialogue?
Are they forthcoming or are they evasive?
Are responses specific or do the parties involved speak in generalities?
Do they come off as overly optimistic?
Some company’s may be trying to force their projects onto the blockchain although their main concept behind the venture does not necessarily require a blockchain. This is done in an effort to capitalize on the ‘buzz’ around the technology itself.
Similarly, it is important to ask oneself :
“Could this project be accomplished using a token that is already in existence, such as Ether?
"Is the creation of a new token necessary?”
The Concept
Another excellent place to start is to determine if there’s a market for this type of themed project. Discovering if competitors already exist in the market and how the new project can gain traction in this area is a good question to begin with. It’s important to try to attempt to determine if the project will be able to acquire a share of the market space with their product innovation or services.
Furthermore, is there a descriptive plan of how the blockchain based project will eclipse the existing/traditional models in their specific field? If traditional models are absent, then it may be another bad omen.
How long has the project been in development?
If a project has no substantial record of progress over several months and has only recently appeared, this is a sign to be very cautious.
The existence of a Whitepaper is another critical element but don’t simply gloss over this aspect, read it!
Do you come away with a better understanding of the blueprint for success after reading?
Are you confident that the team has the ability to deliver versus what is promised and are the goals achievable?
This line of inquiry refers to a project or company’s Roadmap, and how they aim at accomplishing their goals by projecting short term and long term milestones. Be sure to check the past track record of the team and learn about any of the completed projects that are available to you.
Do a search for any promotional material or advertising you can find, there may be additional clues in the way a product is being pitched.
The Token
Is the token supported or projected to be supported on more than one exchange now or in the near future?
If a token is listed on an exchange ahead of their ICO, double check by comparing the listings of other exchanges.
Has an immediate Use Case been identified?
How will the tokens be used, by whom and are there any indications of support coming from the market?
At what stage the project is currently in can also be very useful.
Is the project in the idea stage, development stage or perhaps the project has already been launched?
Will there a cap on the maximum amount of coins that will ever be produced, like bitcoin, or will there be a steady increases in the number of tokens issued over time that could effect the value of all tokens in the future?
How will the token be used in the network and is it even necessary?
There are many more aspects that can be explored that can potentially shed more light on projects we know little or nothing about but by following this line of inquiry, it's possible to gain a better understanding of any ICO.
Finally, a useful video I came across on YouTube offers similar advice and urges potential investors to take pause and ASK QUESTIONS! Questions, questions, questions.
How To Avoid ICO SCAMS - Do Your Research!! by Bitcoin for Beginners
https://www.youtube.com/watch?time_continue=53&v=krDt5wf3yWU
I will be following up this post with a few obvious Scam Alerts concerning current ICOs. We will have a quick look at:
Beer Token
Wounded Warrior Coin
0x2x Exchange Protocol
Synthhorn
and a few more eyebrow raising projects.
Sources
Source 1 - https://medium.com/@kickico/how-to-detect-that-ico-is-a-scam-e0ea1b0b2959
Source 2 - https://www.quora.com/Are-ICO-tokens-a-scam
Images
Dreamstime.com
flowjournal.org
Business24-7
ibisworldwide
cryptolotteryweekly
Twitter
Hacker News
Thank you for this, I been warning people of the dangers of these ico's over and over. It's hard to identify legit projects from scams. What puzzles me the most are the most blatant scams sometimes get huge investments based on marketing ploys. People need to educate themselves about this more as no amount of advice is enough to replace self restraint and caution. I applaud you for bringing this up, most people sing praises of garbage because they invested in it for their own benefit, every time I buy a token I tell people exactly why I bought it, whether it's a long term hold or a short term dump for profit. Holding a token indefinitely is a sure brew for trouble. Invest wisely and take ROI whenever the chance presents itself. Thank you for a great read...
@joseph and @v4vapid , I couldn't agree more with you. It is very important that people research about projects before being an initial investor at an ico stage. I thought you would be interested in taking a look at a post I made about the importance of research: https://steemit.com/steem/@gold84/how-to-find-cryptocurrency-assets-that-will-succeed-before-they-are-popular . Thanks for your suggestions. @gold84
The markets are overrun by people with only one goal. To take your money and never increase it in value. Common thieves they are, and they should not be allowed to continue.
So many people got a lot richer just by holding bitcoin in the past year or two. And when they started investing in startups, the scammers were drawn in by the smell of money, and no legal regulations that would see them answer for their schemes!
I find it curious to say at least, that people buy into ICO-s based on the quality of their webpage. It is creating an ICO bubble, and that bubble will burst. Of those remaining standing after that happens, only a few will develop into respectable companies. And you can not judge the probability of that happening based on a web page's "professional" look.
If this makes sense to you, take a look at my blog post about the historic price of Bitcoin. You might find it an interesting read
Have a good one :)
Invest wisely and just invest in some amount you can afford to lose. This is a gambling world, your plane can either go to the moon or hit the ground hard, that's it.
You have put together an excellent list of questions for any serious investor. Unfortunately the reality is that most investors don't have the skills to critically analyze the offers. The evidence is in the tens of millions being raised, as we speak, for coins which promise virtually nothing.
It's a very fine line between outright scams and ICOs which are not even investments.
Have a look at the blog I wrote about a token offering currently in progress:
https://steemit.com/ico/@swissclive/initial-coin-offerings-often-you-are-buying-thin-air-i-e-nothing-at-all
I pointed out to a couple of the Steemit bloggers who were promoting this one that the investment merits didn't exist. I suffered some serious abuse, down votes and flags from the promoters on a number of my posts in what was a revenge attack.
You can see an example revenge attack here:
https://steemit.com/crypto/@cryptonewz/domraider-decentralized-blockchain-auctions-in-real-time-review#@cryptonewz/re-swissclive-re-cryptonewz-domraider-decentralized-blockchain-auctions-in-real-time-review-20170926t075342491z
I decided not to reply to the abuse nor flag it. No point in war. I will just move on and let the blogger lose all his money.
thanks, ICOs these days remind me of the shit-coin launches back in 2013 after Litecoin started. Everyday there were about 20 new coins, I even mined "FryCoin" for a while named after Fry from Futurama...love the pic you used for this article!
That's hilarious, I've seen weedcoin and gaycoin advertised! WTF?! 😂
Haha, yep these are some of the coins I mined and held back in the goldrush of Crypto days:
SEXCOIN - SXC - Meant for use on porno websites! (I did NOT actually use them I just thought they would go up in value)
EarthCoin - EAC - Dubbed as the "Flagship" coin for 2013...somehow they were going to help save the planet. I think i have about 50,000 of these in an old wallet somewhere.
MaxCoin - MAX - Named after crypto host Max Kaiser - Pretty much a pump n dump
BOOST - NFI...it just sounded good!
And then the one good one - DarkCoin (now known as DASH) - This was the one coin I mined and believed in and held and now it's gone from 10 cents to USD$400!! Evan Duffied (the creator) you sir are a Genius!!!
very nice thanks... thanks. thanks.
Lol, FryCoin! Yeah, there's an incredible amount of tokens out there these days - madness.
What's madness is that even though you advise people to do their research most won't or they'll do a half ass job of it. I thought I learned the hard way 18 years ago but this is a much more violent game.
If you can't afford to gamble (like a college student or someone in a country with a failing currency) never play the ICO/altcoin game, stick to the top 3 and hodl.
ICOs these days remind of the early days of Kickstarter. Wild west with nobody considering consequences but regulations will kick in sooner or later!
Dont forget AnalCoin!
In all seriousness though, it is sad though how many people are falling for these traps.
Also hackers who try to pishing and other methods to get coins.
And we still are in the middle of it.
A lot more people are going to get burned, but this will not stop the blockchain revolution.
Nice read!
Good post about scams - many thanks
Solid advice @v4vapid ! I was talking to a friend yesterday who was totally hyped up about a new ICO that he has gone almost all in on! Whilst he said he had checked it out and it was solid... a pretty quick google search revealed big holes in the whole concept..
I think he wanted it to be a winner so much that he had blindsided himself. That is maybe the first rule in investing is to be open to it not actually being that good.. even if it has unlimited potential! You have to make the effort to pick it apart and find the issues if there are any.
Anyways,, my trading days are over now as im almost all in on Steem Power and my life is all the more peaceful for it! ;-)
Actually, this post was inspired by a friend of mine who feels like he's the last to know about crypto and is preparing to dive in head first without doing any real research. He wants to put all his savings into crypto and I've been trying to calm his FOMO (fear of missing out) and advising that he should slow down and do his homework first.
Thanks for the great comment.
Hope your latest Earthship is coming along ;)
yep.. its hard not to FOMO when you see some new coins jump up 50% .. !!
I'm not building right now.. The last workshop I did was a couple of years ago now.. but im surely enjoying my solar power right now in Earthship Karuna ;-)
These days im trying to find a bit of security and new direction after a big change in my employment status. I've been working for one company as a web developer for the last 11 years and now its all change to... something!?
I used to work in speculative mining stocks here in Australia. It's similar to appraising ICO's but not quite the same. You have been very thorough here @V4vapid.👍
All the bases have been covered.
Personally, I am just ignoring everything except Bitcoin and Verge Currency.
Cheers, thanks for the feedback.
I think it might be wise to make a short list of coins you've researched and believe in. Can't really go wrong with Bitcoin...just incredible how resilient it has been over the last few months.
I was very close to buying bitcoin when it was $US0.003. After that I became skeptical of it.
Then one day last year I saw the chart when it was at $1,800. From there I had a premonition. I shared the chart with my friend and told him that this was going north in a very big way, and would not stop.
Some are even predicting $1 million. Time will tell I guess.
As for Verge Currency, I have researched it, and it looks very undervalued to me. The team behind this are capable and committed.
This is a really solid post. Simply because you are using pure logic, reason and dillagecne to find the truth.
I have found that this same technique can be applied to just about anything and the truth shall be revealed!
Really nice write up and much needed. IMO 90% ICO are either scams or just pump and dump tokens of which 1 year from now will be basically non existent.
Cryptocurrency is truly revolutionary and there are indeed great investments to be had but honestly its one of the biggest money making scheme out there these days. I really don't have respect for 95% of them.
I am so thankful to be here on Steemit cause at the end of the day I am mostly invested here and I can USE it every single day regardless of if the price of $teem goes up or not! Plus this is obviously a REAL community and has an acutual working concept!
The price is still low IMO and a viable profitable investment of which is about as safe as can be in the crypto world.
Love your work, you really are a gem here. One of the most direct no fluff intelligent peeps on here.
SteemOn!
Cool
Useful @v4vapid, thanks!
I think it's also worth being very wary of the potential for 'pump-and-dump' when a newly launched coin hits the exchanges. There can be lots of hype and price rises based on thin volumes.
Thanks for responding, great comment.
I think pump and dumps are equally as bad and many people are not able to control their emotions when they see coins rising sharply.
Another reason to remain calm when people are losing their shit.
This is becoming a huge issue. We have guidelines of our own which we have published here . They largely overlap with your own although we are quite interested by your observations in relation to github. We're going to have a closer look at that one. Upvoted and followed. Feel free to follow back if you take an interest in our ICO articles. Thanks.
Wow!!!!!
This is inspirational......