Sunday, June 17, 2018

Stop Investing in FAKE ICO Offers!!

3 comments


 In recent years, the cryptocurrency space has dominated investment space and attracted investor in big way. Regardless of what any analyst or investor might think of the new trend, the hype is undisputable. Dozens of new cryptocurrencies launch each month, and alongside these new tokens and coins comes a series of initial coin offerings (ICOs). In 12 months (Jul 2016 – Jun 2017) the number of cryptocurrencies worth >$1 million has soared by 468%. Meanwhile, the total value of all currencies together has skyrocketed by 1,466%.


Cryptocurrency is so hot, in fact, that raising money through ICOs has become more effective than traditional early-stage angel and VC funding.

In the third quarter of 2017 alone, ICOs raised more than $1.3 billion for crypto ventures — approximately five times more than funding raised through venture capital in the blockchain space. 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. Australian investors lost over $2.1 million in cryptocurrency scams in 2017 . But the growing popularity of ICOs and the often-technical nature of the blockchain ecosystem has led some token buyers to unwittingly contribute to ICO scams. 

Below steps can help you to be sure as possible to avoid falling in the scam.


a.       Check the Founders Profile
The first and most blatant sign of an ICO scam is that the token’s founders or developers are anonymous or otherwise-unknown. Check Social Media profile of founders i.e. Facebook, Twitter and LinkedIn profiles carefully, many scam projects now try to do up a proper Social media profile. Find more social activity from founders, If there is no trace of discussions, participation in any groups or projects – it is a red flag. 

Scam ICOs also tend to use logos of big well-known companies, for example Visa and Mastercard, Microsoft, or Apple. The more logos you see, the more cautious you should be. Interestingly, this also seems to be the modus operandi for many big coins post-ICO nowadays by announcing “fake” partnership before their coin gets pumped. 

If founders or members of the team claim prior association with universities or companies, double-checking with reputable third-party sources (e.g. a university newspaper or the company website) can provide the facts. Look at their experiences and see if they have relevant qualifications and check out the companies which they work at previously. 

If a team is unwilling to identify itself, token buyers should be very cautious about contributing to the project. While there may be valid reasons to desire this privacy, it is far more likely that their purposes are despicable.

Additional caution should be taken if none of the leadership team has any domain knowledge in the specific vertical. Beyond determining whether the development team is real, it's important to try to see if their qualifications measure up. Do the founders have the experience they claim to have? Is it relevant to the current project at hand?

Pay attention to the tinyest detail — even the domain registration date can be important. A project with history would date back for at least 6 months. Check the previous products of the team using https://web.archive.org/, catalogues and traces of SEO promotion if necessary.

b.      Check the Advisors Profile
If there are advisors listed on the ICOs, especially the more famous ones, you should email them and confirm if they are indeed an advisor to the project. Advisors value their reputation and will react if their name is misused.

c.       Check the business legal details
Look up the registration address, location — you can even send an offline mail to the office. Sending a request to the business association can also deliver proof.

You can even google the cell number and e-mail — you may find traces of previous activities or social engagement to decide the authenticity further of the founders.
  

  • Unrealistic Goals in White paper

A cryptocurrency or ICO whitepaper is the foundational document for that project. The Whitepaper that outlines the mission, technical details, team and other crucial details behind the venture. While the amateur investor may not have the technical background to fully understand every aspect of a whitepaper, general understanding of blockchain concepts is a must when evaluating whitepapers.
Some more legitimate projects (e.g. Ethereum) offer a high-level whitepaper outlining the key points of the venture, alongside a detailed technical document that explains the technology behind the project. Check to see if the whitepaper has complementary resources as well, including financial models, legal concerns, SWOT analysis, and a roadmap for implementation.

Scam ICOs like to confuse the investors by including lots of buzzwords, like blockchain, AI, marketplace or even invent their own terms when not needed. They also tend to promise investors outrageous returns that are too good to be true.


  • No Clear Use Case or Business Case

Check if developers are unable to clearly articulate a valid use case for the token. 

The token should serve a key purpose in the startup’s platform. If it does not, the token will not sustain its value over the long-term. Related to this problem are tokens that advertise themselves merely as digital currencies without offering any real innovations or improvements upon existing cryptocurrency technology.

Speaking about the theme, or concept, check if there’s a market for that kind of product and who are its rivals. Even non-scams can be quite weak in this field. Scam can be seen by an over optimistic or too general description. Check the time it took to get from the initial idea to prototype or ICO.
Not every venture needs a blockchain, and not everything needs to be decentralized. This might seem obvious, but with all the hype around blockchain technology and its disruptive potential, it can be easy to latch on to an idea the moment its whitepaper mentions a large industry the project is purportedly tackling.

Even projects that require cryptocurrencies as payment (e.g. Steemit, which rewards writers on its platforms with a native “digital points system,” Steem) could very well survive with existing cryptocurrencies like Bitcoin and Ether.

When evaluating an ICO, a good first question to ask is: “Do we need a blockchain or a native token for this project?” If the answer is no to both, chances are the ICO project is an example of solutionism — crypto for crypto’s sake — or a scam.


  • Check Token SALE

Successful ICOs like to show their token sale progress by displaying their token sale address prominently, since it’s free marketing for them. Scam ICOs, on the other hand, tend to hide their token sale progress by giving individual contribution addresses so that no one knows how much is raised.
A common tactic involves giving your visitors a big “sold out” message to create a sense of urgency. What happens is that the ICO has already sold out in the presale and round A,B,C token sale. When you scroll down the bottom, Viola! You see see Round D token sale open now for you!


                                                     Token sale & Subscribers are faked

Another common tactic for pre-ICO is to inflate the number of subscribers to your ICO to create FOMO (Fear of missing out) . You can see ICOs who have claimed to have a few hundred thousand subscribers on their mailing list. An example is Plexcoin which was recently arrested and jailed by US SEC and Canadian Regulators.


Inflate the number of subscribers

You don’t need that many people for a successful ICOs, Kyber Network which raised 60 million only had 50,000 whitelisted participants. Getting 10,000 interested participants is more than enough for a 10 million fundraise.

Look for the token sale figures as the ICO is ongoing. Better yet, watch the token sale over time to see how it is progressing. If a company makes it difficult for anyone to chart the progress of its ICO, this is a major red flag. Some scam ICOs will hide their token sale progress under the pretense of individual contribution addresses; this prevents potential investors from seeing exactly how much has been raised and how much time remains in the sale. In some cases, this might be an effort to generate a sense of urgency among potential investors.

After SEC (Securities and Exchange Commission, US) reports, everybody knows one can’t just issue ‘randomcoins’. So if a token is not supported by anything (i.e bonuses, ecosystem, company share etc), its issuer might be a scam.


  • Empty repositories for open-source projects

If an ICO project is proposing open-source code, an empty or nonexistent GitHub is often a red flag. One of the most obvious red flags for a scam project is the lack of detail on how the technology works. For nontechnical investors, it can be helpful to simply check if a project has any existing files uploaded to public repositories or if a project has a functioning product.


  •  Mining structure disproportionately favors development team

While not always an accurate litmus test for scams on their own, the supply schedule and mining structure of an ICO can be used to cross-reference other data points and validate the intention of the founders.

In simple terms, a premine refers to when a portion of the tokens for a crypto project is made available to a small group prior to being made publicly available. At times, this can be a necessary vehicle to reward developers and early investors. However, if the percentage of total tokens supplied throughout the lifetime of the project reserved for a premine is high, there is reason for concern.

For instance, Paycoin, whose founder was found guilty of operating a $9 million fraud scheme, had the majority of their tokens reserved for developers on the project. Favoring the development team could be an indication that the team’s intent is to maximize their personal financial gain from the appreciation of the token, rather than maintain the viability of the blockchain network over time
One of the key traits of many public blockchain projects is the fact that they are open-sourced. This means the code base is often uploaded to repositories like GitHub for all to examine. For those who have blockchain programming experience, looking through the published code can allow them to gauge a project’s validity.


  • Exercise Caution

Even the most successful ICOs and cryptocurrencies are slammed for being fueled by speculative investing. The idea of getting rich quick on an investment in an as-yet-undiscovered hot new project is tempting enough to draw seasoned investors and beginners into risky areas. Keep an eye toward caution as you look for new investment opportunities in the ICO and cryptocurrency spaces. Be aware that projects sounding too good to be true likely are. Spend time scrutinizing every detail, and assume that the absence of a piece of crucial information may be an attempt to hide an unsound model or concept. Look for outside sources to verify the legitimacy of any project before making an investment, and always ask questions that you can't already find the answers to. The cryptocurrency and ICO spaces offer tremendous opportunity for investors who have done their homework and are able to make sound investment decisions. They also feature pitfalls which can lead to large amounts of money being lost due to scams, frauds or even legitimate businesses which are simply poorly designed and unlikely to succeed.

ICO is a new business and that always means high risks. You don’t need special method or complex technologies or big data to detect most scams. A little patience and investigation will protect your investment funds just right.

Source : Internet

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