Investing in ICOs can really be a life-changing experience, and we all know that there are two perspectives to this view – it could be for good or for worst. The capitalization of the cryptocurrency market is something of interest to virtually every single internet industry and the everyday people who patronize the internet.
While there is yet to be a precise stable measuring standard to judge these businesses and ensure that a strict rule is being followed each time a coin offering is conducted, the safest bet will be to get all possible and accurate inferences to judge the character of a project.
Now, like shopping for groceries and materials obtained for everyday use, the internet space is crowded with blockchain related ads and loads of it. Virtually every facet of the economy has been affected, almost all the infrastructural systems have also had a version of the blockchain piece.
With this insight in perspective, it becomes worrisome to know how to join ICO without hurting a foot. Many people usually will depend on hype to drive them to invest on impulse, others will consider due diligence to satisfy their conscience. The truth is, there are no specific guidelines or rules governing which token is best to invest in or not to, especially when one is considering returns on investment and the unregulated nature of this crowdfunding type.
Sadly, the risks involved in the unregulated forms of crowdfunding to support a decentralized product are too obvious to ignore or be careless with. As much as there are viable prospects, there are also damnable consequences if we decide to invest in a scam coin or shit coins.
Over 1000 coins out there all came from one ICO crowdfunding or the other. What that means is that, for every 1 scam or shit coin out there, there is a ray of hope that a lot of other successful projects have made it through the exercise and are now trading success fulling on multiple cryptocurrency exchange platforms.
But it all comes down to the simple things, – ‘am so excited learning about how crypto can change my life…’; but how can it? How can I invest in any particular ICO and trust that I would get the desired results once the token sale event is over?
Let’s face it, it’s a fact that we all dabble into one crypto or the other because of the speculative current. Some people believe that once they read through the whitepaper they know what direction the team is headed and can ‘predict’ the outcomes. As good as that may be, many successful projects today have eluded that theory and are doing ok.
Soothsaying in crypto hub can be so enticing especially when over-hyped with words that can sway people to believe their predictions based on the sheer speculative premise. Although, there have been accounts of some people having a very peculiar insight into how this whole ‘crypto thing’ works.
For example, among others, Vitalik, founder of Ethereum decentralized network was so sure that Smart contract protocols can change how dApps will be created on the mother blockchain. Indeed, we see how things turned in that direction with multiple platforms using Ethereum network’s Turing-complete virtual machine to build their dApp assets.
So down to the matter at hand. If you want to invest in some tokenized assets, how do you go about it? Simple, read, read, and then read again. It can’t get any simpler than that, information is the girdle of this ecosystem, with it you can truly make unimaginable gains from token investments.
The basic principle that may be helpful is to follow-up on cryptocurrency websites that announce upcoming ICOs and also join cryptocurrency community hubs where experienced traders, investors, and blockchain enthusiast meet to discuss prospects and shed more light on the progressive development of the niche itself.
The one question that happens to elude most ICO product, and will be wise for you to get an answer to before owning an investment or hold a security share will be, why blockchain?
Whatever has been conjured and scribbled into a whitepaper doesn’t necessarily explain the need for blockchain. Every ICO investment succeeds not after a huge amount raised during the crowdfunding, but when the set objectives are well aligned are achieved to meet the optimal vision of the project.
Everything save the kitchen sink is now chained to the digital block, whether or not it could find an expression there. People just believe that digitized asset sales can generate funds and digital assets will have a worth when it hits the exchange, however, the sad truth is that most of these so-called utility tokens have no intrinsic worth or value. After a period of time has elapsed, the token prices are at a stalemate, or become useless.
The truth about most coins is that they really have no point existing. There are many cryptocurrencies out there whose values are over estimated, you really do not want to associate yourself with such, as it is a signal that such projects will phase-out with time. Similarly, there are some too which are undervalued which could hold potential if given time to mature.
The simple truth is that there mustn’t be a blockchain version of everything. And if while observing due diligence, you notice the prompting in the pit of your stomach – ‘really… why blockchain’, then it’s a sign something is definitely wrong. However, we shouldn’t leave you to always depend on your gut to tell whether or not a token sale event is worth the hassle. Study the project well enough to be convinced beyond the hype.
For us to really determine the potential of a blockchain product, we must return to ‘DLT 101’. What that? Is where you learn all the basic of cryptocurrency investments.
ICO’s worth to invest in should have the following traits:
1. Use case parameters
The first thing you want to do is to research the concept and ideology behind the project, many visionaries are quite innovative of theoretical concepts, which practically have no importance when they are brought into existence on the blockchain.
Many developers are simply looking for the crypto versions of their real-world products and do so to their own demise, as such products will not last long till they are no longer useful or in demand. It is important to note here that many projects did have a successful ICO but today, they are nowhere to be found.
Evaluating the use case parameter can be done by considering the following questions: What’s the product about? Who will use it? Are there currently existing products in the market solving the same problems? Will there be a tense competition? Is/Are the problem(s) really solvable using blockchain technology? Can it be solved using conventional methods?
Compare this reasoning, if blockchain won’t make it any better, so what exactly is it doing on a blockchain? – Definitely, all these questions are important and sometimes the determinant factors to a long-standing virtual business relationship – of course, that’s what it is; you’re investing in a tokenized asset means you buy the idea, concept and accept the people behind it.
One very insightful technique will be to consider the category to which the product already falls under and try as much as possible to see how many of such ventures exist. For example, in the FinTech industry, which happens to be the majority that uses blockchain technology so far, if a new ICO is planning to build a currency type blockchain, ask yourself why, after all most cryptocurrencies are already performing that tasks, so why another one.
Then maybe they want to solve speed or offer anonymous services, you could also look at that same group and see if there are others offering such services, if there are, find what’s unique about this new one, else – no future.
2. A resourceful, credible, well informed and accessible development team
Solving a problem using decentralized systems and network is not just about knowing or creating ERC-20 smart-contract-based tokens. No, it goes beyond that; understanding the very nature of the problem and how a cascade of associated entities will be affected once the product hits the market is essential to a successful project.
A team with a hands-on experience on how to cater for the technical know-how and satisfy the curiosity of investors with reliable data and information will achieve more than a team with hype will. Also, anonymity isn’t something investors will like to associate themselves with, especially when it has to do with the team’s identity.
In fact, people prefer the service of anonymous products to a team whose identities are unknown, as you would prefer to see a face behind the project to which you would be committing your hard earned currencies.
3. A seamless approach towards their goals and objectives (timeline)
Looking through the proposed product, you should have an idea of how and when the team will make important strides and mark their milestones. Usually, the development team will provide a roadmap indicating the direction of the project, go a bit further by analyzing if what is presented is achievable within the stipulated time.
How would you know? Well, castles aren’t built in the air nor was Rome built in one day. So if someone is saying they want to solve the entire problem within 3 months, as much as they want to make you not wait too long to begin enjoying your dividends, this team is likely oblivious on how business or developing a new product works.
4. Proper documentation and information presentation layouts (whitepaper, website, business plan and social media influence)
Ensure that all the documents for the tokenized asset are intact. Screen through the official documentation provided, read through their press releases, check what major cryptocurrency bloggers or news sites are saying about them. If the project is that good, it often doesn’t take too much effort to get under the radars of credible media outlets.
5. Escrow or smart contract contribution system
Don’t fail to check how the team intends to raise their capital, and what smart contract will be set in place to ensure the safety of investor’s funds. If an escrow is used, what are their previous experiences and do they have a credible score on their reputation?
6. A community / fan-base ready to support the project through with insightfulness (hype level)
Two things draw crowds; a hype and true value. Like gems people are always attracted to things of great potential and value. So if that tokenized asset will indeed be worth something of value people are drawn naturally to it.
7. Target trades and exchange markets
One more thing that distinguishes certain projects is where and when they would be listing their tokens once the sale is completed. When developers are targeting premier exchanges or when these exchanges are the ones extending their invitation way ahead of time, it, therefore, means that they would be valuable.
Finally, in my opinion, selecting a particular ICO to invest in is much work and I simplify it by looking at the objectives of the team, their reputable skills and how much tokens will be in circulation. Well, call me paranoid, but I think lower cap ICOs have a more tendency to accomplish their tasks and regulate the tokens once they are out there. Having too many coins in circulation may be just an easy target for the pump and dump investors.
But in case you are not sure how to go about the whole process, try visiting review websites (you can start here, go through our list of ICOs and our take on them) to gain a head start, from there everything else is dynamic.