Evaluating Crypto Currency ICO's: What to Look For

Evaluating a crypto currency ICO is a daunting task, but with the right guidance, you can make an informed decision. Look for a clear and concise whitepaper, such as the one provided by the Ethereum ICO, which outlined their vision and technical details.

A strong team is essential for a successful ICO, and a good track record of past projects can be a major plus. For example, the team behind the Filecoin ICO had a history of successful projects, including Protocol Labs.

The token economy is a crucial aspect of any ICO, and it's essential to understand how the tokens will be used and distributed. The NEO ICO, for instance, had a clear token economy model that outlined the token's utility and scarcity.

A well-thought-out roadmap is also vital for an ICO's success, and it should include specific milestones and deadlines. The Qtum ICO provided a detailed roadmap that outlined their plans for development and deployment.

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A well-documented white paper is essential for any ICO, it's like a business plan that investors should be excited to read about.

If the team hasn't put effort into documenting their goals, vision, and revenue model, it's a red flag. This could indicate that they don't really care about their business.

Check if the ICO has an actual product or service, don't just rely on flashy websites and promises. Be wary of vague or misleading definitions, like in the cases of Stox.com and Hubii Network.

Look into who's actually behind the ICO, don't be fooled by celebrity endorsements like Mayweather or Hilton. They may be being paid to promote the platform without having a substantial investment.

A team with a proven track record, like the one behind Iconomi, is a good indicator of expertise and a solid business plan. Reputation counts in this sphere, just like everywhere else.

If you're not getting satisfactory answers to questions like "Is the product necessary?" or "What is it aiming to do?", it's best to steer clear of the ICO. These are the same questions you'd ask of any other enterprise seeking funding.

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Token distribution is a crucial aspect of an ICO. A good project will link its token distribution to the roadmap.

Each phase or milestone of the project requires a certain amount of funding, so the token distribution should reflect this. Some teams take it too far by paying themselves more than 50% of the tokens as a reward for rendered services.

A high token distribution to the team members, say more than 50%, is suspicious. Projects that release their tokens hours after the ICO has ended often see a price drop quickly after the launch, which stabilizes the net asset value.

Consider the distribution of the tokens; how many are sold, distributed to advisers or ultimately end up with the team? Some projects need to develop a beta version before sending out the tokens.

The correct distribution of tokens is linked to the roadmap since every step in the development needs some financing. If you look at the percentage gain of Etherium (one year between ICO and token distribution, around 500% gain), Augur (1+ years, 1500%) and Decent (8 months, 350%), sometimes this break creates a very positive hype around the project.

An ICO that wants to raise 50 million to build a product that will yield 1 million per year should be questioned as to its worth.

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When evaluating a cryptocurrency ICO, it's essential to understand the business model and structure behind it. A well-defined business model is critical to the success of a cryptocurrency, and it should be figured out early on. This involves building a case for why a cryptocurrency model is the right path for the company.

The token should tie everything together and be at the center of various actions, such as transaction validation, value exchange, and miner rewards. For example, in the case of Bitcoin, its blockchain operations are totally ingrained in its currency, and it's used for a variety of purposes. In contrast, Ethereum's ETH is used to reward miners and fund smart contracts.

A viable economic model behind the token is also crucial. This includes questions like: what is the purpose of the token, what function or utility does it perform, is it absolutely necessary, and can you describe a viable economic model behind it? For instance, Steem's currency rewards contributors and can be spent in other services.

Here are some key questions to consider when evaluating a cryptocurrency's business model:

Evaluating startup characteristics is a crucial part of the investment decision-making process. This involves assessing the team, product, and market, which is often referred to as the "team-product-market" trifecta.

Making investment decisions based on pattern recognition and drawing guideposts for making decisions takes a career lifetime to perfect. You can't replace that with fake or superficial evaluations.

A warning signal emerges when newcomers start offering broad brush evaluations without having had direct investment experience. This can lead to uninformed decisions and potential losses.

To accurately evaluate startup characteristics, someone needs to know something about the emerging crypto-tech space. This includes understanding blockchain-based users, applications, and novel marketplaces that didn't exist before.

Evaluating startups in the crypto-tech space requires a deep understanding of the new ecosystem and its underlying assumptions. This includes things like identities, naming, proofs, verifications, rights, smart assets, and smart contracts logic.

Having a good idea or great product is not enough to guarantee success. If someone is surrounded by the wrong team, it will likely fail.

A startup's team is crucial, and it's essential to research the individual founders, team members, partners, and advisors. This includes checking their experience in crypto and/or blockchain technology and the market they want to operate in.

Carefully check the LinkedIn/Twitter profiles of those involved to see if they're active and how long they've been active. It's also important to verify if they clearly state that they work for the ICO.

Some ICOs drop the names of important people as being their advisors, but in reality, those people have had nothing to do with the ICO. This is a red flag, and you should be cautious.

A strong team and vision are essential for a company's success, regardless of the amount of money it has. Look for entrepreneurs who have achieved something on their own and have a diverse team.

When evaluating a team, don't care much about the advisors listed on the website, unless they're well-known and reputable individuals like Elon Musk, Bill Gates, or Vitalik Buterin who confirm their support for the ICO.

Here are some examples of ICOs that were scams, where the team members and advisers didn't exist or were not involved in the project:

A clear roadmap is essential for any project, especially when considering investing in an ICO. Check if the team has mentioned a clear roadmap on the site or in the white paper.

Most scam ICOs have a roadmap that starts with preparation for the ICO, indicating a lack of prior experience. If the team's history is solely focused on planning the ICO, it's a red flag.

A practical roadmap should include specific milestones and deadlines, not just optimistic promises. Be wary of teams that seem to be making unrealistic claims.

Check the history of the roadmap to see if it's been revised or updated regularly. This can indicate a team that's flexible and willing to adapt to changing circumstances.

A clear roadmap should also include a clear plan for how the project will be executed, not just a vague promise of success.

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A business model is the foundation of any successful company, and it's especially crucial when it comes to cryptocurrencies. The token should tie everything together, as seen in the case of Bitcoin, where it's at the center of various actions such as transaction validation, value exchange, and miner's rewards.

To build a strong business model, you need to figure out how tokens relate to your company's operations. This involves answering some fundamental questions, including: What is the purpose of the token? What function or utility does it perform? Is it absolutely necessary? And can you describe a viable economic model behind it?

The purpose of the token is to provide a clear value proposition to users, as seen in the case of Steem, where the token rewards contributors and can be spent in other services. The token's function or utility is also essential, such as in the case of Ethereum, where ETH is used to reward miners and fund smart contracts.

Here are some key questions to consider when building your business model:

Value flow is also a critical aspect of a business model, and it's essential to consider how value flows from the outside of the ecosystem to the inside, and vice versa. This can be achieved by generating value within your own market or outside of it, through transactions with the broader cryptocurrency markets or the real world.

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When forming a company, it's essential to register it in the country where you want to operate the business. This helps establish a legitimate presence and can protect investors.

Lots of ICOs create shell companies abroad to avoid legal investigation, so it's crucial to check if the founders have registered their company in the country they claim to operate in.

Be wary of ICOs that don't reveal the address of their company on their website, as this can indicate they're operating from a garage or hiding their identity.

A good ICO has a strong community that's fed updates regularly. This community can be found on social channels like Facebook, Twitter, and Reddit.

It's essential to investigate whether the ICO and its team members are active on these platforms. You should also check if they have a good, open support community on Slack and Telegram.

If the ICO is not active on BitcoinTalk, the largest forum in this field, it's a red flag. Also, be wary of "bounty posts" - paid messages that spread good news - as they can be a sign of fake hype.

A website is a crucial part of an ICO's success, it's where investors and customers are attracted. A professional website is essential, not just a standard WordPress or WIX template.

Bad design can be a death blow to a project, it's often due to a lack of investment in smart marketing. This can raise red flags about the team's ability to manage your investment.

The website should be easy to understand, with clear explanations of the concept. If you can't explain it to a six-year-old, you don't understand it yourself, as Einstein said.

A responsive and intuitive website is a must, it should be easy to navigate. If the team can't be bothered to design a decent website, how will they handle your investment?

An explainer video should explain the concept in under two minutes, without confusing terminology. If the video is not done professionally, it's a warning sign, either create one yourself or send them packing.

A good ICO has a strong social media presence, which is not just about having a lot of followers. It's about interacting well with them and answering their questions professionally.

Check the social media presence of the ICO, as it's easy to buy fake followers. Look for decent posts and see if the team responds to questions and comments.

Investigate if the ICO is active on social channels like Facebook, Twitter, and Reddit. Many good ICOs also have a good support community on Slack and Telegram.

A red flag is if the ICO is not active on BitcoinTalk, the largest forum in the field. This can justify immediately discounting it as a possible investment.

Check the ICO's rating on listing sites like ICObench.com, and look for a score of 4+ on any rating site. This can give you an idea of the ICO's credibility.

Read the project's announcement thread on BitcoinTalk.org carefully, as it's a good starting point to assess the team's responsiveness and willingness to answer questions.

When reviewing a cryptocurrency ICO, it's essential to look at the code and smart contract. A good ICO will publish its code on Github, a popular online tool for collaborating on software.

The code should be open and transparent, with a clear history of commits and developments. You can analyze the code to determine the quality of the ICO by looking at the number of commits, reviewing the Insights tab, and checking the consistency and length of the code.

If the ICO doesn't disclose the smart contract code, it may be a sign of instability or copied code. A good ICO will share its GitHub repository and get the code audited by the community, allowing investors to review the smart contract and ensure the token sale conditions are as promised.

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Having a working prototype is crucial for any ICO. If a team can't even program an app or a prototype to present, it's a major red flag.

A prototype or product is essential for demonstrating the concept and feasibility of the ICO. Just having rotating JavaScript objects on the website is not enough anymore.

ICOs with a working product bring valuable experience and knowledge to the table, which is a major plus for investors.

ICOs want to be transparent, and one way to achieve this is by publishing their Smart Contract code. If the ICO doesn't disclose their Smart Contract code, it's likely unstable or copied from another ICO.

A good ICO shares their GitHub repository and gets the code audited by the community. This allows investors to review the Smart Contract and determine if the token sale conditions match what's promised.

Investors can look at the Smart Contract to check if the token sale conditions are exactly as promised. This is a crucial step in evaluating an ICO.

If the ICO doesn't have a developer, it's likely they copied the code from another ICO, which is a red flag. Unstable code can have security problems, putting your investment at risk.

ICOs with a working product are always a good choice because they bring experience and knowledge to develop the product they promise to investors.

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