How can you tell if an ICO is a Scam/Fake?

Token Sales

How can you tell if an ICO is a Scam/Fake?

While there are a plethora of legitimate token sales in the cryptosphere, there is potentially an even greater number of scam offerings out there. There are certainly bad actors in the space whose only intention is to exit a sale with their investors’ cash, but many ICOs fail for far less sinister reasons — due to recklessness or a lack of information and experience on the part of the company. Whatever the reason, illegitimate token sales hurt the whole ecosystem, and it’s important to know how to spot them. 

We have outlined below the steps you can take to inform and empower yourself, and avoid getting caught up in a token sale sham.

The Team

One of the most important considerations when investing in a token sale is the team behind it. The crypto ethos is one of complete decentralization and trustlessness, but that should not stop you from investigating who is behind a coin offering. When looking at the team, consider reputation — if the token sale goes sideways, what do these people stand to lose? What is their current standing within the community? Has anyone heard of them? You should also be sure that there is a diversity of talent within the company — if the company is building telecom solutions on the blockchain, do they have experts in telecom as well as in blockchain development? 

The team should also be relatively easy to make contact with, and transparent about their process. A team that makes itself inaccessible before a sale is complete is unlikely to become more responsive later on. The team should also prioritize security standards like KYC and whitelisting investors. Don’t trust a team that makes any kind of monetary promise, i.e.: “You’re guaranteed to double your returns.” In crypto, and investing in general, there are no guarantees.

Finally, remember that it’s not difficult to hand someone a check and ask them to be on your advisory board. A project’s advisory board may look impressive, but the core team members are more important and should be able to defend the project’s integrity. 

The Documents

Every token sale should offer a white paper that explains the technical details of the project as well as the tokenomics of the sale and a projected roadmap of development. With the emergence of IEOs and IDOs, we’ve seen companies get more lax with their project documentation, but any legitimate project should be able to provide a thorough explanation of the project and what investors can expect. 

Plagiarism is rampant in the ICO world, especially when it comes to white papers. When looking through a white paper or investor deck, ask yourself these questions: Was this written by the company for the company, or is it a generic white paper about blockchain? Do the explanations actually make sense, or does the document try to overwhelm the reader with jargon and algorithms? Does the white paper suitably justify the project? 

The Project Itself 

Once you’ve read through the white paper and researched the team members, look at the actual project and its tokenomics. Does this project fill an open need on the market that no other project better fulfills? Does it make sense to use blockchain for this project and does it advance the project meaningfully to generate tokens? Does it sound feasible or does it make overly bold promises, i.e. to build its own brand-new blockchain that’s better than all the rest? Is the project all hype on social media from people trying to cash in on bounties and airdrops? 

Look carefully at the tokenomics and project roadmap. Can the project be completed in the amount of time allotted? Does the roadmap over- or under-promise? Are any of the company’s projects available in beta testing? Does the breakdown of token allocation make sense? How many tokens are reserved for team members vs. the public? 

Still not sure? ICO Ranker is always happy to take a look at a project. If you’re unsure about a token sale, shoot us an email and our independent journalism team will investigate and report back.

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