Whenever new a technology emerges, most people are optimistic about how some software or gadgets would change the world. Scammers are not at rest either, they prick their ears in search of valuable information, with the hope to rip off people who are enthusiastic about the new technology.
ICOs are said to be the new way to raise money. We have seen a lot of companies raising millions of dollars by selling tokens that will be used in the protocol that these companies promised to build by using this money. ICOs have opened to the general public investment in blockchain businesses. In third quarter of the 2017 alone ICOs raised more than $4.8 billion for crypto venture, which was more than the funds raised through venture capital in the blockchain space.
With the increasing growth rate in public interest and a slack in regulatory structure, it is no surprise that some ICOs have been used to fund scams and cheats investors of their money.
If you are considering investing in an initial coin offering it is important that you perform your due diligence on the platform and ensure that is does not promote any fraudulent trait. Below are the red flags to watch out for in order to protect yourself and steer clear of scams.
ANONYMOUS TEAM
You should always try to find out exactly the team behind the project you are interested in and always try to find the company behind the project, if they are transparent, they should be willing to gladly show or give more light into their team(s): Full Names, Positions , Roles,Technical teams e.t.c. If you have trouble in getting their details, then it is a red flag. As they ought to be transparent enough, since they hope to raise millions of dollars, ICOs often list their advisors on their websites. You should also verify the information given about their advisors, if it is legitimate or not.
WHITE PAPER
A white paper is the most important element of any initial coin offering. In a white paper, an ICO presents details of what it plans to achieve, a breakdown of how the technical aspects of the platform function, and describe its token distribution model. If an ICO does not provide a white paper, then its a scam or if you read the white paper and it is extremely unclear, you did not exactly see how it is going to be implemented, you did not see any in-depth explanation or any details concerning the project. A time you need to know that the scammers in many cases are not engineers, they do not care about blockchains, decentralization and the technical implementation and so on. They only want the white paper that looks good and if you are not careful and you read the white paper it might look good to you but be analytical and look for details and try to find out how they're going to implemented. If the white paper is unclear and you find it hard to understand the details on the white paper. It is a red flag and should be careful.
GITHUB ACTIVITY
Most ICOs propose open-source solutions that make it possible for potential investors to assess their code via a repository link like GitHub.When you try to find out exactly how the project is moving forward when it comes to coding and implementation, then you go to github and you see no activity at all, it is a sign of red flag. Because the scammer would most probably not spend a lot of time and energy on coding because they know that people would most likely not check github. And it is important to check so that you re aware and you are not fooled by just a nice white paper, always check github.
FAKE ICOs WEBSITES
Scammers spare no effort, they place paid ads on facebook, google, telegram where they announce ongoing ICO. However, these ads link to fake websites, most of which you can see in the endings of the links (.id, in etc.). if you buy something on the website, your money is most likely lost, and if you even just log in, your password will be used to log in to the real ICO website and change the wallet address you want to have your tokens minted to. When it comes to the websites most people do not check the SSL() certificate. When you invest in an ICO click on the little lock button on the top next to the domain name, because if you check the SSL certificate, you will get to know the company behind the website, then you know that the website is coming from the company that you are investing. And if it is not, then it is a red flag.
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