Identifying Initial Coin Offering Scams

For a long time, ICO scams dominated the cryptocurrency industry's headlines. According to one report:

• 81 percent of initial coin offerings (ICOs) are fraudulent.

• 6 percent of ICOs failed,

• 5 percent died, and

• 8% went on to be traded on an exchange.

Some ICO scams have been well-publicized, with users losing tens of thousands of dollars in fiat and cryptocurrency. A new ICO started raising funds near the end of November 2016, in eerily similar fashion to many other new cryptocurrencies.

This project may have seemed well-intentioned from the outside. It also paid off handsomely for many investors who got in at the beginning. The price of one BCC hit a new all-time high of $59.24 on June 10th, 2017. At the time, BCC was outperforming Ethereum (ETH) by more than 30 times its ICO price of $1.84 per BCC. BCC's growth accelerated (almost exponentially) throughout 2017 and early 2018, eventually reaching a market cap of over $2.6 billion and a value of over $400 per coin. It was, however, an ICO hoax.

Scams involving initial coin offerings (ICOs) may be disguised as complex Ponzi schemes.

The euphoria didn't last for long. BitConnect demonstrated that there are numerous cryptocurrency scams to be aware of when parting with your capital. BitConnect was a sophisticated Ponzi scheme and initial coin offering (ICO) fraud. The project announced on January 16th, 2018, that it was "closing its lending and exchange site." BCC's price and market cap both collapsed in an instant, leaving many investors with significant losses and a hard-learned lesson. Be cautious about where you invest your money.

It's critical to do your own research before investing in any cryptocurrency, and it's especially important at the start of a project's lifecycle, when ICO scams are more likely to sneak by early investors.

Choosing an ICO that can positively disrupt the blockchain space and become a great long-term investment is challenging enough. If you pick a project with poor intentions, the chances of getting it done are slim to none. With that in mind, here are a few preventative measures you should take to spot ICO scams and avoid the stress of a bad investment.

Always Read the Whitepaper

You can learn more about a project's thinking processes and motivations by reading the whitepaper. This should show simple comprehension, originality, and a good dose of pragmatism. Token delivery should be fair and transparent, demonstrating the team's commitment to long-term development.

A haphazard, disorganised, incomplete, over-embellished, and/or plagiarised whitepaper can be found in a scam ICO. Many con artists would employ ghostwriters for their whitepapers and adopt bare-bones requirements, assuming that all they need is a released PDF document to entice unsuspecting investors.

It's worth noting, however, that the best-organized scams would almost certainly still have presentable whitepapers and a confident demeanour. In these situations, digging deep into the fine print of what's on offer and evaluating elements like the roadmap, potential ideas, and writing style can be useful.

If the author seems to be floundering and making stuff up to entice new buyers, you might be dealing with an ICO scam.

Check out GitHub repositories

Since blockchain ventures are technical endeavours, they must demonstrate some degree of code creation and programming competence and operation.

An ICO should have open-source code repositories (typically on GitHub) that demonstrate progress and commitment in developing the required blockchain technology.

Development can be a time-consuming, painstaking process that is crucial to an ICO's success. How do you expect the ICO to deliver on its commitments in the future if the code repositories are empty?

Evaluate Promises

When an ICO's promises seem to be too good to be true, they most definitely are. BitConnect, for example, promised its investors a long-term, consistent, predictable, and guaranteed return. This arrangement isn't long-term, and it's a classic symbol of a pyramid scheme. When confronted with similar outrageous deals, proceed with caution.

Follow your Instincts

If something about an ICO sounds off, it's probably because it is. Take your gut feelings as a tip and stop any investments that make you nervous. At any given time, there are hundreds of different ICOs to choose from, so make sure you recognise your investments and are comfortable with the path they're taking.

Take your time, be mindful of yourself, and, above all, do your own studies.