How to find the best ICOs to invest
What Are Initial Coin Offerings
Initial Coin Offerings (hereafter to be referred to as ICOs) are the current hot topic of the crypto currency sphere. First popularized by the Ethereum team, this new form of crowd funding allows fledgling projects to raise money for development, whilst simultaneously providing a token/asset of sorts to backers. ICO Investors hope that one day, the token/asset with which they are provided will be worth more than the price they invested/purchased it for.
ICOs exist in a grey area. They are unregulated, and as such, one must do their due diligence when deciding whether or not to contribute their hard earned Bitcoin towards the development funds. Additionally, tokens are not considered securities. There is no guarantee that the development team will hold up their end of the bargain if they offer a buy back, a dividend, or a future use case for the token.
In regards to the above, we here at CoinSchedule have compiled some helpful tips to assist both novice and experienced investors in navigating the Wild West that is crypto currency ICOs.
The Novelty Factor – Original Projects vs Copycats
When investing in an ICO, it is important to identify the core features of a project that differentiate it from the endless sea of cloned coins (alt-coins).
For instance, in the beginning days of alt-coins, there were many forks of the original Bitcoin blockchain with just minor tweaks, such as an increased supply, or quicker transactions. Most of these coins have since been abandoned. The only ones that made any money were the creators of those copycat coins.
A good example of innovative projects are MaidSafe, Storj, and Sia. They are different from Bitcoin in that their primary focus is on decentralizing data storage, and not on being a currency. These projects have an innovative, original use case, and could see an increase in value if adopted.
Two other projects of merit are Waves and Ethereum. These two projects are similar, in that they promise to make it possible to create more interesting applications with the blockchain on top of just transferring funds (like Bitcoin does). It’s no surprise they were able to amass the two largest ICOs to date.
One should look to avoid investing in an ICO which is too similar to an established project, a minor fork of Litecoin, or any other popular coin for that matter. These sorts of ICOs often look to ride the hype of other successful projects. Case in point, there were a great many ICOs following the success of ETH that promised a focus on ‘smart contracts’.
Without an innovative/novel use case, one can expect less attention or growth around these sorts of projects than was received by their predecessors.
And by the way, so far in this post I have only mentioned examples of new blockchain ICOs (like Ethereum and Waves). With the new ICO possibilities offered by Ethereum’s Dapps and Waves’s CATs, this point becomes even more important as the barrier for entry for new people to launch projects using these technologies is lower.
Are Early Investor Bonuses Worth It
Another thing to look for when evaluating an ICO is whether or not the development team is offering a bonus incentive for early investors. This can vary widely from project to project. For example, an ICO may offer a 10% bonus distribution for the first to invest before a 100BTC milestone is reached. This means that, if 1 BTC gets the investor 1000 coins, they would receive 1100 coins instead.
Conversely, if one is investing towards the end of an ICO in which a bonus was offered, the investor must understand that there are those who will theoretically have a more optimal level of control of the total coin supply.
Escrow, and Refunds
A good thing to look out for when considering an ICO investment is identifying who is handling escrow services for the crowdfund.
Reputable development teams will enlist individuals with a solid reputation within the crypto currency community to act as trustworthy holders of raised funds. With their reputation on the line, these individuals are less likely to cut and run with the raised funds.
Additionally, solid development teams will have set in place a condition where, if a certain level of funding is not achieved, the individuals who contributed BTC will be refunded. This acts as a fail safe in the event a project ends up under funded.
Developer Credibility – Public vs. Anonymous
In regards to credibility of developers, there is a lot to be said about whether or not the team is public or anonymous. When a development team is public, there are faces to the organization, and an individual that could theoretically be held accountable if they squander raised funds, or run off with the money.
Of course, there are also ICOs that are held by anonymous developers, some of which have a credible background, and some of which are new to the scene. The prudent ICO investor would be wise not to contribute to the ICO of anonymous developers who have not had a long-standing presence in the community. This situation is twofold negative in that, there is no accountability if the developer cuts and runs, and, with no former projects to look upon, there’s no way to know if they’re capable of finishing the product.
A Note to Remember
There are no guarantees that your investment will turn out as you hope it will. Do your best to evaluate the risks of any investment you make, and don’t invest more than you can afford to lose.