2/10/18 UPDATE: I am organizing the primary question sections into sub-sections. This change will roll out in stages. I am working on the "Token Purpose" section now.


Hi all,

I'm working this list of factors to consider when evaluating an ICO for investment. This is a LIVING LIST, and I'm seeking input so that I can create a public checklist of sorts. Share your thoughts! I'll constantly update the questions on this list based on new information. Ultimately, we should be able to evaluate an ICO opportunity by working through the checklist. See the end of the list for sources...there will be many in addition to the feedback I get here.

Need a better understanding of what the heck we are trying to do here??? Check out my YouTube video ==> What is THE LIST?

What is THE LIST?
An ever-expanding set of criteria and questions assembled by the crypto-community, broken into segments and organized sequentially, to be utilized as a framework for evaluating ICOs.

Some Ground Rules to Consider

• Strong sources lead to strong opinions
• Data is neither “good” nor “bad” - evaluate it with reference to THE LIST and your gut
• Perfection is the enemy of done
• Come to terms with your personal bias, do your best to minimize it
• Judge with reason, not emotion; do not let the latter affect the former

One list to rule them all!!!

First, I defined and arranged the sections. Then I reviewed ICO evaluation articles and added questions to the relevant sections. Now, I am asking your input! What should be added, changed, defined, removed, considered, debated...?

Evaluating ICO Opportunities

1. Token Purpose: what need does the token address?

FUNDAMENTALS

• Is the token a utility token (usage token or work token) a security token, or a combination?
• For utility tokens: is the token an integral component of the application ecosystem? YES is preferred
• For security tokens: is there some underlying technology that represents a competitive advantage? YES is preferred
• Is the token the project's principal payment unit, essentially functioning as an internal currency?
• Does the token provide return to token holders? YES is preferred
• Is the token new and no other token offers the same service? YES is preferred
• Does the token have a clear purpose? YES is preferred

PROOF POINTS

• How broad or narrowly defined are the use cases for this blockchain?
• Does the token align incentives to simultaneously accelerate growth and token value?
• Who will support the token?
• Is the token structured with centralized control or a decentralized governance?
• Can the resources contributed by users be verified by anyone?
• Does the token reward users for contributing resources towards the creation of a shared service that will benefit all users?
• Does the token grant a governance action, like voting on a consensus related or other decision-making factor?
• For usage tokens: is the digital service useful and does the network underlying the digital service aggregate resources (hashing power, file storage, etc.) that will differentiate the service in the long-term?
• For work tokens: is there a strong network emerging that wants to contribute and is the UX well thought through? And is the service offered useful to people?
• For security tokens: is there some technology underlying the security that gives the token a long-term competitive advantage?

2. Competitive Analysis (SWOT): is this unique in some way?

• Does the project benefit from being on the blockchain? Should it be on the blockchain?
• Can the company successfully dethrone any blockchain-based competitors in their industry?
• What are the possibilities past the first use case?
• Is there a core technical or product advantage that is likely to lead to competitive differentiation?
• Does the company have strategic partnerships with trustworthy sources within the industry?
• Is it impossible to substitute the use of the token for another?
• Are there competitive partnerships/alliances with reputable firms?

3. Technology: what is the tech?

• What type of technology is it? (DApp? Infrastructure? Currency?)
• What blockchain is it running on?
• Are they developing their own infrastructure instead? If so, why?
• Is the technology proposed by the team making any difference in helping blockchains evolve?
• What problem does this technology solve that is not solved before?
• Does the technology depend on other projects?
• Is the token mineable?

4. Minimum Viable Product: how solid is the product?

• Is there a working prototype?
• Were there any public tests of the product performance? (Number of transactions per second, potential vulnerabilities, etc.)
• Do they have a wallet to store coins/tokens saved offline or is it supported by any working wallets that can be used offline?
• Is there a working prototype code working on a testnet?
• Do they have prototype code at all (even if its not currently executed)?
• Is the code a copycat that implemented no new features?
• Does the code have commentary?
• Does the commentary explain clearly the purpose of the function?
• Are the functions a reasonable length? i.e. are they less than 50 lines?
• Does the code allow for rapid expansion of user base and network interactions?
• Are there any external audits of the code?
• Is the product's technical specification thorough and does it demonstrate mastery of the subject matter?
• Are there people out there who want and need this product right now?
• Does the product benefit from network effects?

5. Team: who's running the show?

• Who is the founder, what is his/her background? (Have they built and sold a company before, or a new entrepreneur?)
• Can the team be found on LinkedIn and Github?
• Is the team exceptional technically, inclusive, transparent, objective and capable of fostering a vibrant global community?
• Can this team attract partners and participants?
• Are there people on the team who understand marketing and evangelizing?
• Does the team have a history of success, demonstrated ability to overcome obstacles to success and strong desire beyond money?
• Has the founding team demonstrated the characteristics (inclusive, transparent, objective, etc.) necessary to build a healthy community?
• How will the team continue to communicate their progress?
• Does the company blog regularly about their work?
• Have any members of the founding team participated in blockchain and/or cryptocurrency industry events?
• What is the founding team's expertise with cryptocurrencies and blockchain? Are there any red flags concerning their credibility in these areas?
• Is the team able to explain, in relatively simple terms, the value derived from using the blockchain?
• How many developers are on the team?
• Do the team's developers have active GitHub profiles?
• How are developers compensated? By donation? Or some formal commitment?

6. Advisors: who are the big guns? (mentors and advisors)

• Are there any industry experts backing the project financially or as advisors?
• What tangible benefit (i.e. advice or strategic connections) do advisors provide the company?
• Do advisors include the project on their own public profiles such as LinkedIn?
• Have advisors discussed the project publicly and recently?
• How involved are the advisors in the project's online community?

7. Roadmap: where do they plan to go?

• What is the team's timescale for implementing their proposals?
• How detailed is the plan?
• How realistic is the vision?
• Are the goals achievable based on what the team has accomplished to date?
• Is token distribution linked to the roadmap?
• Does the roadmap include a history of previous deadlines?

8. Token Offering Structure: how likely am I to get burned?

• What is the hard cap?
• What is the soft cap?
• How many tokens are being created?
• What is the circulating supply of tokens?
• What is price per token?
• Is there a pre-sale?
• Who has written up the token issuance contracts and actual token issuance software?
• Which blockchain infrastructure is backing up their sale?
• Will the software platform generate new tokens?
• What is the planned use of funds? (e.g., marketing, legal, development, etc.)
• What share of the token distribution is allocated to bounty program?
• How are tokens put into the hands of investors and interested individuals?
• Are the founders holding onto most tokens?
• How long is the vesting period before investors can diversify?
• Are the funds in a multi-signature wallet?
• How do you buy tokens? Is there Escrow or direct to a company wallet?
• Is the team going to destroy or redistribute a significant part of unsold tokens?
• Are token burn actions and bounties paid according to sold tokens or to the token reserve regardless of how many tokens were sold?
• Is the token distribution coming directly from a smart contract?
• Is there a cap on funds raised per person?
• What rights does the token provide the investor?
• Are there any limitations on the ability to resell the coin or token?
• Is there a lock-out period? If so, for whom?

9. Marketing & PR: how serious are they?

• Is there a professional whitepaper?
• Is the whitepaper free from spelling and grammar errors?
• How in-depth is the whitepaper's description and outline of the technology?
• Is there a professionally developed website?
• Does the website include a comprehensive ICO FAQ?
• Does the website list the company's physical address?
• Is there professional presence on top social media platforms (Twitter, Facebook, LinkedIn)?
• Do team members include the project on their LinkedIn profiles?
• Is there an official presence on Telegram?
• Is the Telegram channel active and growing?
• Do the Telegram admins have regular access to key team members for questions?
• Is there an official presence on Discord, Slack, Rocketchat, Gitter?
• Does the project have an announcement (ANN) thread on BitcoinTalk?
• Is the BitcoinTalk ANN thread overly focused on bounties?
• Do many of the positive BitcoinTalk posts come from new accounts with relatively few posts?
• Is there any evidence of BitcoinTalk posts being deleted? Are the opinions of seasoned members being shouted down?
• Does the company report progress on a regular basis?
• How is customer service and tech support on the project's social media accounts?
• Is the ICO listed on top ICO ratings websites?

10. Hype: what are people saying about the ICO? (ratings + community)

• Is there a Reddit community?
• Are there a significant number of users on the main social media pages for the project? (Bitcointalk, Telegram, Twitter, Medium, and YouTube)
• Is the social community diverse?
• Is there a bounty program?
• Is there an airdrop?
• How often has the project been mentioned in the press?
• Has the project been mentioned in mainstream technology media and in prominent finance publications? (Techcrunch, VentureBeat, Forbes, WSJ, Reuters, etc.)

11. Legal Considerations: is this on the up-and-up?

• Does the company have a physical address listed publicly?
• In what jurisdiction is the company incorporated?
• Do either national or international regulations apply to the project?
• Is the ICO compliant in your country?
• What legal structures are being disclosed?
• If a security token: federal and state securities laws require investment professionals and their firms who offer, transact in, or advise on investments to be licensed or registered. Is this the case?
• Is there a SAFT agreement?
• How is security handled?
• What are the apparent, perceived or real regulatory risks?
• Are there plans for external or internal audits?
• Have they published the terms and conditions of the sale in clear language?
• If there is a DAO (Decentralized Autonomous Organization) -like component, is its articulation realistic and well grounded?

Thanks in advance for your input!

Crypto-Kristen  

SOURCES:
1. "Our Process for Evaluating New Tokens" by Nick Tomaino https://thecontrol.co/our-process-for-evaluating-new-tokens-4627ed97f500
2.  "Scrap the White Paper: How to Evaluate Tokens and Blockchains" by Coindesk https://www.coindesk.com/scrap-white-paper-evaluate-tokens-blockchains/
3. "How to Evaluate an Initial Coin Offering" by Strategic Coin http://strategiccoin.com/evaluate-initial-coin-offering/
4. "Due Diligence: How to Evaluate an ICO" by Cryptos R Us https://cryptosrus.com/due-diligence-how-to-evaluate-an-ico-initial-coin-offering/
5. "Due Diligence: How to Evaluate an ICO Investment" by Bitcoin Market Journal https://www.bitcoinmarketjournal.com/ico-due-diligence/
6. "10 Steps for Evaluating Digital Asset Crowdsales" by  Token Market https://tokenmarket.net/blog/how-to-invest-to-ico-and-blockchain-tokens/
7. "10 keys for evaluating Initial Coin Offering (ICO) investments" by CryptoPotato https://cryptopotato.com/10-keys-evaluating-initial-coin-offering-ico-investments/
8. "Methodology" by ICORating https://icorating.com/methodology/
9. "ICO Analysis Framework" by Kasper Rasmussen https://blog.ethfinex.com/analysing-icos-4abe41930f04
10."Evaluating Tokens and ICO" by HackerNoon https://hackernoon.com/evaluating-tokens-and-icos-e6c22c1885bb
11. "ICO Analysis Framework" by MT Kander http://www.mtkander.com/cryptocurrencies/ico-analysis-framework/
12. "How to Value Cryptocurrency" by HackerNoon https://hackernoon.com/the-7-things-you-need-to-know-from-the-valuing-cryptocurrency-conference-call-c238095a03b9
13. "White Papers Versus Other ICO Evaluations" by Financial Advisor Magazine https://www.fa-mag.com/news/white-papers-versus-other-ico-evaluations-36272.html
14. "How to evaluate a Blockchain ICO" Nami Consulting http://consultnami.com/how-to-evaluate-a-blockchain-ico/
15. "How to Evaluate an ICO (a VC Perspective)" by Lauren Stephanian https://medium.com/the-mission/how-to-evaluate-an-ico-a-vc-perspective-65ac781971b6
16. "Investor Bulletin: Initial Coin Offerings" by United Securities & Exchange Commission https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-initial-coin-offerings
17. "How to Evaluate an ICO" by Shermin Voshmgir https://medium.com/blockchain-hub/how-to-evaluate-a-ico-part-1-c6829d4de766
18. "ICO Bounty Programs: Your community should be more than Bounty Hunters" by Brian D Colwell https://briandcolwell.com/2017/12/ico-bounty-programs-your-community-should-be-more-than-bounty-hunters/.html
19. "The ICO crapcoin checklist" by Matthew Roberts http://roberts.pm/ico_crapcoin_checklist
20. "4 Criteria For Evaluating Blockchain ICOs" by CoinDesk https://www.coindesk.com/evaluate-blockchain-initial-cryptocurrency-offering/
21. "Tokenomics — A Business Guide to Token Usage, Utility and Value" by William Mougayar https://medium.com/@wmougayar/tokenomics-a-business-guide-to-token-usage-utility-and-value-b19242053416
22. "Quantitative & Qualitative" by Crypto Bulldog https://twitter.com/CryptoBulld0g/status/956878022421950464
23. "ICO Red Flags" by tokenrecord https://bitcointalk.org/index.php?topic=2916380