 |
June 06, 2018, 09:16:54 AM |
|
Hi Community,
I am making a guide so that newbies or 'noobs' can rely on this guide to avoid potential scams and techniques commonly used by malicious actors. This guide also covers the points to consider when making the decision to invest in Initial Coin Offerings (ICOs), which are high risk investments in the crypto currency sphere.
Table of contents
[1.0] What are Initial Coin Offerings (ICOs)?
[1.1] The ICO Process
[1.2] Returns on Investments
[1.3] What is White listing / KYC / AML
[1.4] What is hard cap / soft cap
[1.5] Project Evaluation Metrics
[2.0] Possible Scam Techniques Used by Scammers
[1.0] What are Initial Coin Offerings (ICOs)?
Just like initial public offerings (IPO) in financial markets, Initial Coin Offerings (ICOs) seek to raise funds for their very own projects (usually blockchain projects) in a specified time frame determined by the organizer (organization). The main difference between the two is that IPOs is a form of regulated capital-raising process and complies to regulatory frameworks set up by the governing authority in a local jurisdiction. Firms raising capital through an IPO provide investors with shares or equity, effectively and legally making the investors the owners of the business.
On the flip side, ICOs is a form of unregulated capital-raising process (crowdfunding) that ANYBODY can set-up regardless of organization size, capital, and legal status. Organizations raising capital from ICOs need not require any permission or legal documentation compliance to the local authorities. ICOs usually DO NOT provide shares or equity to investors, and therefore, in the legal sense, investors are not the owners of the organization / firm.
[1.1] The ICO Process
The ICO process typically starts with the organization soliciting the public for contributions (or investors) as you like to call it. ICO typically starts and ends with the following flow of events:
1. Website and whitepaper, and [ANN] Announcement thread is published
2. Public / Private Pre-sale Begins
3. Public Sale Begins
4. ICO is closed
[1.2] Returns on Investments
Just like a typical IPO / equity in the financial market, an ICO is considered an even high form of risky investment assets. Returns can range from x0 (lose everything) to beyond (x100s and multiple folds - ethereum did this)! As always, do your own research (DYOR).
[1.3] What is White listing / KYC / AML
All of the above terms is applicable when an organization calls for it in order to comply with the rules and legal regulations set in their local jurisdiction.
KYC - Know your Customer (Consist of submitting your personal identification documents to verification provides for them to subject to Anti-Money Laundering (AML) checks.
White-Listing - Typically happens after KYC. Submitting of personal BTC/ETH addresses. When contribution starts, only submitted white-listed BTC/ETH addresses can contribute to the crowd sale.
[1.4] What is hard cap / soft cap
Hard Cap - Total possible amount the project can raise. The crowdsale usually closes after "hitting" or fulfilling the hard cap.
Soft Cap - Minimum Amount the project must raise. Not "hitting" or fulfilling the hard cap usually results in the cancellation of the crowd-sale. Refunds are then made back to the investor's wallets.
[1.5] Project Evaluation Metrics
Before contributing to the crowd sale, ask yourselves the following questions:
1. What problems does the project aim to solve?
2. Who is in the team? Are they identifiable? Is it a real person?
3. Who is spearheading the development?
4. What is the hard cap and the amount they are trying to raise?
5. What are they going to do with the ICO funds?
6. Does the whitepaper logically describes what the project sets out to do?
[2.0] Possible Scam Techniques Used by Scammers
As this is an open platform, there would always be scammers or malicious actors that takes on the form of genuine projects to con your hard-earned money. Always do your own research!
1. The Wrong Contribution Address Scam
Sometimes, although the project and crowd sale is always genuine, the main project website or the opening post (OP) thread may get hacked by 3rd party malicious actors. The hackers would then change the contribution address to the hacker's addresses, resulting in you contributing to the wrong address.
Moral of the story: Always double check that you are contributing to the right address!
2. The Personal Message Scam
A hacker may take on the form of replicating the username of the original organizer of the crowd sale (E.g. Original_Satoshi) to mislead people into thinking they are interacting with the official community member of the project. The hacker would then request you to contribute to the project and gives an address (which the hacker controls) over private message.
Moral of the Story: If a person asks you to contribute funds to a project over private message (PM) --> AVOID
3. The Phishing Scam
The original crowd sale is IIII.com
A hacker may ask you to contribute to the address at IIIl.com [Notice the I and the l]
Sometimes, they make use of idn domains like [ÏÏÏ.com instead of III.com]
Moral of the Story: Be vigilant, make sure it is the right domain and don't get phished.
That's all folks, I hope you have learnt something in this thread. As always, this is an open community, if you have any suggestions to improve this guide, please private message me. Credits will be given!
Thank you and stay safe!
|
