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Author Topic: 3 kinds of ICOs — Protect yourself  (Read 13566 times)
mamsong9222
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May 12, 2018, 04:18:39 AM
 #441

 the important thing is that we have tried. well, of course i have some real ico and really do it out there, and one of them is gladius.
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May 12, 2018, 04:27:15 AM
 #442

A very nice thread that I believe it could helps beginners and newbie when they are interested in participating in ICO as investors.Take care for you own money and be safe when picking those ICO.
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May 12, 2018, 10:55:44 AM
 #443

This is a very important thread, I got to learn new things I was not aware of before hand. It good of the op for bring this to the awareness of others. This is a real ico101, that need to being taken by investors
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May 12, 2018, 11:07:39 AM
 #444

Utility ICOs: Token would not be qualified as securities only if its sole purpose is to confer digital access rights to an application or service and if the utility token can already be used in this way at the point of issue. If a utility token functions solely or partially as an investment in economic terms, such tokens would be treated as securities (i.e. in the same way as asset tokens).
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May 12, 2018, 11:38:58 AM
 #445

There are 3 kinds of ICOs:

1)  SCAMS

There have always been a lot of scammers, hackers and thieves in the crypto space since day one. Think of Mount Gox. According to Business Insider:

Quote
“…one out of every 16-17 Bitcoins belongs to someone who stole it”

If you don’t think that these thieves are trying to steal money through ICOs or from ICOs, you are kidding yourself. You just need to see the Bitcointalk forum dedicated to scams, or to participate in a Slack channel and you will see the never-ending phishing e-mails trying to lure you to their sites, in order to empty your wallet.

In addition to thieves and scammers, there are those who lie or exaggerate. Many users on Bitcointalk are pump and dumpers.

2)  CRAP

Everyone is desperate to host an ICO to make money. Therefore, they are throwing anything and everything onto the blockchain, including the kitchen sink. They may not be intentionally trying to scam, but they think that they have a good enough idea for an ICO. But these will fail because the blockchain will not solve anything for them. Examples include ICOs that want to put 3D data (which would equate to hundreds of Terabytes of data) or 153 exabytes of medical data on a blockchain. This shows that they are clueless about the blockchain and have never run Bitcoin’s full node. Bitcoin’s blockchain is 120 GB and Ethereum’s blockhain is 200 GB and they are both having scaling problems.

Even though crypto veterans and fans would like it to be, the blockchain is NOT the panacea to every problem in the world.

ICOs are also throwing any kind of business problem that they can make up, into the ICO. If they cannot make up the business problem, they will exaggerate about it. They will fail because the business problem doesn’t really exist, isn’t significant enough, cannot be solved by a blockchain or they do not really have the solution, though they try to make it sound like they do with lots of technical jargon.

Swarm Fund cites this business problem:

Quote
“You need large amounts of money to buy real estate and your money is tied down for an indefinite amount of time.”

This is a lie and not a business problem. You can buy one share of a REIT, and there are thousands of REITs to choose from, and you can sell it one minute later. If they start off their pitch with a lie, what else are they lying about?

Energi cites this business problem:

Quote
“A small number of large energy companies supply millions of customers who are price takers.”

Therefore, the solution is to create more energy suppliers, especially nuclear power plants, which is the cheapest source of electricity. But the project does not propose this. They propose to enable consumers to sell their solar self-generated electricity directly to other consumers.

To do this, consumers should have BOTH solar panels and batteries. This is a TINY market. Though solar panels are growing, it is still a tiny percent of the market and solar generated electricity is still much more expensive than nuclear generated.

Consumers with solar panels do not have that much surplus electricity to sell anyways. They use most of what they generate. Tesla and Enphase hyped up their batteries for solar panel owners to store their surplus electricity. These batteries are NOT selling. Enphase spent over $100 million to develop their battery and partly because of the lack of battery sales, their stock has plummeted approximately 85%.

Of course, the project’s pitch looks impressive at first glance.

3)  LEGITIMATE

There are only a few applications that make a lot of sense for the blockchain: transfer of value (currency), store of value, remittances (disrupt Western Union and bank wire transfers), smart contracts, gaming and gambling. These applications will disrupt their respective industries, because the blockchain will provide a lot of cost-savings or time-savings to the users. There might be other applications that make sense that I missed, but applications proposed by many ICOs do not make sense. Jesus Coin is an extreme example, but there are applications that fall across the spectrum from Jesus Coin to Bitcoin.



YOU CAN REDUCE THE RISK AND THE NUMBER OF ICOS TO REVIEW, BY USING 3 FILTERS

1)  The project’s idea should make sense, but do not base your investment decision purely on the idea. Watch:

“Ideas are like assholes - everyone has one, no one cares”
https://www.youtube.com/watch?v=PhJgrEackis

Entrepreneurs typically try to hide their ideas because they think they are the only ones that came up with the ideas. Venture Capitalists tell them to scream their ideas to the public and they’ll see that nobody will steal them. Ideas are a dime a dozen. There are probably 10 other people with the same idea that you have or that the ICO has. The most important factor to success is the ability to execute. This is why Venture Capitalists refuse to sign non-disclosure agreements and rarely invest in startups which haven’t built a prototype or product.

HAS THE ICO TEAM BUILT ANYTHING THAT WE CAN USE TODAY?

If not, take a pass. This is the best evidence that the team can execute. It takes way more skill, time, work and money to build an app than to create a one-page website and video. It shows:

  • The team has proven that they can develop.
  • It is less likely that the team will invest so much and not follow through.

Everything else is useless. Don’t be fooled by big teams, fancy pretentious titles, references, roadmap, video, fancy animations, escrow, blogs, Slack, Telegram, Twitter, Facebook, Reddit and white paper.

One project stacked their team with a dozen people and then lied about them. One member had the title of “Blockchain Expert”, but he worked in Inside Sales until 1.5 months prior. One member had the title “Blockchain Developer”, but he never developed a blockchain before.

Here is an example of a project team using fake photos and fake names: https://bitcointalk.org/index.php?topic=1949528.msg19485217#msg19485217

Don't rely on Github unless you can verify that they didn't copy the code from someone else and you can run it.

Several high profile projects, with big teams, nice videos, lots of social media activity and hype, raised millions of dollars and still have not produced an app. This number will grow and become more evident in the coming years.

Gnosis raised $12.5 million and their website says:

Quote
“The Hunch Game is nearly ready and can be launched in the first half of 2017 as an example Gnosis app.”

No app yet.

Qtum raised $15.6 million. I don't see anything produced on Qtum's website.

After raising $50 million, Cosmos's website is still pitching its white paper. Come on. What have they produced with that $50 million?

Augur had Vitalik Buterin on their team. After Satoshi Nakamoto, Vitalik is the most desirable person in the universe to have on an ICO team. After raising multiple millions and after two and a half years, all they’ve released is a simple beta that is barely usable.

Don’t be suckered by animations and videos. Satoshi didn’t have any of this and his coin was the most successful. Besides, the animations aren’t that impressive anymore, as I’m beginning to see the same animation on multiple websites. Some of these teams must be using the same graphic designer.

There is no guarantee that any business will not fail. But, when the ICO team has a prototype/product, they have proven that they can develop. That significantly reduces your risk. With many ICOs, you have no idea if they can build anything. You cannot trust the information on the profile of many ICOs. Just because they can hire somebody to make a video, it does not mean they can write thousands of lines of complicated code. It's like you giving money to someone to fix your car, simply because his video says he can fix cars, but he has never fixed one before.

Y Combinator is one of the biggest startup incubators in the world. They provide a small amount of funding (approx. $25k to 50k) to startups, which usually consists of 2 founders each. Then they build prototypes or products. Then the startups give pitches to angel investors or Venture Capitalists. If prototypes or products are unnecessary, then why do they waste so much time and money before pitching to angels and VCs?

Almost all incubators have startups that consist of usually only 2 founders, that are building prototypes and products. ICOs are stacking their team with a dozen people and they still cannot build anything. With 12 people, they should've built 6 prototypes/products by now. This shows that they are simply stacking their teams with useless people, in order to impress you or sucker you in.

2)  IS THE TEAM FROM A CORRUPT COUNTRY?

Check Transparency International's ranking.

If so, take a pass.

The number of ICOs from corrupt countries, especially those that were famous for sending out phishing scams for years, have exploded.

Yes, there are scams from countries that are not corrupt and successful projects from corrupt countries. What is important is the probability and if you are willing to take the extra risk.

In non-corrupt countries, people grow up with lots of regulations and enforcement. Though there are exceptions, the people feel that the way to get ahead is based largely on merit. In corrupt countries, there is less regulation, less enforcement and more people trying to find ways to get ahead by working around the system. In fact, they see that the most successful people in their country, usually in their government, are those who get ahead by lying, cheating or working around the system, instead of based on merit. If you do not think this is a risk, then we will agree to disagree.

Law enforcement is a big deterrent. Hurricanes prove this. After hurricanes Katrina and Irma, there were widespread lootings. Why? Because police are not on the streets and criminals feel immune from punishment.

Law enforcement through extradition is a deterrent. If an Australian defrauds investors in Germany, Germany can extradite the Australian and punish him. This makes the Australian think twice before he defrauds Germans. However, there are many countries without extradition agreements. This provides immunity to ICO teams. Therefore, they can lie, defraud and cheat investors from other countries, and there will be little to no recourse from the other countries. This can bring out the looting mentality.

There are many ICOs enticing investors, by claiming that their token or coin will go up in value or that token holders will get dividends, profits or ownership in other assets. Some tell buyers that they are “investing”. This means that they are selling securities and are breaking security laws.

I watched a video of a conference. ConsenSys was warning about the repercussions of selling securities. Waves’ CEO, who is from a country without extradition agreements with Europe or U.S., debated this, downplayed the concern and shrugged it off. Why should he care? No European or American government is going to be able to punish him if he broke security laws. Even if Europe cannot punish him, if Europe bans his coin, will you suffer?

Without law enforcement, ICOs can lie and get away with it. One project claimed that they will make 400+% return per year for the investor. In countries that enforce securities laws, if you make this claim and do not deliver, investors can sue you. In countries with advertising laws, the police can punish you for false advertising. In countries that are immune from these laws, ICOs can make any claim they want. One of the most egregious claims is when an ICO tells you that you will be a part owner of a physical company. Good luck in getting a judge in their country to force the company to give you equity because you own some ERC-20 tokens. Good luck to you and your multiple flights to that country.

Few corrupt countries have extradition agreements. For those that do, can you rely on their corrupt governments to fulfill their obligations?

3)  “NEVER INVEST IN A BUSINESS THAT YOU DO NOT UNDERSTAND”

This is a quote from Warren Buffett. It is very applicable because many ICO teams try to impress the audience with technical jargon. Many investors are not tech savvy and are baffled or confused, but they invest because they think that the project team must have come up with a technological break-through.

Last word:

You need to be able to verify that the business problem exists, that the market size is truly as big as the ICO claims and that the solution is possible. Quite often, they exaggerate on most of these. You need to verify that a blockchain or a cryptocurrency actually is needed for the solution. Quite often, they’re not.

Do not rely solely on ICO listing or rating sites. They likely do not know about all of the ICOs. Not all ICOs are willing to pay to be listed. They have methodologies that you may not agree with. Some claim to be experts, but you are likely more of an expert in your own field, whether that is medical, law, engineering or finance, than they are. They will likely have biases, especially for ICOs originating from their country or region. Putin wants to increase the crypto industry in Russia. Is this why there has been an explosion of ICOs from Russia? Even Putin’s Advisor ran an ICO. If Russia took out Facebook ads to disrupt U.S. and European politics, who is to say that they will not pay off ICO listing and ratings sites to favor Russian ICOs?

Even thou this is a old post it has great information for new members to the forum, as well as people new to investing in ICOs. I think that today this applies even more then last year with how people are investing in ICOs (me included)
It made me rethink how I haven't been doing as much research these days as I use to into my investments. It is great advice and have gave you a merit as I think this could benefit many on this forum. Thank you
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May 12, 2018, 11:41:58 AM
 #446

Thank you!
I have learned something new. Many new ICOs and many new scams, so guys, be aware!

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May 12, 2018, 11:44:38 AM
 #447

Thanks for the useful article! I always advise to invest in few ICO that already have a working business. It will save you from scammers.
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May 12, 2018, 05:47:48 PM
 #448

There are several ICOs that claim that their tokens will entitle you to ownership to real estate, USD, gold or other coins without giving detailed, convincing explanation of how the tokens will have legal ownership.
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May 13, 2018, 05:03:50 PM
 #449

Thanks for the information it's really valuable. People are often scared by ICOs but if you do your research well you will have big chances to make profit.
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May 13, 2018, 05:27:35 PM
 #450

I want to invite you to pay attention to a new, but very promising ICO Vireo. This ICO guarantees you high profits and safe cooperation. Vireo is a really cool and unusual project! Check it
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May 14, 2018, 08:08:47 AM
 #451

Oh, thank you, author, put everything in place in my head...and why have I never seen this thread...?
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May 16, 2018, 01:26:06 PM
 #452

This scenario is really making the whole project a big risk so what many are doing is just demand for the tokens/coins to be available in many exchanges as fast as possible so that with a good value they can just dump their holdings and then proceed to another ICO projects
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May 17, 2018, 08:16:20 PM
 #453

Thanks for the tips bro it seems i have knowledge now to invest or to choose the best ICO with a bounty program. Most i joined ICO are all scam and not legitimate there all wasting the money of all investor.
As you said, the government will kill ICO as soon as they can instead of accepting to see more startup use ICO to call for investment like now.
You forget SEC joined the cryptocurrency world to manage this market since the last year.
So, as long as they want, they can do anything as kill this market easily.
But, they know the benefit from ICO for the startup want to call for investment to develop.

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May 17, 2018, 08:22:46 PM
 #454

Thank u for giving a detailed analysis on icos and their growth prospective  it is an eye opener for every one
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May 17, 2018, 08:25:22 PM
 #455

nice thread. Investing into something without understanding it based on someone else suggestion is like gambling in casino.

Actually, you can always read the platform or the roadmap of the ico in order to determine if it will be successful or not, in this way you can have precautions for your self before investing a huge amount.

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May 17, 2018, 08:58:36 PM
 #456

Thanks to the author! It's like a textbook. After reading this beautiful document, I did a second analysis of the ICO in which I was going to invest. You want to participate for the first time and buy tokens. I think I stopped in time.
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May 18, 2018, 06:15:48 AM
 #457

Thanks for the tips bro it seems i have knowledge now to invest or to choose the best ICO with a bounty program. Most i joined ICO are all scam and not legitimate there all wasting the money of all investor. Smiley
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May 19, 2018, 12:58:09 AM
 #458

This is a very good job! Keep it up! This post should not only end up here in bitcointalk. It would help a lot more people if this will also be posted outside this forum. I know this forum houses the biggest cryptocurrency community in the world but it is not enough that only the members of this forum will read about this. Please post the same in social media sites, blogging sites, and others. Crypto fans need to educate themselves with the reality. Smiley
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May 19, 2018, 05:44:41 AM
 #459

This is a very good job! Keep it up! This post should not only end up here in bitcointalk. It would help a lot more people if this will also be posted outside this forum. I know this forum houses the biggest cryptocurrency community in the world but it is not enough that only the members of this forum will read about this. Please post the same in social media sites, blogging sites, and others. Crypto fans need to educate themselves with the reality. Smiley

Yes, I absolutely agree. This post is very helpful not just for the newbies but for everyone. It is an eye opener for all of us to be careful and to study the icos before investing our money into it.
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May 19, 2018, 06:08:07 AM
 #460

This is food for thought especially for people like me who is new into cryptos world.
Choosing ICOs has been a serious actions to execute after hearing, reading and seeing many fall ICO, but your post has been insightful and meaningful. Gracia's
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