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Author Topic: 3 kinds of ICOs — Protect yourself  (Read 13566 times)
telcoin
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October 11, 2017, 03:05:48 AM
 #81

Awesome advice! Definitely can empathize with all you wrote. Moreover, would add that transparency is vital; Team (LinkedIn, public Profile), Product (at least a smoke screen test), Whitepaper (well written, detailed, timeline, compensation, distribution, concept, people, etc), and online presence (Social media, blogs, etc). All helps with credibility (references never hurt either).  Grin

Feel free to give us some advice to make us as transparent at possible: http://www.telco.in

Cheers!
Chris

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October 11, 2017, 03:08:15 AM
 #82

Great thread man, should be pinned here haha
If Bitcointalk had a tip system i would tip you ;p 
So many projects raised millions, have NOTHING, some just tax miners and make hands free money
Everyone wants to get rich, and it's easier to take it from the uninformed in crypto sadly Sad
Dont trust anything with Vitaliks face on it, thats one of my rules haha

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October 11, 2017, 03:14:14 AM
 #83

ico is how to determine their own market value? What is the proof of what they have, and if they can not prove this and what is the difference between the air?
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October 11, 2017, 03:46:40 AM
 #84

I think ICO's are revolution that's for sure , because it is like every individual can invest in 90's 00's tech companies regardless how much money they have that is one good part of it. But there is too many junk and similar ico's , every entrepreneur or scammer wants to grab some easy money. We need to be so selective and need to make our own due diligence , we need to search team , product , market , is there a need for this idea.. Because nearly we are all invest our own hard gained money...

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October 11, 2017, 03:54:04 AM
 #85

Nice thread and great breakdown!!!

I tell people time and time again that these should be the MINIMUMS for any ICO's. Team, idea, and proof of concept. I found out about Unikoingold recently and they seem to fit the bill
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October 11, 2017, 03:59:15 AM
 #86

Thanks for this, Jilp! This is educating the people here in terms of how to classify the so many ICOs that are offering their sets of tokens right now with a price. However, the knowledge to be able to determine which ICO is a scam, just a crap, or legitimate still needs to be learned by the great majority of us here.

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October 11, 2017, 04:22:28 AM
 #87

The success of any ico is  what the owner of the ico snd it's community made of it! There is no hard or fast rule! The truth of the matter here is nothing is actually legit, People create value on anything they decide on and make it legit. This is the more reasons for you to look for ico that had created value and is continuing to create value both in short and long term!

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October 11, 2017, 05:22:06 AM
 #88

Folks, I am badly in need of advice, all sounds convincing Grin


https://bitcointalk.org/index.php?topic=2240518.0
https://bitcointalk.org/index.php?topic=1946065.0
https://bitcointalk.org/index.php?topic=2143279.0
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October 11, 2017, 09:20:46 AM
 #89

Your post is GOLD. Thank you for sharing this, I think this should be put on top of this section.
I agree with all of your points, except the one about "Corrupted Country". In my opinion, it means nothing. A good project can be done even if the main developers are from Venezuela, for example, or Angola. There are many good project done in Russia, even if this country seems quite corrupted. You have to separate individuals from government. The government could be corrupted and yet a single developed could be the most serious and reliable person on Earth.

As mentioned in my OP:

Quote
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, you may be right. I may be wrong.

ModulTrade
https://bitcointalk.org/index.php?topic=2240518.0

Quote
“While the number of MTRc is limited the increase of trades pushes the demand for MTRc and its valuation”

This means that they are selling a security and will be on regulators’ lists. Maybe ModulTrade doesn’t care about regulators because Russia does not have extradition agreements with other countries, but what happens if regulators ban their token in Europe or North America? Will you suffer a loss?

Countries without extradition agreements make teams feel more invulnerable. Therefore, they are more likely to lie and cheat investors from other countries, because there is little to no recourse from the other countries' governments.

I watched a video of a conference. ConsenSys was warning about selling securities. Waves’ CEO, who is from Russia, debated this and shrugged it off. Is he less concerned because the chances of him getting punished is minimal?

Russia wants to boost the crypto industry in their country. Putin's advisor ran an ICO. Is the Russian government funding Russian teams to help them maximize the money that they raise on ICOs? If so, you should be aware of this risk. Though there are exceptions, in the far majority of time, when a government tries to pick and choose companies, it’s not a good idea. The U.S. government forced taxpayers to give $535 million to Solyndra. It looked great at first and then it went bankrupt. Governments are not educated nor skilled to be Venture Capitalists, investors or stock pickers. Their money is often spent on policies to further their political or social goals.

In the extreme cases when the government tries to centrally manage the economy, they create socialism, or communism which is the extreme form of socialism. Every government that centrally manages their economy have always made their economies poorer in the long run. Think of Cuba, Venezuela, when Russia was communist, when China was communist, etc. The people who are best at picking which business will succeed or fail, are those in the free market.


How about Genesis Vision mate?
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October 11, 2017, 09:39:25 AM
 #90

Took me some time to read all posts, i can say this is very useful thread and it answers to 99% questions asked in this section.
Moderator should pin it.
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October 11, 2017, 12:46:53 PM
 #91

Fantastic thread! Would you mind reviewing every single ICO so I don't have to do any work? Grin
LOL. I want to believe that to be a joke. If with all OP has stated here, anyone cannot make use of it to help themselves from getting scammed, then they truly deserve to be scammed.

Almost all the people have fallen for these sort of ICO scams today because they really cannot do the needful diligence out of laziness, which is why we have China coming up with all these regulations otherwise some of those ICOs won’t even have been able to make it past the pre-ico before they see there is absolutely no room for them.
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October 11, 2017, 01:48:49 PM
 #92

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.

They 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 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 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 he says he can fix cars but have 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, you may be right. I may be wrong.

Law enforcement is a big deterrent. Hurricanes prove this. After hurricanes Katrina and Irma, there was widespread looting. 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. 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.

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. 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 that 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?
That's a pretty brief outlook on the things that someone should try to understand when the come by an ICO that is going on or is going to start soon.

Thanks for the info.

 
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jlp (OP)
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October 11, 2017, 02:57:18 PM
 #93

Crowdholding claims that they have a working beta, which is good news. However, I can’t find it on their website. Have you used it? Have lots of people used it to help guide a startup to success?

Their white paper says that the problem is that too many startups fail due to lack of market need. Their solution is that funders (YUPIE token holders) will be able to tell the startups how to find market needs.

This is ridiculous. If this is the case, then companies would be asking their shareholders on what the market needs. Google, Apple, Facebook and the hundreds of thousands of companies should be asking their shareholders about market needs. They don’t. Why not? Because the shareholders do not know. The only people who will know are the end-users and customers. That’s why companies spend billions on market research, focus groups, free samples, surveys, product trials, etc., etc. The only people who know and will tell the truth are those who have to part with their money and will get enough value in return to justify it. Anyone who has studied Marketing knows this.

Let’s say that there is a startup that wants to sell Japanese seaweed snacks. How much are you willing to pay for the snacks? What would you recommend to the startup? Even if you wouldn’t eat this, how would you know others won’t? You may never have tasted it before, so you will have no idea. The only way the startup will know if these snacks will sell is if they do market research, in the right target markets, with product trials, etc.

Even if Crowdholding's idea has merit, how do you, as a YUPIE token holder, know for sure that startup companies will reward you after they succeed? The tokens are not legal contracts. You cannot get a judge to force the company to pay.

Startups take many years before they are financially successful. Most companies are still losing money when they go IPO on the stock market. Amazon is barely making any profits. Twitter is still losing money. Facebook took way longer than most companies to IPO and they barely showed a profit. Technology and growing companies rarely pay dividends. How long will you wait before Crowdholding’s startups start rewarding you?

I do not think Crowdholding is trying to scam anyone. They likely think that they have a good idea, but do not see the flaws. Most ICO buyers do not see these flaws because they haven’t spent enough time in the business world and are impressed by lots of jargon and big teams with fancy titles.
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October 11, 2017, 03:23:15 PM
 #94

Nice thread to read, thanks for sharing!
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October 11, 2017, 10:50:15 PM
 #95

everyone ico having bright future because now a days people are launching good projects which is quite great for investor to invest in right place because they are giving demos etc and everything which is given below so i would like to say that we should never ignore any ico because every ico having good future which is quite great.

Huh  I think you need to add some punctuation.

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October 12, 2017, 08:19:23 AM
 #96

Interesting post. Now if I can add a thing or two, I'll add that one should also look at the past professions and achievements of people behind the ICO project. For example, keep track of all the available information you can get about the founders and team members behind the ICO. Are they credible enough to start and make what they propose successfully? And likewise, are they transparent when it comes to providing records, specifically where they will use the contributions or where the contributions of the people who invested in will go?

I remember that I once read what Peter Sin Guili shared on his Twitter. He said that for an ICO to be credible, everything about the company's management should be transparent. This is what I say too to people I know to check before they start investing their money with any initial coin offerings.

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October 12, 2017, 09:10:00 AM
 #97

Hey guys - HAVE YOU HEARD!!!!

There is this awesome new ICO's with KITCHEN SINKS as its focus!

LOL - just kidding.

Great article - I feel its a little unfair to judge an ICO via its location however. There are scammers in every country. Dont make the mistake of NOT investing if it falls into a "high risk" country - it could very well be the best investment of your life.

By the same token DONT make the mistake of just investing in an ICO that is in a low risk country. If you do, using this as a basis for your decision - you are very likely to be scammed.
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October 12, 2017, 02:58:14 PM
 #98

Kyber brags that one of its benefits is that it doesn’t hold the users’ tokens. Therefore, the tokens won’t get hacked or stolen. They are implying that if they hold tokens, the tokens can get hacked or stolen.

Then they say that they guarantee high liquidity by “holding reserves of all tokens in the network” that users may want. They would need to hold TONS of tokens to guarantee high liquidity. By holding tokens, these tokens can get hacked or stolen, according to Kyber.

Their business model is completely flawed.

In regards to CombiCoin, their pitch is that you reduce risk by diversifying. However, they increase risk for you because they have your money and you have to believe that it’s backed by other coins. Tether is doing this already, except they back up Tether with USD.  There is already talk that Tether is not backing up their coin with sufficient USD. You’ll never know for sure that CombiCoin’s TRIA is backed up by sufficient coins. Instead, if you went out and bought the other coins on your own, you’ll never need to believe anyone’s claims.

Agreed on Swarm and Combicoin.
But, with Kyber it is a different story. As far as i understood, they don't hold tokens. They have reserve managers (anyone with specified credentials can be one) and Reserve Contributors (could be you or me). The reserve contributors hold the tokens and supply the Reserve Managers. These Reserve Managers trade on the Kyber Network Platform and are paying a fee in KNC to Kyber, which will get burned.
So, if my understanding is right, Kyber told the truth. They don't hold the tokens and they can provide the liquidity.

I do not know if Kyber is truthful or not. I wrote that their business model is flawed.

They have a MVP (minimum viable product), which is very good news, though I didn’t try it to confirm that it works.

Kyber’s white paper explains the problem of exchanging/converting coins or tokens to other coins or tokens.  I agree with this problem and it’s getting worse every month.

Their white paper correctly states:

Quote
“…most of the trades happening on centralized exchanges are vulnerable to internal fraud and external hacking. This is an ongoing concern and a number of hacking incidents has been reported at various exchanges​ ​affecting​ ​thousands​ ​of​ ​users​ ​and​ ​loss​ ​of​ ​hundreds​ ​of​ ​million​ ​of​ ​dollars.”

Then their white paper states:

Quote
“we maintain a reserve warehouse which holds an appropriate amount of crypto tokens for purposes of maintaining exchange liquidity.”

This means that they are doing exactly what they said is risky about centralized exchanges. They will be creating a honey-pot for hackers, employees or reserve managers to steal. Every reserve created by users will be honey-pots. One might argue that it’s more difficult to steal because the money is in a smart contract. That’s not necessarily true. DAO’s money was in a smart contract and it was stolen.

Also, they didn’t say where the data is stored. They did say that it will be “on-chain”. Will it be on the Ethereum blockchain? If so and if they have a lot of trades, they are going to have significant scaling issues.

They have a comparison to competitors which is good to see and should be in every white paper. However, they say that they are the only one that is secure against attacks. How can they say that? Nothing is guaranteed against attacks, not even Bitcoin. If Chinese miners collude, they can attack Bitcoin. Someone hacked DAO on Ethereum. That’s why they forked into Ethereum Classic. If someone hacks KyberNetwork’s reserve, is Vitalik going to fork Ethereum for KyberNetwork?

In 4.2 of their white paper, they state:

Quote
“The entire process occurs within a single transaction, and the KyberNetwork never has a possession on the user tokens​ ​(neither​ ​token​ ​A​ ​nor​ ​token​ ​B).”

But their diagram shows the user sending token A to the KyberNetwork.

I hope that Kyber works. We need decentralized exchanges. But the crypto/blockchain technologies still have vulnerabilities and limitations. Centralizing money is risky. Just be aware of this risk.

Their white paper says that Vitalik Buterin is an advisor. If true, then this shows that stacking a team with lots of people doesn’t mean the ICO is flawless. If untrue, then the ICO put in a famous person without his permission.

I don't know if Kyber is unscrupulous. I don't think they are, but don’t think that unscrupulous people won’t put Vitalik’s name in their team without his knowledge. I’ve seen Vitalik’s name in many ICOs. I cannot see how he would have the time to advise so many ICOs.

Besides, Augur had Vitalik on their team and after 2.5 years, they have a beta that is barely usable.
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October 12, 2017, 03:40:46 PM
 #99

I just came across this thread:

How to create a ICO
https://bitcointalk.org/index.php?topic=2255274.0

It provides a link to an article and says that after reading it, you will learn how to find good ICOs. But the article is written by Crowdholding, which is hosting an ICO.

Read my thoughts on Crowdholding in a comment above.
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October 12, 2017, 03:43:38 PM
 #100

i congrate you for this amazing thread.You make a hard work and i think you can will pissed somebody if people trust your thread.we all have to consider you.but i dont think even they can understand you

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