10 keys for evaluating Initial Coin Offering (ICO)

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An initial coin offering (ICO) is a fundraising method that trades future crypto coins for cryptocurrencies which have an immediate, liquid value. Usually, a percentage of the tokens is sold to ICO participants and a percentage kept for the company’s needs (private investors, etc. Terms differ from one ICO to another). An ICO allows both big and small investors to fund the projects they like. The recent year carried thousands of successful ICO stories. The motivation for the project is obvious. The motivation for the investors of the ICO is that the price of the token would be higher (or much higher) than the token’s price during the ICO.

ICOs are really hot among the crypto investors. Recently, Hdac and Filecoin collected respectively astonishing amounts of $258 and $275 million. The success of an ICO is influenced by many aspects. Investors should bear in mind following key elements

1 – Team Composition

Find out everything you can about the team, especially the development team and the advisory board

2 – [Suspicious link removed], as Bitcointalk is the biggest forum for Bitcoin and crypto related issues. It is strongly recommended that you read the messages carefully.

3 – Stage of the project and VC investments

Evaluate the stage of the project. Does it only have  a whitepaper? A beta version? Is there a launched product with limited functionality? Prefer projects which have “some lines” of working code, however, many ICOs have proven they can become success stories without any code written.

4 – Community and Media

It is crucial to have a wide open supporting community like a public Slack for all investors. Openness is as crucial in gaining our trust as the Github code.

5 – What do they need the token for? Is the blockchain necessary?

ICOs mean the creation of a new dedicated token for the project. One of the most important questions each project needs to answer is what is the token for? Why isn’t Bitcoin or Ethereum enough to serve as the project’s token? Yes, many projects just make up a scammy story. Hey, an ICO can’t be an ICO without a dedicated token.

6 – Unlimited / Hard cap

In the early days of crypto ICOs, the difference between open and hard cap didn’t have the same impact as today’s ICOs. An open cap allows investors to send unlimited funding to the project’s ICO wallet. The more coins are circulating, the less unique your tokens become for the trading afterwards – through less demand.

7 – Token distribution – when and how

Greed can be defined by a high token distribution to the team members, let’s say, more than 50% of the tokens is suspicious. A good project will link its token distribution to the roadmap.

8 – Evaluating the Whitepaper

Most typical investors actually don’t read through the whitepaper, even though it contains all the necessary information about the upcoming project and the ICO.

9 – Quality of the code – Meet Github

10 – The Bottom Line

ICOs will become more and more ‘mainstream’ as a method for raising funds. There will be plenty of projects to choose from, hence it will become even harder to assess these projects.

It is key to investigate and read as much information as possible and write down all the important aspects, positive and negative, before making an investment decision.