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Author Topic: 5 things you need to check before buying crypto  (Read 314 times)
johnvrijck
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June 11, 2019, 09:44:51 AM
 #1

In this article I will give you 5 pointers on how to recognize scam coins & projects through whitepaper research. Although most projects that turned out to be a scam had a great whitepaper, some of them gave away their bad intentions in the whitepaper. So before investing in any cryptocurrency, you should always check the whitepaper!

What is a whitepaper?
So what is a Whitepaper exactly? When a company intends to launch a new cryptocurrency, they usually set out all the details in a Whitepaper. This document contains the technical, financial and commercial information about the project. This document normally explains in plain language what they’re planning to build, to attract investors and other interested parties. In other words, the whitepaper explains the project’s purpose and process, the Why and the How.

Not every project or coin starts with a whitepaper. Litecoin started by giving a video presentation on ‘Creating Litecoin’ at a Coinbase event. Loom Network decided not to write a whitepaper, but immediately started developing and delivering code. Others are just forks of existing projects, like Bitcoin, so they don’t have their own whitepaper. Some projects bring out a Pink Paper, Green Paper or Yellow Paper and other projects, such as Cardano, bring out multiple whitepapers to describe every part of the tech they are building. Luckily, 99% of the cryptocurrencies and ICO’s/STO’s/IEO’s still release a whitepaper at some point to outline their project and tech. So if you thinking about investing in a new coin (and to avoid scams) your first stop is reading the whitepaper.

What parts of a whitepaper do I need to check before investing in a cryptocurrency?
Although scam projects are getting better and better in not raising any suspicion, there are some sections of the whitepaper which you need to take a closer look at to filter out unreliable projects.

1 – Technology
The most important thing is the project’s proposed (technical) solution to a real and relevant problem. It makes no difference if it’s something new or a better application of existing tech, when the problem they’re trying to solve doesn’t need solving, there’s a big chance the project will fail or is set up to raise a quick buck. This is usually the most difficult to verify, but keep an eye out for common buzzwords that are solely used to confuse u without really explaining what the project is about.

2 – Team, Advisors & Partnerships
The people behind the project should be easy to verify. Check their Linkedin, online profiles, company profiles, any addresses you find, advisors, partnerships etc. Don’t be afraid to openly ask them if they’re involved in the project. Fitrova, a project that did an exit scam, boasted about great partnerships, but after checking with those partners they denied even knowing the CEO. Declouds, also a scam, wanted to prove his alleged partnership with a bank, by photoshopping himself into a picture of the board members of that bank. And finally I almost participated in an ICO with fake team members, but just in time the community found out that all the pictures where stolen from some Australian School Board website. So always doublecheck the information provided to you about the people behind the project and don’t forget to do a reverse image search on their pictures.

3 – Roadmap
Technical development always takes longer than promised, but a roadmap gives you an idea if they’re realistic about their goals. If the roadmap states that a mainnet will be delivered within a few months, that would be great, but could also indicate that they’re trying to make a quick buck (unless the started the development way before the ICO/STO/IEO of course).

4 – Token Allocation & Price
Things to look at are the amount of tokens they are going to bring out. It;s a difficult factor, but it might give you an idea if they’re realistic about the project or just want to make a lot of money. If their total token supply and pricing results in a really high marketcap, you should be suspicious about their intentions. Other thing to look at: Will the tokens be locked up (vesting) for team members? Will they burn unsold tokens? Can they bring out extra tokens whenever they decide to do so? Normally the best token allocation for investors is projects with a low token supply, so you get a bigger piece of the pie when you invest, but this strongly depends on the other factors.

5 – The Rest
There are so many things that could be red flags. Make sure to also verify the information on their websites and social media, does it look real or are they just using empty words, fake testimonials and social media bots. It wouldn’t be the first time that you are let to believe they already have a nice User Interface for their wallet, but in reality that are just stolen pictures from another project. Also beware of dubious statements, like stating they’re SEC-compliant or already have secured listing on big exchanges. Or things like saying their product can be used in any store or with every bank. Watch out for Ponzi Schemes like Bitconnect, with promised returns on investment for holding their coins. Sometimes they bloat with big whales who have invested already. Always check out the contribution address and try to trace back those big whales, to make sure it’s not the team contributing to itself faking that they already have landed investors.

Conclusion
In the end, you must feel safe about the project’s intent after reading the whitepaper. A lot of projects that turned out to be a scam had a legit whitepaper at first sight. But after looking closer into the promises they make in the document, how they’re going to build it and with whom they plan to make it a success, it should’ve been possible for investors to pick out the red flags. Of course there are many other factors that could lead to the conclusion that the project is a scam, but researching the whitepaper is one of the most accessible ways for you to verify it yourself.
Fortunately, www.allcryptowhitepapers.com has the largest whitepaper database in the world. With almost 1700 projects in our database, it’s the best place to start your research. Also don’t forget to check out the Whitepaper of the Week and News section, so you don’t miss out on anything. Knowledge is power!
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June 11, 2019, 10:55:12 AM
Merited by suchmoon (4), Lucius (1)
 #2

Rather than go through all this, yet still get scammed, it's wise and best to simply invest in the BTC and very few well know alternatives.

Reading whitepapers don't help to spot a scam project, the best way to do that is to avoid them altogether(by investing in BTC).

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June 11, 2019, 03:25:06 PM
 #3

Since even scammers are paying at a premium to create a realistic whitepaper it wouldn't be enough for investores especially the newbies to just look into the token's whitepaper only. Without doing the necessary background checks for the people behind the ICO to even looking at the content of their whitepapre you wouldn't even know if they are using fake identities and plagiarized content for their whitepaper in the first place. So its really not enough for us investors just by looking at it individually because you will be easily fooled by them.

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June 11, 2019, 05:57:46 PM
 #4

And just because something isn't a scam doesn't mean it won't fail.  Investing in new ideas and businesses is always very risky and you should never use an amount of money that you can't afford to lose.
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June 11, 2019, 07:38:01 PM
 #5

Actually there are many things to consider when checking or buying crypto. One thing I learned that one should never invest during private or public token sale because ICO price is higher than when the tokens put to exchange. So the basic thing that one should do if you are aiming to buy that crypto then join telegram channel. See how the team manages the group and their response and announcement. There are other teams that will cheat on investors injecting total supply tokens or.owning 70% of.the total supply that could benefit them in the long run.

But, there could.be more better considerations when buying crypto and that is by choosing strong coins in the market like those coins/tokems having huge market cap.volume.

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June 11, 2019, 07:56:45 PM
 #6


Having a good whitepaper and roadmap is common and usual. Of course, it should be presentable as the purpose of it to somehow attract investors.

But unfortunately, even how good and well-detailed their whitepaper is, why some project coin/token still fail? And to add for that, most roadmaps didn't follow properly. Late execution and poor handling by the devs/owners itself.

If a newbie is totally new to crypto, without any basic knowledge at all, never test the waters on those new coins but instead stick only to those who are in the market for a long time now and already established a good foundation.

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June 12, 2019, 02:29:30 AM
 #7

Rather than go through all this, yet still get scammed, it's wise and best to simply invest in the BTC and very few well know alternatives.

Reading whitepapers don't help to spot a scam project, the best way to do that is to avoid them altogether(by investing in BTC).

@Couster you’re correct as reading the white paper won’t help the newbie, because anyone can draft it up using content writing services. The advice you have given is legit, that is invest in bitcoins to avoid being scammed I hope newbies follow this advice.

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June 12, 2019, 06:57:12 AM
 #8

No. 2 is the most important and easy to detect scam or real ICO. If you can find information about the team, their business license info and all of their personal information, team will less likely to scam in that case.

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June 12, 2019, 10:49:47 AM
 #9

Rather than go through all this, yet still get scammed, it's wise and best to simply invest in the BTC and very few well know alternatives.
Reading whitepapers don't help to spot a scam project, the best way to do that is to avoid them altogether(by investing in BTC).

Good advice, especially for beginners, I think that a small percentage of those who have investing in bitcoin lost something (hacks excluded). Some people have problem with high bitcoin price, and misconception that they have to buy a whole coin, so they pick some other cheap coins mostly based on their name and a bunch of nice promises.

I will not argue that all new projects are scam or that it will fail, but 80% or maybe even 90% of them will not survive. The fact is that it is very easy to launch such a project today, anyone can make a coin and write great whitepaper.

In addition to those things that OP write, before you invest in some coin, ask yourself does this coin have any practical application now or in future. We can conclude that most altcoins can be a source of quick profits, and that with perhaps a few exceptions they are not something you want to keep up for long in your wallet.

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June 12, 2019, 01:10:45 PM
 #10

I think if you are new and have little experience but want to buy a crypto market it is best to buy projects above the top 20 CMC. These projects are quite safe and can give you a decent profit if you choose the right time to buy. It's best to stay away from small projects and low transaction volumes.
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June 12, 2019, 05:30:52 PM
 #11

I agree with your points, But there are some observations I will make:

there are many cases of projects that have a true team, a true whitepaper and a good idea ... But when the project's creators are faced with the real world, they stop being optimistic, they stop communicating with the investors because finally they realize that it has no conditions to evolve in the real world.

Where do I want to go with this? Most of the people who create cryptos projects are people who are deluded and are blind for profit and do not have what it takes for their projects to have a future in real world

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June 13, 2019, 02:40:21 AM
 #12

I think if you are new and have little experience but want to buy a crypto market it is best to buy projects above the top 20 CMC. These projects are quite safe and can give you a decent profit if you choose the right time to buy. It's best to stay away from small projects and low transaction volumes.

That's not a good idea at all. If we're talking about top 20 on CMC, you are pretty much including the most obvious premium shitcoins like Tron(TRX) and shady coins that could crash down due to regulations like BNB.

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June 13, 2019, 03:31:29 AM
Merited by suchmoon (4), DdmrDdmr (1)
 #13

all of these things look pretty only in words but when it comes to actually doing them you can see how hard they are. for example you mention whitepaper and technology but the problem is that you need to first be an expert who is familiar with technical aspects of cryptocurrencies to be able to analyze the new project an conclude whether it is actually a good one with anything new to offer or is it just the copy of what existed before, or in most cases is it just advertising by using technobabble and hyping the project up by using certain keywords!

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June 13, 2019, 05:44:48 AM
 #14

That's not a good idea at all. If we're talking about top 20 on CMC, you are pretty much including the most obvious premium shitcoins like Tron(TRX) and shady coins that could crash down due to regulations like BNB.

Depends on when you enter and exit the market, you can make significant gain from them. Not saying that you should support copy-paste project but if it's about profit, fundamental values for the top-50 has little effect. At this moment, the hype is what matters. Sad but true, hopefully, project with a fundamental value could survive and kick those garbages.

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June 13, 2019, 07:00:14 AM
 #15

Depends on when you enter and exit the market, you can make significant gain from them. Not saying that you should support copy-paste project but if it's about profit, fundamental values for the top-50 has little effect. At this moment, the hype is what matters. Sad but true, hopefully, project with a fundamental value could survive and kick those garbages.

Well, you're actually right. I'm not sure if that's what I would suggest to beginners asking for advice though. I'd still heavy suggest investing/trading BTC, as I think it's risky enough.

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June 13, 2019, 09:19:44 AM
 #16

<...>
I know I’m being reiterative here, but please refrain from simply copying/pasting an article and adding a reference to avoid formal forum accusation of plagiarism. As I’ve mentioned multiple times, it is way better to summarize it in your own words, add your opinion, experience, or whatever. Any answer on this thread has taken longer to think through that what it took to paste the OP’s content (being the only tricky part adding the link).

As to the topic itself, @pooya87 has summarized nicely the counterpart to that the OP states, and that constitutes a mantra of overly repeated things to investigate. Truth is, people (including me) will find it hard to perform those tasks properly with the degree of knowledge and time required, and will usually fall-back to relying on what some review sites says (and we know how well that has played out more often than not).

Performing the required due-diligence steps, even if one is technically capable of understanding the ropes, is no guarantee, but may improve the odds of not being scammed upfront. The more you invest, the more you should try to cross-reference information, but it’s still a game of odds.

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June 13, 2019, 04:17:54 PM
 #17

Concerning this I've always mixed reaction. However, this was not enough, even a good attention seeker may transform into negative way. However, this is the same old thing in the cryptocurrency universe. Only bitcoin and other reputed cruptocurrency will be good opportunities. Anyway, Thanks for the thoughtful analysis.
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June 15, 2019, 03:42:28 AM
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Excuse me, is there a coherent watchdog website that throoughly, lists, reviews, and allows community cintribution on any given scam project?
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June 15, 2019, 07:27:31 AM
 #19

Rather than go through all this, yet still get scammed, it's wise and best to simply invest in the BTC and very few well know alternatives.

Reading whitepapers don't help to spot a scam project, the best way to do that is to avoid them altogether(by investing in BTC).

If you are talking about an investment with lesser risk, then invest on BTC.  But as the common saying goes, the higher the risk, the higher the possible return of investment.  And by reading whitepapers you can minimize such risks and have higher possibility to earn so much money.

The bottom line is, an investor must need to understand the risks that he/she can handle before going into it.

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June 15, 2019, 01:58:22 PM
 #20

<…>
Not sure how decent offsite ratings are, but you can always google the project name alongside the term "scam" and begging to get a general idea.

Here you can look through Scam Accusations. If it’s an Altcoin, you may in addition look through the Announcements (Altcoins)/ Tokens (Altcoins) and read the comments, although it it’s self-moderated then negative/scam tokens will likely have been deleted. In addition, Bitcointalk has a currently evolving Trust System (see Trust Flags) in place that can help you identify scammers on the forum.

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