Initial Coin Offering (ICO) is a crowdfunding way for companies to raise capital by offering investors crypto-coins instead of shares in their company. While you will know to look for teams, understand their motives, learn how the fund is being used, community feedback, etc. – there are some things that you might overlook.
Here is a lowdown on 5 crucial factors that make an ICO viable for investment.
1. Economic Backing for Technology
Most ICO events talk about changing the world through cutting edge technology and unique business concepts. Regardless of how novel a concept may seem, any project that requires an ICO should be able to clearly define how their technology or business concept is going to earn revenue and at what point of the project.
The presence of a clear financial model is more of a necessity rather than a bonus for an investor looking to making returns at least in the long term.
2. Jurisdiction Issues
Many countries have strict laws that restrict the usage of cryptocurrencies. So, be sure to check the laws in your region to see whether you can legally invest in an ICO.
For example, in 2017, the Chinese central bank made ICO’s completely illegal in the country. Those who raised money through ICOs were also asked to refund it back to the investors or face serious consequences.
As such, you need to be very careful about investing in any ICO offered by nations that restrict the usage of cryptocurrencies. The bigger risk is that you may not even get back the money you invested if the law rejects to help you.
3. Coin Access
When will you get access to the coin? Until the company answers this question by providing a realistic date of delivery, you are better off not investing in them.
A company that is led by an excellent team will always know when they will finish the development and put the coins on the market. Any hesitation from the company about the exact date of delivery can only be due to poor management. And that is a company you must never invest in.
As a rule of thumb, look for ICOs which promise to give you access to coins within 3 months.
4. The White Paper
It’s rare that people actually go through a “Terms and Conditions” document before getting into something. It’s ironic that high stakes investors would actually risk all their money without having a clue of what they’re investing in.
The White Paper essentially contains all the required information about the ICO, its concept, and how the business is going to make a difference.
If you can’t find the patience to read it, you can find someone (like a lawyer or business consultant) to break it down for you. At the end of the breakdown, you should have a concise answer to the following question – What value addition does this project bring forth to warrant your investment?
5. SSL Certificate
Make sure that the company’s website has an SSL certificate that confirms that the business has taken all measures to protect itself from being hacked and will never be a threat to its users.
If you see a green padlock on the left side of the URL bar, then it signifies that the website is secure with an SSL certificate. In contrast, if there is no green padlock, then that is definitely a cause of concern since most cryptocurrency companies have a website with an SSL certificate.
And if you see a red padlock instead of a green one, then exit the site immediately since it signals that the website contains some malicious bots or viruses. Any cryptocurrency company having a red padlock is obviously not worth trusting.