Whether you want to invest in ICO tokens or any blockchain projects, there are some prerequisites that needs to be considered before investing.But before we go further to discuss on advice and opinions on investing in ICO and blockchain projects lets throw more highlight on existing cryptocurrencies.
Cryptocurrencies has no doubt gained the love of the world and it's showing no sign of going down or crashing totally. In fact, it is expected that it will have a exponential increase before this year runs out. Bitcoin became so good that coinbase, the platform that is widely known for most trading crashed last year, not because of anything else but because the volume of bitcoin transactions was too massive for them to handle owing to the increase in value of the bitcoin.
Those who have been skeptical about crypto assets have now resolved that it is worth investing in, but for anyone who really wants to make money in cryptocurrencies, it is advisable to look beyond bitcoins, not because isn't profitable, but because there are lots of other ICOs all over the internet with their own unique idea and just looking for funding to bring the ideas into reality. It sounds dicey but just like no one could vouch for bitcoin in its inception; you never can tell which of these ideas will be groundbreaking.
For everything that has an advantage, there is sure some disadvantages also. In the year 2017, it was recorded that approximately half of the ICOs that were launched were scams with people losing their hard earned money. This is why there is need to for education in relation to decision making and investment in the Blockchain projects.
There are offers you may receive that could be tempting and you would want to invest. An example is buying a token which cost just below a dollar. There is a need for you to match the Initial Coin Offering (ICO) with the following conditions listed below and make sure it satisfies at least 80 percent of this list.
Before we discuss on te advice on investing in ICo, first, we will understand what an ICOS is al about and the processes involve.
The ICO process;
ICO becomes a source of raising fund for instance, when a company come up with an idea that will help people solve a poblem but short of funds for its completion, they usually come up with an ICO for crowd funding. During an ICO, tokens or the coins are created and widely distributed using a Blockchain platform such as Ethereum. The company offers these coins to the public for purchase and is uually exchanged with fiat currencies or other popular cryptocurrencies like Bitcoin or Ether etc.
The process goes like this:
1. Companies/Founders announce the Initial Coin Offering (ICO) date, price and idea of the project which is normally displayed via their whitepaper on their website. ICO may include Pre-Sales which is also known as pre-ICO.
2. A demo or alpha version is launched for to attract investors.
3. Social media platforms and crypto-communities is the major tool ICO founders use to make known of their idea.
4. How well they make sales is determined by the performance of the company especially their developers and social media marketers determines.
5. This step-by-step process is to make people aware of the ICO or token sale process and earn brand recognition worldwide.
How then can we decide on investing in an ICO? How will you know that company will fulfill the promises and perform better?
1. Research, Analyze and Probe the Company
You have to know the founders of the company, their idea and their motivation behind the idea. In as much as majority of these companies are startups, they are backed up by people who are in no way novice in the blockchain game.
So exploration and verification of the portfolios of these startup companies is necessary and the media is a very credible way to go about it and the media can also show the track record of veteran companies. Be sure the company strikes a balance between the business trends and technical advancement.
2. Verify if the idea really is in consonance with Blockchain?
Think around the idea of the company and ascertain if the company’s idea is what needs a Blockchain model to drive it. Building a Blockchain model is said to be an expensive task and it is sure an intimidating one because a poor coding can lead to the collapse of projects that took a long time to build and also lead to loopholes that will result in security breach.
3. Competition of the Blockchain Market
Every business has competitors and the blockchain market is not in any way different. This requires that a proper analysis is done on both the target audience and the target market. To ward off competitors, the idea of the company you will choose must be new and feasible and has a well defined roadmap to achieving the idea.
4. Utilization of Funds
You have to check the structure of the company and its funding. Probe their previous investments and the people that are their main investors, because if the company is totally dependent on token sale, it won’t tell well concerning its development and a crash is just around the corner.
It’s always wise to invest in capped ICOs. As investing in an open cap ICO may not fetch you good returns. And the most pertinent thing is that ‘Are you happy with the fund distribution?’. If yes, move ahead with the next factor.
When to reject at first go?
In other to make wise investments, there are few things you should put you off. A company without a whitepaper is a company you shouldn’t ever consider and if at all it has a whitepaper, it still doesn’t mean you should go ahead. Read the whitepaper and make sure it has a well defined roadmap of the company, its founders/advisors.
A company worth investing in should have a proof of concept, and also lookout for the number of commits it has made in the github repository.