How To Avoid ICO Scams

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ico scam

The crypto craze is back. And investing in crypto and blockchain project is now more tempting than it has been in the last 12 months. People are turning their attention back to cryptocurrencies. And as they are doing so, fraudsters see an excellent opportunity to defraud the naïve.

Initial Coin Offering is to a swindler, what a crypto exchange is to a hacker; a goldmine. It’s the riskiest decision you can make besides storing all your coins in a crypto exchange

And that’s why some governments like South Korea have banned the trade. Today, we shall be focusing on avoiding ICO scams. But first.

What Is An ICO?

It stands for Initial Coin Offering. When companies create their own crypto, it starts by selling the coins to the public. This is so, to generate revenues for the future development of the crypto project. It is the path that most cryptos in the market today have taken with the notable exception of Ripple.

IEO, on the other hand, stands for an Initial Exchange Offering. It’s when companies sell their crypto to the masses on a digital exchange. Some of the companies that have gone this path include BitTorrent that held an IEO on Binance.

Why Some Governments Have Banned ICOs

ICOs have a terrible history. They were at their peak in 2016-18 during the most recent crypto bull market. Back then, bitcoin prices were hitting the roof with record-breaking figures and investors were actively looking for opportunities to make profits. Fraudsters took advantage of these desperate moments to create scam ICOs.

But that was back when prices were rising. Since then the market has taken a thorough beating. But that is changing as prices have started to recover since February, the first positive month in a year-long bearish run.

How To Spot A Potential Scam ICO

Read Reviews By Others

No matter what you know about the market, it’s essential you consult other sources. Reading multiple reviews on the projects in question helps in making a more informed decision when investing in an ICO.

But as you read the review, be careful as some websites are paid by ICOs for a positive spin. The reverse is also true; some have reviewed good ICOs poorly on purpose and later approached the companies for money in exchange for better reviews.

That being the case, it’s advisable to use reviews only after you have researched on your own. Use reviews to supplement the information you already know. That brings us to our next point.

ico scam

Do Your Own Research

Look, not just the technical aspects but also the business plan and the team behind the new project and their past experiences. Look for a solid plan and a team with an excellent track record.

You can find this information on the company’s website and social media profiles of the team behind them. If you don’t find enough credible information, avoid it at all cost. Also, check to see if the company is real and the country it’s registered in.

Checking The Whitepaper

It’s a critical document in any blockchain project. It contains the vision, structure and other information regarding the token. Being so, the information provided should be clear and concise.

Look out for a reason behind the project and services it will provide, whether the token is connected to the project, the timeframe of the ICO and how funds will be used.

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