5 Things You Need to Know Before Investing in an ICO
Always wanted to invest in an ICO but wasn’t sure what to check on first? Well, we’ve got a little something here for you.
Icofunding co-founder Alejandro Gomes de la Cruz recently detailed 10 things you should know prior to investing in a coin offering to avoid getting scammed and here are five of them, in no particular order:
The Token. According to Gomes, one of the most important things you need to check out is the token or appcoin. Why? Because you need to make sure that it’s (a) actually useful and (b) that actually it grants a return on investment. Aside from that, it’s also paramount that you check how they’re issued or distributed: “In some cases, if the founders have no tokens, they would not have the right incentives to grant their value.”
The Press. Gomes wants you to ask yourself, “What did I knew before: their project or their ICO?” If there’s a lot of literature on the ICO but very little – to none – about the project itself, it might be best to look elsewhere. Where the project team focuses its marketing says a lot. Speaking of teams:
The Team. Arguably one of the most important aspects to look at, the quality of the project’s team shows how successful a project can be. Gomes typically focuses on two requirement, the first being the team’s Technical Solvency, or whether they have the requisite skills to get the job done, and the second being the group’s Degree of Involvement, since “it is not enough to have a team able to cover all the roles required. A good project needs people truly involved.”
The Code. As per Gomes, there are several things you should look at in regards to the code. First, you need to make sure that has units test covering all uses. Second, you need to verify that the code is public and that it matches the one on the blockchain. Lastly, you’ll also need to make sure that the smart contracts comply with security standards. If all these are okay, you might have something solid in your hands.
The Audit. Finally, before you invest in an ICO, you have to make sure about who audits it. As Gomes says “if there is a well-known third party auditing the code of the ICO and also a third-party auditing the balances of the company, we are probably facing a good investment.”