One of the hottest topic in the market and a favourite among the crypto investors, ICO is a unique decentralised fundraising method that is centred around cryptocurrencies. A popular source of capital for startup companies, in ICO, a part of the crowdfunded cryptocurrency is pre-allocated to the investors in a token form in exchange for other cryptocurrencies.
The first token sale (ICO) was held in July 2013, by Mastercoin. Recently, in 2017, ICOs gained popularity so much so that about $6 billion was raised via ICOs in that year alone.
Our team has prepared a list of KPI’s that you can well use before deciding your next ICO investment.
7 questions that you need to answer before arriving at the decision of ICO Investment?
Question: What is the project? What is the token structure?
An essential document that details the purpose of the project. Have a thorough read of this document that can provide you with a convincing explanation as to why this project needs to be created, the purpose it will serve and how it is going to incentivize its participators.
Things to look in a whitepaper:
When going through the whitepaper, look for the purpose of the token in the sense if it is a utility token or a security one. Utility tokens represent your future access to the company’s product or service. In case a token derives its value from a tradable asset, it is a security token and subject to the regulations of federal securities.
Token mechanics that will let you know about the number of tokens that will be up for the sale, the soft cap, hard cap, how much will be burned later on and how much will be distributed among the team.
Usage of raised fund as in how much will go in the marketing department or will be used for the actual product development, basically, it should have the proper distribution of the funds given in the document.
Who are the people behind this project?
Get an understanding of the leading team’s background. For instance, if the product’s focus is on Biochemistry, there need to be people in the team that are specialists in this field. Moreover, look into their profiles on LinkedIn, Twitter and Medium accounts to see if they are fake or real. If there’s little information available or it is difficult to find, it is a negative sign.
How will the investors profit from the project?
Look for the ROI the ICO project is offering. Return on Investment (ROI) basically measures the profit or loss generation on an investment in relation to the amount invested. Knowing about the ROI provides you with the amount of money you might make in the investment in future.
Are people especially developers excited about this projects?
It is vital that the project is on an open community like Telegram or Slack so that investors can get their queries cleared. Look at the size of their community, has it been recently set up and the activity it is involved in. It should have a presence on a number of other sources as well such as Facebook, Twitter, Reddit etc.
Prototype & Product
What is the stage of project?
It is essential that an ICO has already a prototype available or the team is working on it. You would need something to put your trust in before investing in an ICO. It basically gives you an idea of what kind of the ICO will be and more importantly the project will have something to be backed on. It shows the team hasn’t just hasn’t come up with an idea but making progress with it.
What is the platform for token?
Is the project based on bitcoin or Ethereum platform? What’s the reason for choosing a particular platform? These are some of the important questions that need to be answered. A trusted platform means you have something to back on and rely on its authenticity.
What real world problem does this project solve?
Does the project solves some kind of problem or is it based on someone’s whim? Usually, a project has its problem statement defined and given but if you can’t find the problem it is providing the solution for, it’s time to get suspicious.
One of the trending and most lucrative option in today’s market, ICO is something that warrants an investors attention. Just make sure you keep in mind these points while performing proper research to cash in on this option.
So once you’re convinced for these questions, we believe you’re very to cracking your next big profit ICO. Stay tuned for our next article on tools for ICO.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
I am an entrepreneur and a writer with a bachelors degree in Computer Science. I manage the blockchain technology and crypto coverages at Coingape. follow me on Twitter at @arya_achal or reach out to me at achal[at]coingape.com.