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Watch out for scam projects

In recent years, the cryptocurrency space has dominated the investment news cycle. Regardless of what certain analysts or investors may think about the new trend, the hype is undeniable. Dozens of new cryptocurrencies are launched every month, and along with these new tokens and coins comes a series of initial coin offerings (ICOs). In anticipation of the hype, we need to be vigilant. Here’s how to identify cryptocurrency and ICO scams.

The appetite for profit among investors for opportunities continues to grow rapidly, despite the fact that cryptocurrency has had a disappointing first quarter in 2018. All these factors combine to attract scammers.

What’s more, investors have proven that they are willing to dump money into highly speculative digital currencies, apparently investing in scam tokens or ICOs.

For cryptocurrency investors looking to take advantage of new investment opportunities while staying safe from cryptocurrency, ICO and token scams, the prospect can be daunting.

Blockchain technology and cryptocurrencies are developing very quickly, and even experienced investors may find it difficult to keep up with each technology.

While there is no guarantee that any cryptocurrency or blockchain-related startup will be legitimate or successful, the steps outlined below can help you get caught out of cryptocurrency scams or initial coin offering (ICO).

Here are some factors that need to be identified to avoid cryptocurrency and ICO scams:
Get to know the team / management behind it
One of the most important success factors for an ICO or cryptocurrency is the developer and administrative team behind the project. The cryptocurrency space is dominated by big names, with superstar developers such as Ethereum founder Vitalik Buterin being able to create new projects simply by including their name on the development team.

For this reason, scammers are increasingly using fake profiles / biographies on the development team for their projects.

The best protection against this fraudulent tactic is to thoroughly research the individual team members of a project before you invest. This is a bad sign, for example, if you can’t find any information about a particular developer or founder on LinkedIn or other social media networks.

Even if a profile does exist, carefully check their activity along with the number of followers and likes collected. Individuals who rarely engage with followers and have thousands of fans may not be real.

As well as determining if the development team is real, it’s important to make an effort to see if their qualifications meet the requirements. Did the founders have actual experience in the field? Is the experience relevant to the current project?

Check the document (whitepaper)
A cryptocurrency or ICO whitepaper is the basic document for the project. The whitepaper must contain the background, objectives, strategy, focus, and time for implementation for each project related to blockchain.

 

The whitepaper should reveal that a company that has a website that is too ‘perfect’, may mean it does not have a fundamentally strong concept. On the other hand, a company with a website that contains spelling errors may have a whitepaper showing a solid concept and a carefully crafted implementation plan.

The first step to analyzing a whitepaper is to read it very carefully. Carefully check whether the whitepaper has complementary resources as well, including financial models, legal issues, SWOT analysis, and roadmaps for implementation.

Companies that don’t offer whitepapers should be avoided at all costs. Still, it is possible that a hoax company has a convincing whitepaper, like PlexCoin. The company raised more than $ 15 million before the United States Securities and Exchange Commission (SEC) stepped in to shut it down.

The whitepaper should answer any questions a potential investor might have about what differentiates this particular project from its competitors. How the project plans to be successful, and the steps it takes to achieve its goals.

Pay close attention to token sales
Any ICO will rely on a token or currency system to facilitate the crowdfunding process. Legitimate companies strive to make the system transparent and the progress of token sales easy for potential investors to see.

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