Section 9: How do you spot an ICO scam?
The current ICO frenzy has attracted unwanted elements in the cryptocurrency ecosystem. With an ICO happening every day, it’s imperative to be able to differentiate between a good opportunity and a scam.
Lack of open team profiles: If an ICO doesn’t provide social profiles of the team members, it’s quite likely to be a scam. Try to find a team that has at least one member having a successful crypto project under his/her belt.
Compromised or missing escrow: Absence of an escrow account is the biggest red flag to look out for. Similarly, if an escrow releases 100% funds to the project team after ICO, it’s a bad escrow, and should be considered as a red flag. Fund releasing should happen gradually such as 20% after token distribution, 40% after beta release, and similar milestones.
No technical details in the whitepaper: If an ICO promises to disrupt an established industry without providing any technical or operational details, it qualifies as a scam. Good whitepapers have charts, calculations, specifications, and even code at times.
Unrealistic goals: If an ICO makes bold claims without an economic plan or roadmap to support it, it’s best to avoid investing. Further, even if the team has offered a roadmap, you have to do your own research and judge the feasibility of the project.
Missing code repository: This is another sure shot method to spotting an ICO scam. If the company is unwilling to release its code to public repositories such as Github, avoid the ICO altogether.
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