ICO assessment: how to choose safe and profitable tokens
Most of the companies that enter the ICO will not meet the expectations of investors, experts say. How to evaluate a project that decided to release tokens, and choose one that does not bury the investment? The ICO (Initial Coin Offering) market is even more dangerous than the venture capital, experts warn. But, despite this, ICO is gaining popularity. According to the agency Smith + Crown, only in 2016, $ 102 million was attracted to the ICO. Experts do not undertake to accurately estimate the amount of funds raised in 2017, but the amount has obviously increased at times.
At the moment, the largest is the ICO project Filecoin (the development of a decentralized network for data storage), during which in August 2017, he managed to raise $ 257 million. The previous record holder - the Swiss blockbuster start-up Tezos (development of the network protocol, alternative to Ethereum) - collected about $ 230 million during the ICO in 2017.
Successful placement can bring tokens buyers a significant profit. According to the ICO Stats service on September 22, the highest yields are now shown by NXT project tokens (an increase of 362,537% since the ICO), IOTA (117,911%) and Ethereum (86,735%).
Having succumbed to the charm of six-digit figures, token buyers forget that most ICO projects fail, and investors lose their money. It is more dangerous to invest in tokens than in venture projects. It is difficult to estimate their exact number, as there are many companies on the ICO, but over 95% of ICO projects will not be shot.
The situation is aggravated by the lack of independent expertise on the market. Services that are ready to analyze the risks of initial placement of tokens can be counted on the fingers, so that while investors rely only on themselves. If you consider ICO as a financial instrument, you need to understand the subject well. In this sphere, there are a lot of subtleties and nuances, without studying which you risk making mistakes.
The first mistake in choosing ICO is investing in weak ideas and weak teams, experts say. This is a big problem for the ICO market - there for a lot of money comes a large number of people who want to attract them, but do not have enough experience to build a quality business, and not just raise money.
Often, it is impossible to determine whether the idea has gone by itself or it was "helped" by unscrupulous organizers. There is a possibility that in some cases the organizers mask the theft of funds for the failure of the project, but from the very beginning it is unequivocally to establish that this project is fraudulent, but this one is not very difficult.
A separate segment of hackers has formed around the ICO market, which are trying to intercept the investors' funds. To do this, they create phishing sites and accounts, where investors mistakenly transfer funds.
Among other things, there is a risk of changing the rules of regulation in the market, as a result of which, for example, it will be impossible to monetize tokens. We must understand that even if the product is of interest to the market, it is not a fact that regulators will miss it in the near future. Now, many projects in the ICO market are related to real estate, copyright and the financial market. These segments are heavily regulated, and it will take time to introduce new technologies, and most of the projects simply do not put this factor into their development models.
The evaluation of the company that decided to hold the ICO, fundamentally does not differ from the evaluation of start-up by venture funds. On this subject, we have accumulated many years of expertise, which can be applied to the ICO. You do not need to invent anything - there are a number of understandable criteria for assessing the market, team, product, etc.
Market experts and representatives of the crypto community are unanimous in the opinion that the first thing that should be paid attention in the ICO assessment is the team. As in the case of start-ups, project ideas often change when confronted with the market, but the team in any case will remain unchanged, so it is important to understand whether it will be able to cope with the difficulties.
The project should be dealt with by entrepreneurs who already have successful work experience. The founder must be a person with a good reputation, with a clear, well-traced career path. In this case, a person will risk his own name and, as a result, will be more responsible about the obligations to investors.
The reference in this regard placement - when the project was believed precisely because of the good reputation of the builder - you can call the ICO company Brave. The browser project based on the blockbuster was the brainchild of the former CEO and founder of Mozilla, Brendan Eich, and was able to raise $ 35 million in just 30 seconds.
Dreams of unrealizable
The idea of the project should be simple and realistic, says Arseniy Poyarkov. "Building a spaceship, an independent digital economy, creating a" killer "Facebook, Uber and McDonald's - sound ambitious, but it's unlikely to work. Why have not the giants of the industry done so far? Most likely, because on the way to these goals there are a number of obstacles, and they can not be overcome with a pounce, not that the startup, but also the big player.
Tthe team must set big, but achievable goals. The most promising areas of the expert calls the development and implementation of new technologies. In this case, it is likely that the company will someday be expensive.
Another important criterion for evaluation is the scalability of the idea. The audience of the project should not be limited to a regional framework or a narrow profile by type of activity or interests. Potentially the most promising projects cover an international audience, heterogeneous in terms of interests and activities. For example, the project of using computing power can be considered scalable, where any user of a computer, tablet or smartphone becomes the user. The importance of the scale of the project is noted by Anatoly Radchenko, managing partner of United Traders. This is an elementary matter of liquidity. I, for example, do not invest in exclusively Russian teams, because they can have problems with scalability - they will find it trivial to find the contacts necessary for development.
In addition, experts prefer not to invest in tokens provided with tangible assets. They believe in any token provided by the economy of the enterprise - either current or future - but not gold or sand, because in that case it's completely unclear what this token should grow in value in the future.
If the team and the idea are credible, you should take a closer look at the details. Experts identify the following important points:
- You need to familiarize yourself with the project budget and make sure that it is as transparent and understandable as possible.
- The future of the project can be affected by the choice of a block-platform. The most common option is the release of tokens on the blockade of Ethereum, they are the most liquid. But if a complicated idea is declared on the ICO, another platform can be used.
- It is worth paying attention to the legal form of the company, first of all to check that the start-up has a legal entity registered.
- A good sign for an investor can be a successful pre-ICO (raising funds before the official placement, usually at a discount to the cost of tokens, is not always done).
- If specialized professional funds participate in the ICO, this is also a positive indicator.
- It is important that the project has positive feedback from members of the blocking community (for example, at the bitcointalk forum) and approving references in the top international media.