Initial Coin Offerings (ICOs) are still one of the biggest trends in cryptocurrency today, and for good reason. ICOs give an opportunity for investors to exchange common cryptocurrencies like Bitcoin or Ethereum for units of a new cryptocurrency or token. The tokens can then easily be sold and traded on cryptocurrency exchanges if there is a demand for them.

Think about if you had purchased even $10 worth of Bitcoin in January 2011 when it was still relatively new. The cost was around $0.30 USD per Bitcoin. Today your 33 Bitcoin would be worth over $354,000 USD — an incredible return on investment for your initial $10.

But how do we know if there will be a demand?

Finding a list of ICOs and sorting by the highest percent gain since ICO will yield some alarming figures, numbers which are sure to draw any investors attention. Names such as IOTA, Stratis, and NEO rising to the ranks with gains in excess of 100000% may seem very appealing to the hindsight investor, but there is a larger reason why these companies have found success. It lies within a company’s vision, and their deliverables made to the community.

Here are a few things to look out for when considering the profitability of ICOs.

The Team of Developers

Top ICOs have a great team of developers behind them and changing the status quo through upgrades to core technology appears to be the inside edge. Take IOTA for instance: they provide a next level protocol with zero transaction fees that improves transaction efficiency through the tangle, a mechanism where users must approve two transactions in order to make one.

Whitepaper and Defined Roadmap

Before purchasing tokens you need to absorb the company whitepaper. This is important because it can be an easy way for you to determine if a company is legit or not.

Here is some basic information every whitepaper should include:

The overall vision of the project — what are they trying to accomplish?

What problem is this project solving in the marketplace — what is their unique solution?

How the tokens will be distributed — check out at the percentage given to the public, the bounty and the core team

Timeline of milestones — will this be a short or long-term project?

When companies exclude some of this information or don’t even have a whitepaper, it can be a signal for you to reconsider your investment. How can you invest in a companies’ vision if they don’t even know what it is? How can you hold them accountable for success with no timeline?

Social Media

Conduct your own research by checking out reviews of the company you’re interested in. From Google reviews to Youtube and comments on Bitcointalk, you’ll find information from other crypto enthusiasts and investors that can help you judge the legitimacy of a company, and even how they compare to other companies with a similar product.

Want to get an insider look at how the company interacts with the public? Most companies have public Telegram groups where you can ask the team questions and see how many other people are interested in the venture.

Ready to Invest?

Before investing in any ICO you must do your due diligence. There isn’t any formula you can follow to know if an ICO will be profitable or not, but learning everything you can about the product, the team and the company vision can help give you the peace of mind you deserve.