$5,6 billion raised by ICOs in 2017 and just over $4,4 billion made in 2018 (as for the time of this writing) no longer look that impressive, do they?



The bottom line is this: What is now happening in the cryptocurrency funding area has been happening in the financial field right from the moment people coined the term "investment". Impious ICO founders just meet the demand while allowing the crowd to do what they like most - losing money.



And it all is perfectly sensible from the investees' perspective: Why would you spend a massive amount of funds, even greater amount of time and work really hard while trying to create a real thing when you can come up with something cheap and cheerful that will make you just as much money, albeit in a not that honorable but still pretty secure way?



Speculations. This Time, Not Financial



From our perspective, there are only two things that can change this dire situation:



a) Public awareness;

b) Legal actions of governments.



Informing people about how to distinguish scum ICO from a worthwhile project and explaining how it all actually works will reduce the demand. Implementing rules and responsibility for the digital fraud will up the stakes for the scummakers affecting, therefore, the supply.



With the latter being just a bit beyond our jurisdiction, the former is exactly what we're doing here.



So, let's proceed.



6 Steps to Recognize the Rubbish ICO



1. Team.



Researching about the project, learn as much as you can about the p rincipals behind it. These days, it's almost impossible to fabricate the identity; LinkedIn, Facebook and what is known as Google can give you a comprehensive profile on nearly anyone. If they don't, well, use what is known as logic to understand why folks hide themselves.



Pay attention to the previous projects of the given individual(s); check whether the stated information corresponds to the facts or not. Fact checking must go deeper than just acquainting with the names of brands. Look, at least, at the number of employees; foundation/liquidation dates.



Reputation is a priceless resource. Reputable founders try (and should) use it to the full extent. A guy with half a dozen of projects behind wouldn't sacrifice his/her hard-earned fair name for a gravy train simply because the one can (and likely know how to) make just as many bucks without being hated and hunted down by the deceived investors.



2. Stars.



If you see a famous face advertising an ICO campaign (such a trick is now rapidly growing in the popularity), then there is almost no doubt that the founders want to have you . That's because any adequate project (with any adequate management) will attempt to deliver you technical information, graphs, statistics, etc.



If they want to attract investors with a face, i.e. they pay (and they pay a lot, remember it) to the owner of this face, then they simply have nothing to tell you and they target not very intelligent people in the first place (who, if not them, would invest in the project just because Steven Seagal's mustache promotes it?).



The same story with the excessive marketing. If the content (videos, articles or presentations) focuses mainly on how cool the investees are instead of giving you actual data, then you should quit, too.



3. Whitepaper.



Read the damn whitepaper! Read it using, yet again, brain, Google and, if possible, assistance from those who know the area and those who you trust.



There is, however, a problem with a whitepaper. What you have to gain there is the technical information about the project. But you kinda must have an understanding of what it's about.



A number of scummy ICOs give you a collection of barely readable stats and business-like terms and phrases that look perfectly serious for a layman but make no sense to specialists.



As an example, the blockchain itself can be considered. Since the cryptocurrency is based on this technology and the entire ICO field is strongly associated with blocks and chains, many think that the blockchain is a must in any ICO project and happily accept anything where they find the sacred word.



But it's a misconception. Blockchain is like an aircraft carrier - you need it only for something substantial. You don't use the thing for transporting a pair of socks across the Atlantic .



Understanding of whether the given campaign is about transportation of socks or is going to eradicate the terrorism on a global basis and the evaluation of adequacy of the presented tools is the exact job the majority of ICO consulting companies do.



4. Jurisdiction.



While a sightly face is a good sign of a fraud, the proper host country is a strong proof of a fairness.



With the majority of governments still pretending that there is no such thing as a crowdfunding, certain countries have already developed the regulatory basis protecting the investors.



Since the job is in the progress, it would be wrong to recommend the exact country - the norms may change by the time you're reading this. But we can outline the applicable logic :



1) You learn where the given project comes from;

2) You learn about current (and upcoming) norms; whether the ICO is regulated there or not;

3) You get a lot of confidence if the given project is from the area where punishments are prescribed.



Think about it this way: With a variety of 100% safe options, why would a fraud maker take risks establishing the venture where he/she could be imprisoned for it?



5. DAO-ism.



Whereas the religious Chinese tradition prescribes one to live in harmony with the Dao (the Way, in Chinese), the Decentralized Autonomous Organization implies the harmony between the investor and the investee.



Devised not that long ago, the philosophy implies the use of a public blockchain with smart contracts for involving investors in the process of the project management. With DAO, investors can vote and decide whether they want to give money for the given investee's activity or not and take money back if they're not satisfied with the progress.



Obviously, such an approach is unacceptable for the untruthful ICO makers, which gives those who are truthful another possibility to gain a few credits. Since the DAO concept is not particularly spread so far, the crowdfunding based on it is a rarity now. There is no doubt though, the technique will be growing in use in the future.



6. Liquidity.



In the economy, liquidity is effectively a measure of how much somebody wants the thing you own. Dollars are perfectly liquid - everybody will take them from you; the tokens offered by the majority of ICOs get perfectly illiquid almost instantly once you've bought them - buying an ether or a bitcoin with their help is like buying a car with candies.



Examining the whitepaper, the one thing you can evaluate yourself is how much attention the founders pay to the ICO aftermath . Liquidity of tokens belongs there. Except for themselves, scum makers traditionally focus on the launch and the nearest future of the enterprise. Such things as token liquidity and other determinants of a long-term success are typically left behind.



Hence, a comprehensive explanation of how the tokens are going to be maintained liquid and an accurate plan describing not only the profits but also the possible devaluation and risks should be considered favorable.



The end.



The happy one, we believe.



