Before a company makes an initial public offering (IPO), it has to release certain information. It must tell potential investors the present value of its assets, exactly what it does, just how much it brings and how much it spends. It must give investors sufficient understanding to make an intelligent choice about whether to make investments. That information is regulated by law.
Businesses which make initial coin offerings (ICOs) are also governed by regulations, but those regulations, as well as their authorities, remain uncertain. Cryptocurrencies continue to be brand new, and rulings could be inconsistent. In 2015, the U.S. Commodity Futures Trading Commission described Bitcoin as a security. In July 2017, the U.S. Securities and Exchange Commission defined the DAO market as a commodity. Add from the global character of cryptocurrencies that allow businesses to launch coins and tokens in places with milder regulations, such as Singapore, and it's no surprise that investors looking to put their money into ICOs might struggle to make their evaluations.
Forget regulations and forget the numbers. There are just four items that you have to appear at when you are assessing an ICO, and they ought to be available for each and every coin.
First, search past the coin to the Product.
A cryptocurrency isn't supposed to function in a vacuum. It is supposed to support an item. There's no use in purchasing casino chips at a discount when nobody will construct the casino which uses them or if the casino which has been constructed was run-down and badly handled that no one would need to gamble inside.
The exact same principle applies to a cryptocurrency. All the cryptocurrencies are similar. They're all assembled to the blockchain. Some, such as Ripple, maybe pre-mined while some, such as Bitcoin, may have a group launch. Some, for example, Tether, might be connected to a fiat money, while most others will probably be allowed to float freely. But each of these coins has their particular use, and it is much easier to evaluate that use than it is to assess the characteristics of the coin.
Ask yourself if you believe there's a true need for the product the coin is supporting. Ask yourself if you would use the merchandise the coin is supporting. Evaluate the product in exactly the same way that you would assess a business looking for investment and avoid any coins that are not funding a viable project.
You'll find info about the product in the white paper, that's the next thing which you should examine. In an area with them as much regulatory mess as ICOs, the white paper will be the closest you're going to get to some correct financial report. Because firms are using ICOs in a previous stage of financing compared to traditional companies use IPOs, the whitepaper is not likely to include much in the way of statistics and numbers. What you will get is that a description of this vision supporting the venture. You're going to get an explanation of why the business requires a cryptocurrency and exactly what it is trying to do with it.
You'll also get a sense of just how professional the provider is. Whitepapers take the effort to write correctly. The founding team has to be able to spell out its ideas clearly to a writer who must express those thoughts in language which may be understood. A white paper is a specialist solution, and also a fairly low bar to meet for a company that wants to raise countless. And yet, many companies fail to meet it. At the start of the year, TRON, one of the best 10 cryptocurrencies by market capitalization, was accused of plagiarising its whitepaper. It's a poor sign if the company must copy another business's ideas to warrant its existence.
While you're looking at the white paper, it's also wise to pay close attention to these bios of the group members involved with the project. When venture capitalists hear pitches from startup founders, the page that always interests them is your page about the group. Ideas are a dime-a-dozen, but the men and women who may make those ideas happen are much harder to find. Investors want to see that the folks they're giving money to have shown that they're effective at building something, even when they haven't yet had a excellent success. They wish to realize they can do it.
Cryptocurrencies haven't been around long enough for team members to get exactly the identical type of long experience with the blockchain that creators may have with businesses, but they need to fulfill some criteria. They should have experience in the field where they are operating. They should have members that have worked together with blockchain technology. They need to have some experience that shows they are capable of making things happen.
Ultimately, one way to more accurately assess the group is to join its own Telegram group. A rival into WhatsApp, Telegram is the program of choice for cryptocurrency businesses. Many will invite potential investors to join their set on Telegram where they will take questions and discuss the product. You might not be able to sit in a pitch space with the corporation's founders and have a look at their PowerPoint, but you can sit in a digital room with them and create your own decisions.
Assessing an ICO is not easy. There is a reason that Google and Facebook are equally attacking their advertising. But with some care, some thought and a good deal of caution, it is possible to dive right into an ICO and make some smart decisions.