Token sale is a crypto related phenomenon became trendy last few years. Tokens offered for sale are often interpreted as ICO (Initial Coin Offering). Actually, there is no difference between the terms — both are used quite liberally in the crypto community. Token sale is the key means of raising capital for startups to help crypto enthusiasts launch their project.
It has inherited principles of crowdfunding:
- You have something to offer;
- You announce your product, its features and prospects to gain prominence;
- Within specified time-frames, you raise money from your project’s followers who want to back it.
- You launch your project by their means and provide them with exclusive benefits. In the token sale context, you distribute the underlying token of your project among the backers before listing it on trading platforms.
Tokens for sale is a powerful tool for creating cutting-edge projects based on blockchain and take them to the mainstream. Unfortunately, some shady projects use it to trick trustful users into backing them. A super-revolutionary, prospering, world-changing project may turn out to be a unicorn yet another crypto scam. So how not to fall prey to fishy token sales? And how to tell whether a project really deserves your attention and trust?
Table of Contents
What you should know
The project team is its driven force. The more professionals are involved, the better the results. Saw someone well-known in crypto community participating in the project? Great! Saw a celebrity? Well, check the team twice. If Ryan Gosling is about to run an ICO, you, probably, should get somewhat suspicious.
What does the team offer? Do they build a competitive and transparent business model? Check what they did before and what projects they worked at in the past. Not impressed? It would be better to look for something more persuasive.
As you may know, the certain percentage of tokens to be released is held by the core founders of the project (around 25% of all issued tokens). If one project has too many founders and token holders, you should take a closer look at their activities. Pay also attention to hard and soft caps. A hard cap is the absolute upper limit of the amount the team aims to raise during the crowdsale, whereas a soft cap stands for a lower barrier. The difference between those shouldn’t be huge. If the funds raised exceed the high cap or, on the contrary, don’t reach the soft cap limit, this is a red flag.
Social media and community
Check the presence of your project on social media and Reddit, in particular. What do people say and how does the staff react? This moment is crucial since you can detect potential scammers, regarding their reaction, if any.
Reviews and analytics
Google the project you are about to invest in. Is there any information on that? If it is, what do experts say about that? The more information you get, the better. Do not invest in a project that doesn’t contain anything valuable.
News and updates
What lesson can we learn out of these fancy stories about ICO affairs? Always check the news and press releases of the project on large and reputable sources dedicated to crypto. Stay up-to-date with every single step of the team and check analytics. Chances are, you will not be caught in a trap.
Whitepaper is the essential information about the project. Reading this will give you a full understanding of the project’s ideology and philosophy. The project should aim to resolve real matters and provide real solutions. Don’t believe in miracles. At least, when it comes to blockchain technologies.
One in a million?
Google, Facebook and other large platforms take measures towards ICO advertising. There are reasonable causes to do so since more than 80% of the overall number of token sales are claimed as scams. In fact, things are not so bad as they may seem, if only because Changelly has listed a range of prominent tokens issued via ICO: Stratis, Patientory, Storj, Salt, Stox, Viberate, and many, many more! So if you want to back a token sale, just do it deliberately with careful comparing all pros and cons.
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