How to Avoid an ICO Scam– A Blog Article by Haley Clark
This article was written for the blog of icebound.com November 2018.
A blog article for cryptocurrency investors detailing 3 ways to avoid an ICO scam using 3rd party keyholders, ICO whitepapers, and research into the ICO team.
Read the article now at https://icobound.com/blog/how-to-avoid-an-ico-scam/
How to Avoid an ICO Scam
Initial Coin Offerings (ICOs) are an excellent way to make cryptocurrency investments but investors should be wary of scams and schemers.
ICOs are funds used to support new digital currencies and related ventures. These investments are a great way to diversify your portfolio and support the growing digital currency market. Yet cryptocurrency investments can be risky since, due to the deregulated market, your investment is not protected in case of a scam.
What can investors do to avoid an ICO scheme? Here are 3 ways to dodge cryptocurrency investment scams.
3 Ways to Avoid ICO Scams
What can investors do? Here’s a list of 3 ways to avoid ICO scams.
1. Third-Party Keyholders
When researching an ICO, make sure the company supports multi-key holding with two keys possessed by third-party accounts. This reduces investor risk since the ICO keyholder can only access the total investments through the agreement of both third-party keyholders.
The third-party keyholders should be neutral parties with no investments or ties to the ICO they hold keys for. Preferably, these parties should be verifiable escrow accounts. Investors should be able to track escrowed funds and access funds not publicized in the markets.
These factors should be laid out transparently for investors in the ICO whitepaper.
2. Scour the Whitepaper
An ICO whitepaper is essentially the business proposal attached to a specific ICO. Just like any other business proposal, investors should read the whitepaper thoroughly and mark it with any questions or concerns. The team behind the ICO should be willing to discuss these questions and concerns with you but, if they aren’t, red flag them as potential scammers.
The terms of an ICO should not contain meaningless hype or absurd promises. Anything that seems like a get rich quick scheme or claims extremely high returns is probably a scam.
Scouring the whitepaper is one of the most foolproof ways to assure an ICO is legitimate, but it is not a 100% effective method as evidence by PlexCoin. PlexCoin was an ICO committing fraud against investors using a deceptively good whitepaper that was actually plagiarized from a legitimate ICO.
3. Research the Team
The members of an ICO group should be experienced with cryptocurrency investment. They should offer some method for you to contact the team and third-party sources that affirm their credibility. The members should be willing to disclose publicly the successes and failures of the venture as they occur.
Just as scouring an ICO White Paper isn’t 100% effective, researching the team won’t guarantee you aren’t being scammed. The company Proteum scammed ICO investors with an exit scheme. After the fact, the alleged members came out to say that their identities had been stolen and attached to the Proteum without their knowledge.
Smart investors should be wary of scams but the fact that these scams exist should not deter from investing in ICOs altogether. Equipped with these 3 ways to avoid ICO scams, investors can feel more confident entering the world of cryptocurrency investment.