If you ask people what they know about cryptocurrency, you will most likely hear the word Bitcoin (BTC) or blockchain – or even both. However, many do not know that there are over 5,000 cryptocurrencies on the market today. This huge amount is a bit confusing for investors.
With so many options, choosing from them can be challenging. At the same time, however, there are many potential opportunities for cheating people in the crypto space.
You see, some bad actors have come up with tokens to trick people out of their hard earned money. Whether you decide to transfer funds transparently or privately, your first priority should be to find the original crypto assets you can invest in.
In this article, we have compiled a list of some precautions that will help you analyze the tokens correctly – be it a tool token or an asset token – to make a safe choice.
Read the symbol paper carefully
A white paper on a cryptocurrency or ICO outlines the background, strategy, goals, challenges and timeline of a blockchain-related project for a successful implementation.
Since official documents need to be detailed, they can be very revealing. The biggest advantage here is that you can see if the company has a well-thought-out implementation plan for an existing company – which can be very useful for token analysis. Therefore, it can be very helpful to review official documents.
Here is what the official doctor must answer:
What is the unique sales proposition of the project, especially compared to competitors?
What is the vision and methodology of project managers, and how do they plan to succeed?
What measures will the company take to achieve its goals?
What are the usage issues for the token?
Start any investment solution in the cryptocurrency or blockchain industry by reading our whitepaper carefully and checking if there are any free resources in it. This may include financial models, SWOT analysis and legal issues, and a roadmap for implementation. You will also be able to determine the suitability of standardized mass token trading.
If the company does not provide an official document, consider it as a red flag and move to another sheet. At the same time, keep in mind that white papers should not be considered the sacred degree of authenticity either – a fraudulent company may well create a compelling white paper. For example, PlexCoin raised more than $ 15 million through its notable white paper before it was shut down by the US Securities and Exchange Commission.
Learn more about team leaders
The developers and management team are an important part of the success of any unique project, so you need to understand the people who support the project. Find out if anyone has worked on high profile projects before or is a prominent contributor to the blockchain scene. In addition, their qualifications and experience should be important.
Make sure the symbol is maintained by people who know what they are doing. This will help you move away from companies where personal benefit is more important than ethics.
After seeing this loophole, the scammers started inventing founders and fake resumes for their projects. Sometimes they can also use the personal information of uninformed victims to their advantage.
Therefore, the best defense against this scam tactic is to learn and do well. Skip tokens for which you will not find developer or founder information.
Even if you find profiles, check if the actions match the number of followers and likes, and notice other similar nuances.
Determine the likelihood of any legal issues
Finding an ICO for a great symbol is not enough to invest. Sometimes you may not be allowed to participate due to your specialty. If you choose to act in these situations, you can break the law.
To avoid this, make sure that the country’s regulatory authorities do not restrict participation in such codes. While the ICO is still unregulated, the good news is that regulators are working to introduce friendlier rules that can remove most of these restrictions in a large number of regions.