Green Flag - Red Flag : Tips to evaluate ICO investments

By Deba215 | DebsCorner | 22 Aug 2020


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The simple saying ‘Better safe than sorry’ takes a lot of precedence these days when it comes to choosing an ICO. We have witnessed an astronomical growth in terms of transactions being handled by Ethereum / TRON network, a lot of credit for that goes to the SRs and the projects running on these protocol. In a short span of time we have seen thousands of tokens being launched using the ERC20/TRC10/TRC20 protocol which is also helping a lot in terms of enhancing the usage. Most of these tokens trade only using ETH, TRX pair, ICO purchase is also through ETH or TRX only. All these are helping blockchain eventually hold its ground in this bear market and also promises for a prosperous future as a lot of these projects gets into mainstream usage. The token creation process is fairly simple which is helping a lot of projects who had an idea but lacked access to funds and resources to launch their projects.

Having said this there is a flip side to it, low entry barriers are also allowing a lot of scammers get into the system .They are creating tokens with the intent to exit scam at some point of time and escape with the investor’s fund. Lack of regulation in this domain makes it all the more difficult for you to recover your funds once lost. The objective of this article is to assist you with 10 pointers which will help you evaluate a project and make an informed decision. My humble request to all of you reading this article is not to gamble/speculate when it comes to ICO investments. Success takes time, hence legit projects will take time but the ROI will be phenomenal .Becoming millionaire overnight is a myth, it takes lot of patience , perseverance and knowledge to sail through this roller-coaster ride and achieve your financial goals. So be smart and choose wisely.

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In this article we use a simple strategy to evaluate a project – Green Flag means the project is good to invest, Red flag means we need to avoid investing in it. So here are my 10 pointers to conduct a basic evaluation of a project:

  1. PRODUCT: This is the heart of any business. GREEN flag goes to the project which has a working or planned product, a well defined use-case, has plans to launch BETA versions. Also you need to evaluate if using blockchain actually makes it viable and useful. RED flag a project which has vague or undefined use-case or is too simple that every kid off the blocks is doing it. Simple tipping / meme tokens are classic examples of this where you need to carefully access the usability and how the project differentiates itself from other off the mill projects.
  2. TEAM: This is again one of the most important aspects to access a project. A team which is not public has a higher probability of pulling of an exit scam. Blockchain is about transparency and if the team itself is not transparent then it’s a big RED flag. So lookout if the project has a team, who are the developers, advisors, marketers. Does the team has public profiles visible on portal, do they have previous business / ICO / blockchain experience. Is the project happy to post the photographs of the team on the official website. Give it a RED flag if you don’t find this basic information; give a GREEN flag if the results of your finding are satisfactory.
  3. TOKEN SUPPLY AND PRICING: This is a very good indicator to access the intent of the project. This differentiates the professionals from the noobs. A big RED flag goes to ICOs which creates ridiculously high supply which runs into thousands of billions/trillions with an absurd ICO price for each token. If you do simple mathematics you will realize that we will run out of all the ETH or TRX available and still the ICO will not be 100% sold, which means the creator doesn’t even intent to achieve full ICO sale, a clear exit strategy. If you observe this RED flag then immediately drop the idea of investing in that project as high chances you are dealing with a scam or a noob and both are not good for your investments. GREEN flag goes to projects which if 100% sold at the ICO price covers only a small percentage of TRX supply thus leaving enough space for its value to grow and give good ROI to early investors.
  4. WHITE PAPER AND WEBSITE: These are the first impression of the project and again are a big differentiator between professionals and new kids of the block. Give a GREEN flag to a project which has a detailed whitepaper and website which clearly explains the project, product, use-case, roadmap, key benefits, token distribution allocation etc. RED flag goes to projects which either do not have these ready or it’s just for namesake. A project should have this basic stuff ready before they venture out to garner funds from public.
  5. SOCIAL MEDIA: In the digital space social media is the strongest tool available to create a huge global customer base. A legit team will strongly invest a lot of time and energy to build up their social media presence. Give a GREEN flag to the project which is active on most of the social media channels like – Twitter, Telegram, Reddit, Medium, Facebook, Instagram, Slack etc. A RED flag goes to projects which creates it for namesake and do not actually use it to build the community or engage proactively.
  6. COMMUNICATION OF TEAM: The communication by the community managers and teams are a good indicator of accessing the true intent of the top bosses. Check if the community managers are engaging with the community to build relationships with them and spread awareness about the project, developments, future plans or are they just trying to hard sell the ICO. Also transparency of the community managers goes a long way in establishing the trust for the project. Give a GREEN flag where the admins are real and transparent , their social media profiles are matching in different platforms ( i.e they are the same person in telegram, twitter, facebook, linkedin, instagram etc) and they are actively involved in spreading knowledge and awareness. Give RED flag to the admins whose real identity you cannot access. Real people who believe into an idea / project and are entrusted with the task of promoting it will never be required to hide their identity.
  7. PREMINE and FREEZE: A legit ICO will have a clear defined roadmap for token release and distribution. GREEN flag goes to projects which follow their roadmap and keep the un-utilized tokens frozen as defined. RED flag for projects which put 100% of supply into circulation and trade on day 1 itself, high chances they just want to sell whatever they can before they pull the plug.
  8. MARKETSIZE and POTENTIAL: Give a GREEN flag to the project which has identified a niche market and are leveraging blockchain to create a global customer base. Typically products which have a global use-case, a sizeable customer already spending money in that domain (which will shift to blockchain over a period of time) are good green flag indicators. RED flag for the projects which hardly has any existing or future market because the use case is vague or non-practical.
  9. COMMUNITY: Communicating with the community can give you a lot of indications about the project. Give GREEN flag to a project where the community is loyal and knowledgeable, they vouch for the product and the team, discussions in the group is constructive and project centric. A RED flag where the community is not aware about the project as high chances they were just bought or are bots.
  10. COMMITMENT: This parameter kicks in a little later but still helps in safeguarding your money from becoming ZERO. Give a GREEN flag to the team that values commitments and delivers on time – be it a product release, partnerships, merchant on-boarding, events, commitments to investors etc. Vice-a-versa for teams which frequently backs out from their own words.

Apart from these also be cautious about the fake/counterfeit tokens which almost look real to the legit tokens except for a small change in the alphabets. It is advisable to buy your tokens from legit exchanges. You are venturing into risky domain when you enter private sale groups having low control on the fake tokens.

Very few things in the world are perfect but we need to aspire towards perfection on daily basis. So after evaluating a project on above parameters if a project scores 8-10 it could be considered safe, any score below 5 should definitely be skipped for time being till the team proves it other way round.

Due diligence and a little time investment can go a long way in not only safeguarding your money but also to give you phenomenally high ROI in the long run. It’s just a hunt to avoid garbage and fill your bags with gold.

Hope all of you create massive wealth in years to come. Happy Investing!

Debasish Das.

Twitter - @deba215

Telegram - @deba215

Email – [email protected]     

 

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Deba215
Deba215

An engineering graduate, post-graduate degree in management. Having spent more than a decade in financial sector, working for one of the biggest MNC banking group, i decided to pursue the path of entrepreneurship.


DebsCorner
DebsCorner

Thoughts on entrepreneurship in general and blockchain in particular

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