Identifying scams in the crypto space
When speaking of Scam, it's not something new in the world today. Scammers who dream of making quick cash by deceiving other people have been doing such act for decades. MLM schemes are not also new. Alot of guys are making there money this days through ICO scams.
Now, the question is, What is ICO? How is ICO related to cryptocurrency? The sale of a token is referred to as ICO and you need to pay in cryptocurrency or fiat for an exchange. ICOs request for funding as first investmen like a new startup would request and later on the investors are promised some incentives as a return.
If a company offering ICO and maintaining its original investment, that company will inturn have a larger part of the token sales, and this is exactly where the problem is.
Without any commitment, ICO scams are a cheap way to finance artificial development. They are scam on their self because they do not have insurance when they failed to deliver what they promised to.
There is no well-documented proof that the business road map of Crypto's and ICOs are working. Investing into a new startup business that do not have an evidence is very similar to investing into an ICO, which is very risky. Investing into an ICO means you aren't investing in a company but a research project.
Another question is why the ICO scam works? This is due to the fact that people make use of other people, in which on speculation there is alot of cash to be made. The temptation of making your cash back as quickly as possible is something of a cool selling strategy. This is just a new version of ponzi scheme. ICOs are not regulated by a financial jurisdiction, this is why they are so popular and works out and exist in the crypto world with less balance and checks.
The reason why it is quite exciting and distinctive is because you can cash your money out anywhere. Combine this with someone who doesn't know much about investing instead lay his money on anything. In crypto's Hype brings more gains which makes it more dangerous, a marketing company will let you know hype can either be artificially created or can be bought.
The next question that comes up is, How to prevent yourself from falling into an ICO scam? When investing into an ICO, always have it in mind that you aren't really investing; but you are gambling, Alot of these ICO companies will fail to deliver what they have promised to deliver. Its even possible they do not have intention of making a product in first place.
Following the first rule of thumb pertaining investments in new ICOs, its better not to invest your cryptocurrency in them, except if you have seen an example of their first type of product working.
Hard working is the key and its well needed, in terms of doing research for forthcoming ICOs and products they will be offering. Relying on other people's ideas, comments, research, analysis and thoughts are not a good way to go because alot of people pass of paid content promotion as their own.
Only invest in something you understand well. Because you have known the product basics already. So you can even go deep to learn more about their market viability, technology, demand, supply, incentives, road maps, and so on.
As many of us know that majority of businesses fail or do have problems along the way after the following 2 years of start up. Those businesses that don't get purchased or acquire significant amounts of fundings. They possess clients, good revenue streams and also a well-documented evidence to proof that their business proposal is working fine at some point.
Although, an ICO will surely die off later. However, among the recent ICO if not many, that sounds more promising and great contains millions of USD in the market cap, surely will falls into nothing. The die off doesn't just happen overnight, it mostly happens after a year or two. It has happen with alot of cryptos.
Its vital that those willing to invest their assets in an ICO should always look for first hand information to avoid risking or loosing their bitcoin or other coins.