There are many many dozens of cryptos launching each and every month, and side by side that there are many new tokens come out of a series of Initial Coin Offering or ICOs. The desire among a wide pool of people who invest for these kinds of opportunities has grown so much, even despite the fact that cryptos have been shabby in 2018.
All of these elements unite to attract scammers. In the end, if investors have shown that they have the will to throw dollars toward a highly hypothetical crypto, they seem to invest in a crypto that might be fraudulent ICOs or tokens.
For the ones that invest in crypto all they want is to make money (unless they are fooling themselves) but these scams put them at so much risk and they are seem to look negatively about the future of ICOs. Cryptocurrency and Blockchain technology is a fast-paced technology in which even veteran investors are finding it very hard to keep up with the technology itself.
While there is not any guarantee or assurance that any kind of cryptocurrency or likely blockchain-based startup will be legal or win the game, the four strategies that I am gonna show you below will help you keep yourself safe from falling to these kinds of scams.
Know the team behind the coin
Although this may not seem logical as you can not trust anybody on the web and digital space (although we can not trust anybody in the real world either), Getting know to the team and finding out who they are and what they have done can have a huge impact on your next moves.
Perhaps it seems logical that the really important factor for any kind of ICOs or likely cryptocurrencies is the developers behind them and the team that is working 24/7 365 on the project. We hear the big names in the space, superstars like Vitalik Buterin who is the developer and the founder of the Ethereum platform who has made a huge impact on the blockchain technology. But these people’s names if mentioned in a project can have a huge make or break impact on the project.
For this reason, it is ultimately usual for scammers to use fake founder names and biographies on their project websites.
The best tested and protective way against these fraudulent scams is to completely research and know the individual team members of the project and what they have done before you invest. It is a bad sign if for example, you are not able to find any information about some developer of the project on social media sites like LinkedIn or twitter.
Even if those profiles on social media exists you have to check and see if their activity is matching with the number of followers and posts they have done. People who have so many followers but rarely engage and get in touch with them might be fake people.
Before deciding on that if the development team is fake or not it is important to see that if their qualifications do measure up. Really do each of the founders have the experience that they are claiming to have? Is that relevant to the current project that they are having at hand? All these questions will make sure that you do not trust no real people.
Read the whitepaper
The documentation is what every software project is founded on and for a cryptocurrency project it is the most foundational document. The documentation or in crypto terms The Whitepaper should actually lay out the goals, background, concerns, strategy, and the timelines for execution of any blockchain-related project.
Whitepapers can amazingly reveal every aspect of the project: companies that have a pleasing to eye website may show that they lack a fundamentally great concept.
On the other hand, there may be a company whose website may contain and be full of misspelled words but despite that, they have a very rock-solid and special concept and a carefully written implementation plan in their whitepaper.
The very first step to get the whitepaper thing right is to read it completely and with details. Check to see that if the whitepaper is linking to trustworthy places and it has complementary linkings as well. That includes legal concerns, financial models, SWOT analysis, and also a clear roadmap for the actual implementation.
Companies that actually do not show whitepapers should be avoided immediately and at all costs. Still, it is possible that a fraudulent authority to place a convincing whitepaper on their website, as happened with the PlexCoin; this was a company that managed to raise over 15 million dollars before the U.S SEC shut it down.
A whitepaper is a thing that answers all the questions an investor might have about what differentiates this particular project from all its competitors, how it aims to become successful, and the actions that it will take to get to its goals.
Look for unrealistic crypto claims
It is pretty usual now to know of investing possibilities in the cryptocurrency world that pledges a monthly or daily rate of return.
Let’s be sincere, the charm of overnight getting rich is a tempting suggestion for everyone, and that can foster an impulsive motivation to participate in such schemes.
Practically speaking, it is almost impossible to generate any consistently fixed profits.
Offering fixed price returns would require a constant stream revenue, and unless they are sellers of a product or kind of a service to put in their revenues, the seemingly only solution to maintain high and guaranteed profitable rates is by using a Ponzi scheme.
Ponzi’s are like fraudulent scams and they generate returns that are for old investors and they do it using investments that are from later investments, which means that without any legitimate operations they can do that.
The old saying is: If it looks to be too good to become true, then you know it is probably a possible scam. There are no completely free lunches.
There are known to be generally three common fraudulent like schemes in the big cryptocurrency community that they promote unrealistic and optimistic claims, which it includes: Cloud Mining Services, Bitcoin Investment Packages (BIPs), Multi-Level Marketing (MLM) Schemes.
Not being open-sourced
Given that most of Cryptocurrencies are in the open-source world, projects that claim to be close sourced, or those projects that do not show and reveal their real codebase, seem to be a fraud and less credible.
Although it is true that not all the coins that are closed-source are scams, all coins that have been branded scams do not reveal their own codebase or simply they don’t have them.
A huge reason that why they are closed source could be also due to the fact that there kinda is no single code base entirely.
I hope these items will help you make the right decision for your future investments and they keep you from falling into so many scams that are out there.