Before buying tokens, make sure you keep these points in mind:
An ICO is carried out to raise capital in order to develop a product later. That’s why the basis of all token sales is the concept of your product or platform.
Here we have simple advice: use common sense. Do you think the proposal of the company is viable? Do you think it will be well received by the public? Is the need that the proposal tries to solve real?
When analyzing the product information that the startup wants to develop, think about if you know competitors or products that can solve the same need. We recommend searching them in Google and, if they exist, ask yourself what makes the ICO proposal different from the product or service of your competition. Besides, you need to know about the ICO ratings in the world marketplace.
Whitepaper and information about the project
The companies that are organizing an ICO usually prepare a Whitepaper to present themselves and the product. A white paper should describe the business proposal, the technical specifications, the problems it is trying to solve and how the product will solve these problems or needs.
A good whitepaper is based on research and can justify why the product is necessary. When you are considering participating in an ICO and buying your tokens, take a look at your white paper and study if you think it is viable.
The team behind the ICO
Always take a look at the team behind the ICO. Who are they? What have you done previously? Do they have a proven track record that justifies their role in the ICO? With some basic research, such as checking the LinkedIn profiles of team members, you get a very good view of who is behind the project.
The advisors used to play an important role when it comes to supporting an ICO. However, at this moment we believe that they are being abused in the aspect that it is possible to see the same advisors in many different ICOs. Often, they are paid to be counselors and are not as involved in the project as the real team. In many cases they have simply become part of a marketing strategy.
The tokens issued in an ICO can represent capital or debt of the startup and, as we have seen previously, the market has started to call these “Security Tokens “due to its nature. On the other hand, tokens can represent a right to use a product or service, or have some other specific function in the ecosystem of the startup, being in this case known as “Utility Tokens “. The design and attributions of the token, in one way or another, will have significant legal implications as to how they can be marketed in each jurisdiction.
When you consider participating in an ICO, verify that the token that you will obtain in exchange for your investment can grant you a return of it or it could be useful in another way.
Also take a look at how many tokens are being broadcasted and how they will be distributed. There are different roles that a token can have: some tokens can grant a right that results in the use of the product, or it can be used as the pay-per-use method to access the blockchain infrastructure, such as executing a smart contract for perform a specific function. The token can also have the role of simply giving access to a network or, for example, it can be used as a payment method within a closed environment.