Initial Coin Offerings (ICOs) have seen record growth in 2017 and raised a combined $2billion as more blockchain companies look to the cryptocurrency community for investment. However, not all ICOs are created equal and some poorly-managed operations have sullied the reputation of the ecosystem.
Nevertheless, previous successful ICOs have demonstrated that ambitious blockchain firms can achieve their objective in raising funds through this innovation new model. So what should investors look for when thinking of investing in an ICO?
Those that offer due diligence
Currently there is no formal process to audit an ICO organisation, meaning that companies are able to begin selling tokens before a functioning product exists. Before investing you should carry out a proper analysis of the project, its objectives and resource to gauge the likelihood of the project coming into fruition. In addition, the project should be able to provide regular operational updates on its status to ensure the investor feels confident with its progress.
Due to the nature of Blockchain technology, it can be difficult to identify who is purchasing tokens. This means that the true nature of the transaction is not quite clear. To ensure you feel comfortable with your investment, you should turn to a project that offers a certain level of transparency. For example, some platforms enable organisations to require and share personal information when making a transaction. Therefore before investing, you should consider the project’s Know Your Customer (KYC) measurements it has in place.
Whilst ICOs do come with a number of risks that need to be taken into consideration, investors shouldn’t feel put off by this new mechanism. As with any kind of investment, it’s essential to seek advice from a professional who will be able to consult and guide you through each stage so that you feel comfortable with your investment.
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