ICO (Initial Coin Offering) projects provide blockchain startups with an opportunity to raise the needed funds through a crowdfunding process. Just like the Initial Public Offering (IPO) which is done when a company is going public, those who invest in ICO projects gain a share of the company’s ownership.
Similar to company shares and stocks, these tokens can be exchanged with fiat currency or even with other cryptocurrencies in the market. Successful ICO projects may even have their tokens included in the leading cryptocurrency exchanges making it easy for one to liquidate their tokens once they appreciate in value.
ICO Analysis: Fundamental Understanding of ICOs before Investing
Before investing in an ICO project, it’s important to understand how an ICO works and analyze these projects against success indicators. Not all ICO projects turn out to be successful and thus a proper analysis of the ICO project is essential in ensuring that you get value out of your investment. Below are 7 key pointers you need to evaluate when analyzing an ICO project.
1. The Project Roadmap
The project roadmap is a detailed step by step guide on how the ICO project will progress until it is fully operational. It’s essential in guiding the implementation of the project and key in identifying the key milestones and possible implementation challenges. You can get a project roadmap from the company website or still find this in the ICO whitepaper.
With a project roadmap, you will be in a position to get a clear picture on the nature of the ICO project and what you expect to take place at the different stages of the ICO project. If the project roadmap provided by the company staging for an ICO is disorganized, then you need to be wary of investing your hard-earned cash with such a blockchain startup. When choosing an ICO project to invest in, go for those companies which have a clear and strategic roadmap, detailing all the steps in the project lifecycle.
2. The Problem Being Solved
This is another key factor to consider when analyzing a worthy ICO project to invest in. Every ICO project has a specific problem being solved. Check whether the solution offered is disruptive enough and bears the needed potential to effectively solve the identified problem.
You should also be wary of those projects which claim to solve a problem which has an already existing solution. But you can still consider such a project if the startup gives a new and more appealing method of solving the problem which is bound to override the existing solutions.
3. The Market Size
Your key interest in investing in an ICO project should be to gain significant returns out of your investment. This can only be possible if the product being developed by the blockchain startup has a sizable market. There will be no need of investing in a project which has quite squeezed market size or no visible market at all.
It’s only through the market forces of supply and demand that the tokens bought will increase in value. If the market size is small, the level of demand will be significantly low and the tokens may not appreciate to earn you the desired income. Thus always evaluate the market size before committing your investment to a blockchain company staging an ICO.
4. The Blockchain Technology Used
The technology behind token and cryptocurrency development is the blockchain technology. While the fundamental principles which build this technology are similar, the breadth of applications of the technology necessitates the development of new software systems which run under this technology. You need to evaluate the quality of code which has been used in creating the system.
While it’s true that not everyone can expertly analyze the code used in a given system, there are solutions which can help you do a basic checkup. One of these is by searching for the given project in the leading ICO rating companies to see how their code fairs. You can as well look for reputable reviews to see what the experts are saying about the quality of the code and the whole ICO project.
5. The Core Team
The founders and the team behind an ICO project says a lot about the possible success of an ICO project. Check the ICO project website for their profiles. If there are links to social media icons such as LinkedIn and Twitter, be sure to check them too. All these areas will give you useful information on evaluating whether such a team has the necessary experience in spearheading an ICO project.
The information which you should look for include;
- How long individual team members have been in the blockchain space
- Whether there are members who have ever led successful blockchain projects
- Their years of experience
- Whether they have been associated with any unethical practices in the past (you can get this information by searching their names online.)
For software engineers, you may as well consider searching their profiles on Github to see how long they have been members there and whether they have been regular contributors. By doing this, you will get sufficient information about the core team which along with other considerations will help you evaluate the success possibility of the ICO project.
6. The Community Around the Project
Every ICO project generates a certain level of excitement among cryptocurrency enthusiasts and blockchain investors. After the announcement of the project, multiple online media start covering different aspects of the ICO project while online cryptocurrency communities react to such news. The overall result is a ripple effect which serves to spread the news further.
If an ICO project does not command significant interest among the blockchain community, then you need to be cautious when investing in such a project. Lack of interest among the community members could be an indicator that few people are interested in the project or the project is not up to standard.
7. The Legal Framework
It’s important to ensure that the ICO project operates under a well-regulated environment. This will not only ensure the safety of your funds but also avoid legal tussles which may occur later due to non-compliance and regulation issues. The presence of legal and financial advisors among the board of directors should thus be a plus when analyzing an ICO project.
Proper ICO analysis is crucial before investing. Such analysis provides sufficient information to aid you in making a balanced investment decision. When conducting such analysis, always include the above pointers to ensure that you cover all the areas of ICO feasibility assessment.