In a little over a decade, since cryptocurrency came into our lives, it has gradually become the trend investment for millions of people worldwide. Last year surveys estimated that close to 20% of the world’s population had purchased cryptocurrency. Despite its obvious popularity, over the last two or three years, cryptocurrency ICOs (Initial Coin Offerings) have been in a tug of war with VC (Venture Capital) funds. Both vying for the banking potential of private investors.
Which one you invest in, is down to you. Both have potential and both have risk. It goes without saying that the decision of where, when, and how to invest your hard earned cash should be made with caution and thorough research. ICO research starts with whitepapers.
What is an ICO Exactly?
ICOs are a method of raising funds that are generally used by businesses, including startups, who are working to raise the money they need for their next product. Be that an app, or service or a product like a new crypto coin. When investigating cryptocurrency, an ICO whitepaper will largely contain the information you need. It is pertinent though that you use these whitepapers, not as a full presentation of everything on which to base your final decision but as an introduction to the product and the people involved.
Why Do ICOs have Whitepapers?
Each ICO has a white paper that acts as a guide to inform potential investors about the product details. The aim is to help investors understand why the cryptocurrency was created and what problem it solves. Assisting in their decision to invest.
Whitepapers have been around much longer than cryptocurrency or blockchain. They are used by businesses to set themselves apart as an authority on a particular area of expertise. More recently, they have become a marketing tool for raising funds.
What Should A Whitepaper Show Me?
A well thought out project should be easily explained in its whitepaper. On reading it, you should have a clear understanding of what problem the project aims to solve and how. The test is always, can you (after reading the whitepaper) explain it to someone else. If this is not the case then more investigation is needed.
Unfortunately, as there is no regulation for this kind of document whitepapers can be jammed with buzzwords and sparkling sales pitches. Watch out for this kind of paper and approach with caution. These styles are not necessarily scams or less worthy of your investment but they do warrant further research to uncover solid facts. Even if a whitepaper appears straight forward, try to verify everything in it yourself.
Who Is Behind The Project?
From reading the whitepaper, you should know who is behind the project. If the ‘who’ is presented only as a company then look into that business further. Check that they are registered and legitimate first of all. Then check who is involved in the business. This can be achieved through a combination of online investigation, LinkedIn, news articles and the like, and word of mouth. Ask around about the business and its people. Everyone has a reputation (good or bad) and you need to know exactly who you are investing with.
Know The History
Knowing who the stakeholders are is only part of what you need to know about them. When you are researching, find out what else each stakeholder has been involved in. What they bring to the project that gives it an advantage over competitors. Look into as much of their past projects as possible to get a feel for their past project success rate and project reputation. Remember, that some projects will have failed and that is to be expected but there should be some success too.
As tedious as it might seem, read every whitepaper of every ICO that catches your interest. Read the whole thing several times and try not to be blinded by jargon. After you have completed your research of several ICOs, you should have a clear and unwavering understanding of which are the stronger projects and which are not. If you feel hesitant after everything you have read and learned, trust your judgment. There are hundreds of other ICOs for you to invest in.
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