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How to validate ICOs and detect fraud


Crowdfunding and attracting investors in China and decentralized blockchain projects is the main way to develop and implement decentralized projects.

In the field of Blockchainchain, crowdfunding and investor attraction are widely used, and people are usually very interested in investing in these projects. Attracting investors in decentralized projects is done using ICO. In this way, the project puts its tokens up for initial sale to raise capital, and people invest in these projects in some way using currencies such as Ethereum and Bitcoin. For about a year now, ICOs have skyrocketed, with an average of one new ICO starting each week. However, this can sometimes be very bad for the investor.

There are many projects that require a lot of money for tokens for the use of that project and investing in them will not be profitable at all. But the main problem is fraudulent ICOs, and so far many cases of fraud have been reported in ICOs.

To evaluate the value of investing in a project, you should carefully read the project site to get acquainted with the application of that project. You can also follow reputable news sites or analyze the amount of investment and attention to that project. But there are a few simple ways to check if a project is a scam:

Unrealistic goals

Scammers often exaggerate their project and make strange and unbelievable claims. A Blockchain platform cannot completely eradicate poverty, prevent global warming, or replace the Internet. In several cases of fraud, along with misleading reasons, they claimed that, for example, the project could completely eradicate poverty and cause many people to invest in it. Of course, sometimes some strange claims may be true, but when you see an irrational claim about a project, research it hard to be absolutely sure. If a project claims that its new currency will replace bitcoin or that its price will increase 300 times in the short term, add it to the list of scammers.

Real projects will never tell you a myth and will never predict its price.

Not clear

Some scam projects do not explain the operation of the project and only try to tempt you to invest with exciting sentences. Consider this example:

“Our Blockchain project will transform the world of digital currencies. “This project is a trusted network that, like a lever, will revolutionize digital technology.”

If you see such a text on a site and did not find a specific reason for it or how the project worked was vague, do not invest in it at all. Formal and trusted projects clearly explain how the project works and leave the judgment to the users. Trusted projects usually put a file or photo called “WhitePaper” on their site and it is written in a simple and fluent way about all the details.

Developer team

This is very important. Who is behind this project? Do the members of this team have a good resume? Are they known? Have they participated in previous successful projects? If the answer is yes, it is a great opportunity to invest.
Remember that you must be sure of the health of the team members. You can verify this by searching for people’s names or finding them on Twitter. Some scam projects only include the names and photos of reputable people in their projects.

Of course, unknowing developers can also offer great projects. Being anonymous and not famous is different from being anonymous. Large projects have emerged from unpopular programmers. Nxt and SuperNet are examples of this.

An anonymous developer with no background in bitcoin forums (no posts on sites like reddit, bitcointalk, etc.) can be dangerous.

SSL Certificate

Valid ICO sites are usually Https and have SSL certification. Of course, having this certificate is not a difficult task for the site, but after checking the above, you can also check this to make sure it is completely correct.

Risk assessment test

The above is just to reduce your risk of potential scams. There may be sites that trick you into gaining your trust and leaving no room for doubt. In general, you should try to choose more formal ICOs.

Here is a test to assess your risk in possible scams.

Check the ICO site carefully and rate each of the following issues, then add up the scores and see the test results:

Partial suspicions (one point for each)

There is no video, demo or trial version of the project on the site (three points)

Unrealistic goals, without whitepaper or ambiguity of project application (5 points)

No Bitcoin Talk account, no site ssl or unknown development team (10 points)

Test result:

Score 0 to 5: Very low risk

Score 6 to 10: Low risk

Score 11 to 15: High risk

Score 16 to 20: The risk is too high

Score 21 and up: ico is a complete scam

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