What is an ICO?

An ICO (Initial Coin Offering) is a new way of raising capital for all kinds of projects through the sale of cryptocurrencies, being especially popular in the technology startup sector. Translated into English as Initial Coin Offering, we are talking about a way of financing new cryptocurrencies, virtual tokens protected by a cryptographic system. These cryptocurrencies are usually used to make payments or generate value through a mining process with which they are created virtually.

The first step to generate a cryptocurrency is to design it, after which it will be introduced through software on the network that will be made available to a community with the aim of creating miners to support its activity. This whole process has a cost, something that can be financed through ICOs.

The developers start with a closed-door premining that gives way to the exchange of the new coin for other currencies in circulation, such as Bitcoin or Ether, or fiat money. In other words, the objective of an ICO is to offer the new coins to initial investors in exchange for money and later open their distribution to the public. A process similar to crowdfunding, in which a community of users finances a project without the need for intermediaries.

This new form of financing in the digital era emerges as an alternative to traditional sources of financing such as credit institutions or investment funds, growing exponentially since its appearance in 2013 due to its flexible and decentralized nature.

Launching an ICO

Let's imagine that you are a company or individual that you have an idea in mind that you think can be beneficial and useful to the world, but you need a lot of money to develop it.

What can you do?. With Blockchain technology you could open a way of financing. Below we explain very superficially how to do it:

Creation of a Whitepaper: the document that explains in detail what you want to do. Enough to capture interest and be convincing.

You put together a team to carry the idea forward.

Create a prototype.

Create an explanatory web page.

You do a lot of promotion and hype, buying the opinion of influencers.

You program a Smart Contract that manages the token. Better if you use a standard ERC20 which will facilitate integration with exchange houses.

You open the ICO: You sell the tokens based on certain previously defined and disclosed conditions.

Scams in cryptocurrency ICOs

But all that glitters is not gold, and even less in ICOs. It could seem that by operating on a transparent and revolutionary technology such as blockchain, ICOs are free from scams. Nothing could be further from the truth. Let's be real, ICOs if they are full of something they are scoundrels, there are them everywhere.

Despite the fact that technology allows to give many guarantees, the ignorance of investors makes them enter into anything that claims to be called ICO, that they offer a token deal or that they put the word Blockchain among neon lights.

And, in the face of the fast money fever, many scammers take advantage of it daily. On the other hand, the mainstream media and pseudo experts or insiders abound, making it difficult for normal people to get to the pure sources of information to document themselves.

How to avoid an ICO scam using cryptocurrencies?

Do you want to invest in any cryptocurrency ?. Well great. But by far, VERY careful, today more than ever.

There is a fever surrounding cryptocurrency ICOs, and the "bad guys" know it. It is the perfect recipe. While at first only people with high knowledge and study ability participated in ICOs, choosing projects with value very well, now ICOs are people who, sometimes, literally do not even know how to turn on a computer.

Despite these and a dozen other tricks, there is no magic recipe that prevents us from getting rid of 100% of any scam in the world of cryptocurrency ICOs, just being smart. We must be very cautious and critical when giving our money to other people.

Here is the Bit2Me list of most important tips that you should follow and that will greatly reduce the percentage of you being able to fall for a scam camouflaged in ICO:

Don't be naive. The main and most important.

Analyze the white paper (whitepaper) of the project.  This is where the objectives and steps to follow of the project are explained in detail along with the technical solution.

As a general rule, question all projects from the first to the last letter. Don't believe absolutely nothing. Analyze every detail of the whitepaper very well. If you do not understand the whitepaper, it is better not to invest, since there are those who take advantage of the technical opinion to make the scam more credible.

We must study the team behind the initiative. Search your profile (on LinkedIn for example) compare your experience experience. But watch out, a profile can be falsified very easily, anyone can say that he has worked at NASA, for example. So be very careful and check everything from multiple sources. If an ICO doesn't have a visible team run off the web.

You have to see who is going to guard (escrow) the portfolio where the funds are deposited. If behind her we do not find anyone real, badly we are going…

It should be explained (usually in the white paper) how the funds will be managed during the project.

It also helps a lot find reputable companies after the project (Microsoft, NTT Data, etc).

EYE with cryptocurrency Telegram groups, summary websites, Facebook pages, pseudo specialists. Remember that everything can be bought and your administrators can make it seem impartial.

Unfortunately, the world of cryptocurrencies has become a point of attraction for scammers, scoundrels, quacks and pseudo experts who will do their best to take advantage of you. You will have to be very attentive.

Again, stay tuned everywhere. Do not trust the opinion of a single unknown person. Contrast the opinions / recommendations as much as possible, but above all, form and create your own opinion.

Sorry to be heavy, but that's right, you will find everything! In ICOs you enter the Wild West, and for the most part, like most ICOs, they will either be a scam or try to condition you to do something that benefits only them.

Many applications are born or redefined by saying that they are now blockchain companies just because they add a token to their application, an application that no one previously used, and they take advantage of the wave to finance themselves with naive investors.

Does it look bad? The reality is that yes. Let's be honest, there are real barbarities, and the main culprit, hard as it sounds, is the investor, for being fooled.

There are already many ICOs that have disappeared overnight, without a trace, after raising the money.

Even truly famous ICOs such as Tezos, who raised more than $ 230 million, and are currently embroiled in multiple scandals and countless lawsuits by investors who want their money back.

As always, it is not the technology, but the evil and irresponsible use that is made of it. However, in all this chaos of blockchain ICOs, only one technology can solve it: Blockchain.