Scam Projects and How to Identify Them


- Advertisement -

Each month comes with dozens of cryptocurrency launches. Many of these coins and tokens start with (ICOs) Initial Coin offerings because they are new to the market. A lot of investors have grown in appetite for cryptocurrencies even with the issues that the ecosystem faced in 2018.

The fact that the appetite of investors in the cryptocurrency community is on the increase has become an inviting factor for scammers and hackers.

Scammers have seen that investors who are enthusiastic about cryptocurrencies are willing to throw money into projects that they feel will have great potential soon. Again, this attitude on the part of investors has fueled more actions from scammers in the crypto space.

It takes a lot of courage and effort to invest in new cryptocurrencies because you want to make the most of new opportunities while staying off ICOs of fraudulent tokens and coins.

The rate at which blockchain technology is growing and evolving makes it difficult for even investors that are already experienced to catch up. The truth is that there may be no guarantees that a cryptocurrency that is just entering the market will either be a scam or legit.

Even though we cannot guarantee that, there are steps you can take to identify and avoid throwing your money into scam projects. One thing you will not want to do either as a newbie or an experienced crypto investor is to fall for scams. It is not a good idea, it is very discouraging.

Blockchain and cryptocurrency technology is developing at a rapid pace, and even experienced investors may find it hard to keep up with the technology.

The truth is that it is almost impossible guaranteeing that a cryptocurrency organization that is just starting will either be legitimate or successful.

However, as a wise investor, you can play safe as it has to do with investing in new projects by following the steps I will list and talk about below. If you have the at the back of your hands, you will avoid largely the possibility of investing in scam projects.

Here are ways through which you can identify and avoid scam projects;

Find Out The Team Behind The Project

One singular factor that can guarantee the success of any crypto coin, token, or ICO is the team behind the project. When I talk about the team, I am referring to the developers and administrators backing the project.

There are household names in the crypto space. A very good example is Vitalik Buterin, a superstar developer responsible for the Ethereum blockchain. If such a name is behind a project, be sure that the project will most likely not be a scam project.

You must know the major household names in the crypto space because scammers can go as far as inventing fake founders and biographies to deceive investors.

Even with the fake biographies and founders, if you do your due diligence to research the team members, you will save yourself from losing money to fake projects. One bad sign is not being able to find any of the developers or admins on social media platforms like LinkedIn.

Even if you see their profile on these major social media platforms, you should check if the activities they carry out on the platform are enough to give them the huge amount of following that they might have on the platforms. If they have thousands of followers without constant engagement, they are not real people.

After finding out these details, you should check for the qualifications of the founders. Do they have the qualifications that they claim they have? Even if they do, what relationship do these qualifications have with the project at hand?

Scam Projects and How to Identify Them

Study The Whitepaper Religiously

The whitepaper of cryptocurrencies and ICOs refer to the primary document that explains the project. First off, every solid whitepaper should show investors solid information about the background, strategy, goals, concerns, and implementation timelines for the project it is backing.

Whitepaper ought to reveal a lot of things. Sometimes, when you see companies with flashy websites, it may just be proof that their fundamental concept is not solid, you will know this from the whitepaper.

Again, a company with even spelling errors on the website may have a solid fundamental concept. You will get all these details from the company’s whitepaper about a project.

Just like you do for every written material, including this article, you should make sure you carefully read the whitepaper. You should read project whitepapers more than once, paying attention to details.

It is your money that may be at risk of being lost, so you should not be in a hurry. Take your time to understand the whitepaper. A very good whitepaper will have the following details;

  • Models
  • SWOT Analysis
  • Implementation Roadmap
  • Legal Concerns

Never get involved in projects without Whitepapers. They are automatic red flag projects.

Now, it is not as though a company cannot give the public a very fraudulent project backed up with a convincing whitepaper. The case of PlexCoin is an example of a fraudulent project with a convincing whitepaper. The project raised more than $15 million before the United State SEC closed down the company.

By looking at the whitepaper of a project, you should be able to tell what differentiates this project and company from others. The whitepaper should be able to answer any question you have about the project, how the project will achieve its goals, what measures it will take and how it will become successful.

Look To The Sale of Tokens

To facilitate the process of crowdfunding, ICOs usually depend on tokens and currency systems. Companies with legitimate interests make sure that their systems are developed. They make sure that token sales progress is easy for investors to look at. As a potential investor, you should pay attention to the figures of the token sales as the ICO is going on.

Make sure you take your time and watch the sales of tokens for some time, seeing how much progress it is making. Any organization that builds its system in such a way that observing the sales of tokens becomes difficult for investors is a red flag. Never invest in such companies.

One thing scam ICOs and token sales will do is hide the progress of their token sales. They usually claim that the contributions are from individual addresses.

When they hide their token sales progress, you will not know how much they have raised, how much is remaining to be raised, and how much time is remaining. Sometimes, they use this method to create a sense of urgency for potential investors, even though they are not making any sales at the moment.

Check the Feasibility of the Project

As much as it sounds very obvious, you should not forget that the success of a project rests on the fundamentals of the project. If a project will succeed, then the project must have solid fundamental structures that will outdo the fundamentals of its competitors.

Your best shot at investing should be looking at the goals of the company. Is it feasible, can it be done? It is not enough for the company to have impressive goals, the company must have the capacity to carry out the goals, and the goals must be achievable. The company must have these goals in both the long and short terms and must be able to achieve them both in the long and short terms.

You cannot talk about feasibility without talking about transparency. Companies with very solid models do all they can to be transparent to their communities and potential investors. As a potential investor, you should invest in companies that will keep you up to date with the happenings in the organization. These companies are used to giving community members detailed reports on their websites and social media handles.

Lastly, you should look at the timelines the company has set as it has to do with achieving these goals.

Thread With Caution

As much as you want to cash in on opportunities by investing in new tokens you see good potential in, you should be careful. Even with paying attention to all the steps above, you should apply caution while investing. Never invest with a mindset of getting rich quickly or hit and run. Stay away or be careful with projects that are looking too good to be true.

Take your time to look at every detail, and study the projects you are thinking of investing in carefully. Leave no stone unturned. Go as fast as finding out from external sources about the legitimacy of companies and their projects. Make sure you ask questions whose answers are neither in whitepapers nor websites.

If you have done your research, cryptocurrency investment could buy you a fortune. Remember, there is no legitimate way of spotting scam projects, you just have to try out all the steps here.

One step may not give you the answers, not even two or three. Maybe just one can give you the answer, but to stay on the safer side, make sure you pass the new projects that you want to invest in through these tests.

- Advertisement -
Mufasa is the lead writer at CryptoMufasa who likes to share all the latest info on the crypto world with you! Mufasa Enjoys enjoys a good read and recommendations so don't forget to comment on the posts and let him know.


Please enter your comment!
Please enter your name here

More like this

What Is Spot Trading And How Does Spot Trading Work In Crypto?

Spot Trading is an instantaneous or on-the-spot exchange of...

Brazil now accepts cryptocurrency as payment.

Although it will be allowed to pay with cryptocurrencies,...

Coinbase Wallets Will No Longer Support XRP, BCH, XLM And ETC

In a recent blog post, Coinbase Global Inc., the...

Kraken Settles With The SEC And Is Fined $362k For Violating U.S Sanctions on Iran

Kraken voluntarily agreed to pay a fine after the...