How to Identify Scam Cryptocurrency Project
The era of sh1tcoin is not over. On more than five occasions founders who don't even know what they plan on doing can be done "effectively". Anyways you need to be careful not to fall victim to these snake oil crypto projects.
I was fortunate enough to be part of an investment pitching session. And I must say, the era of sh1tcoin is not over. On more than five occasions, founders who don't even know what they plan on doing can be done "effectively." If not for the NDA agreement, I would have shared some of these "bright ideal" :). Anyways you need to be careful not to fall victim to these snake oil crypto projects. One will think the bear market of 2018 will do well to chase these types of valueless projects away from the crypto space. Now, most of these new projects are just capitalizing on the Buzzword, "blockchain technology", to raise funds. And since space is still new and with a lot of Jargon like Proof of Stake, Sharding, Byzantine, and the likes. It becomes relatively easy to pack a whitepaper full of nonsense and still have a successful ICO.
My experience in the pitch session is what has led me to write this piece, and I do hope you learn one or two things about doggy crypto projects. This way, it will be better to gift your cash to charity instead or buy government bonds. (You are welcome).
One will think a sh1tcoin project will at least try to write its white paper, but you'd be surprised at how many of them copy other project's whitepaper.
And because the whitepaper is quite bulky, it becomes hard to compare the words. To detect a copied whitepaper, I simply copy some critical sections of any whitepaper and run a copy space check on it. Or even a simple Google search. If any of the resulting pages leads to another project, then the earliest of the project is the spammy one (at least in most cases).
Team Without Real Contact Address
This looks obvious, but you will be surprised at how little work people behind a scam project put in. Personally, If I can't find an active LinkedIn address, linked to some members of the teams, or some proof of life before the project, I am not buying. I don't need to know where you live, but I need to know you have a presence online before the project. That way, I can understand you are real. Also, make sure you crosscheck the names of every member of the team. Just Google the title and add crypto to it: Eg, Dylan Joshua + cryptocurrency, or Dylan Joshua + blockchain. If the profile belongs to another project's team, you will find out quickly. I also have a lot of tools I use to verify if an email address is valid or not. You can find tools like these online for free. This might sound or look stressful to you, but if you are investing a lot of money into the market, you need to do all you can to weed out the rotten eggs.
No Recent Updates
Another critical characteristic of a fake crypto project is the lack of updates. Even if a phony project updates anything, it will mostly be about how and where to buy their coins. And maybe a regular airdrop and discount. Updates about the current state of the technology or any significant achievement will not be posted. For this reason alone, I have stopped investing in ICOs. I need to see a product update to know if the team is working or just after more money. As a rule of thumb, if nothing extraordinary happens within three months, then something is not right. 6 months, and I am not even interested. This is a technology, and regular updates and improvements are needed.
Another common thing with a fake crypto project is a promise of annual returns. I have seen a project promising a yield of 800% just for buying and holding their coin for a year. If I were told my investment would return 8X in 2016 from buying a currency, I would believe (I bought into ICOs which yielded more than this). Now, I will make a return of 50% on my investment per year. This is way more than anything centralized financial platforms can give me. Right now, Bitcoin is up about 2X from its lowest point in 12 years. But this is Bitcoin, not some new coin which can get pumped and dumped hard by "evil" trading masterminds. The crypto market is full of ups and downs, so any project promising you a guaranteed income is surely only focused on making money for its team. They don't care about you. The fact that they could even make such a promise is a sign that they don't know how the market works in the first place.
You Don't Understand the Project
I don't consider myself an authority on all things crypto, but to some extent, I think I should be able to understand what a project is all about from its whitepaper alone. You'd be surprised at how confusing some project whitepaper is. By confusing, I don't mean technical, I mean plain confusing. Imagine a Church launching a coin which stands for the troubles and tribulations we all go through as human being? (I don't think a project like this exists, but I have seen something very close to this). Yeah, this is the type of confusion I am talking about. If you don't get the project, you are not dumb; it is merely because it is a fake project with no future.
Project is an Exact Copy of an Already Successful One
To be clear, I don't mean forks of another project. A fork is generally an upgraded version of a network. What I am talking about here are coins, which are exact copies of existing ones. The only difference between them and the original project is usually the price of the currency. And maybe some network configuration. Apart from this, they don't offer anything else. A project like this doesn't last long since they generally don't have a plan. They eventually get stuck in the shadows of the original one.
If any project you plan on investing in has any of these signs, the best thing to do is wait things out or sell it hard when it touches a crucial resistant point (combined with some other factors).