There are thousands of cryptocurrency tokens in the world right now, and it feels like hundreds more are being launched on a daily basis. Projects seem to crop up with regularity and they all have a “proposition” that—they feel—will make them the next Bitcoin, Ethereum or Litecoin. This abundance of options presents investors with a dilemma—surely, not all of these projects will be successful, how will they differentiate the duds from the real deals?
In this post, you will find simple and practical tips that will help you pick the best ICOs from the seemingly bottomless pool. Before you can decide on which ICOs are successful and which aren’t, however, it is important that you gain a right understanding of what makes an ICO successful. There have been projects that raised millions of dollars within hours and ended up being a scam. Time has shown that it is far more important to focus on how much utility a coin has, how significant the problem it claims to solve is, and how viable the proposed solution is.
Below, you will not only find a quick guide to picking the right ICOs, you will also find out what really defines how successful an ICO is. To remove any doubt, examples will be used to illustrate how these factors have worked in the past to make some projects successful where others failed.
1. How Significant is the Problem?
There are lots of problems in the world today. Sectors from finance to health to technology, education, poverty, commerce etc. and the subsectors within them have lots of pressing challenges. Even the blockchain sector that is just about 10-years-old already has numerous problems that need solving. The most successful projects are those that seek to solve the most pressing problems, problems that affect millions of people.
A good example of this is Polkadot, a protocol that gives users an opportunity to combine multiple blockchains, making it possible for people to get around notable problems like scalability, security, and efficiency. Polkadot raised ~$145 million last October. Consider WAX also—a project that provides users from all over the world with a platform to create online marketplaces at no cost. This project raised ~$68 million during their ICO in November 2017.
These projects, among many others, sought to solve significant problems and their potential translated into successful ICOs. Never get drawn into investing in a project’s ICO unless it has a use case that solves a pressing problem.
2. How Effective is the Solution?
There are hundreds of projects in the cryptocurrency sector that understands how important it is to solve a significant problem. However, not all of them have viable and effective solutions—as a matter of fact, quite a number of them do not have any solution. One way to know whether or not a project has a solution is how simply they can explain their unique value proposition.
Some projects claim to have solutions so technical that laymen would not understand them. While this may be valid, it tells us 2 things. (1) the solution does not address a well-known problem and (2) many others will struggle to understand it and as a result, its ICO may not succeed.
The IoT sector is quite complex, yet people understand the unique value proposition of IOTA: facilitating the exchange of data and payments between IoT devices. Many people don’t know what Tangle Technology is, but they understand how IOTA will help the IoT industry.
3. How Qualified is the Team?
If a project plans to solve a major problem and have a proposed solution that seems effective and easy-to-understand, the next thing to consider is: do they have the personnel to pull it off? You cannot claim to have an innovation that solves Ethereum’s scalability problem, but nobody on your development team has significant work experience on the Ethereum blockchain.
This metric is quite subjective because Vitalik Buterin was about 19-years-old when he wrote the Ethereum Whitepaper and he did not have a lot of development experience at the time. The truth, however, is: before Ethereum got to where it is today, it took the effort of lots of people with specialized skills.
A strong team is very important to the success of a project and its ICO and fraudulent projects know this too, that is why they put up the names of well-qualified people on their websites even though these people do not work with them. Make sure that people with pertinent expertise are part of a project before you invest in its ICO, furthermore, take further steps to ensure that these experts are really connected with the project (check their social media accounts, their LinkedIn pages etc.).
4. How Much Progress Has Been Made?
Does the project have an MVP? Does it have a working prototype or a testnet? If a project is preparing for an ICO without any of the above, chances are high that it may not succeed. While there have been cases where projects develop prototypes after their crowdsale, it is smarter to invest in a project that already has a proof of concept.
5. How Quickly Will the Solution Be Made Available?
If a startup has a development roadmap that exceeds 3 years, it may be wise to stay away from such a project. Bitcoin’s whitepaper was published in October 2008 and the network went live in January 2009. Ethereum was proposed by Buterin towards the end of 2013 and the system went live in July 2015. If a project claims that their solution is so complex, it will take 3 years to build, the smart option would be to avoid its ICO.
6. Do They Have a Sound Business Plan?
Assuming a project has a solution that is as unique as it is effective, assuming it has a working prototype and its team is packed with people with the technical know-how, another important question to ask is: how sound is their business plan? A solid business plan is what convinces investors that a project will bring returns and the absence of one may doom a project’s ICO.
For example, Stratis developed a platform that allows businesses create custom applications on the blockchain without having to build a dedicated infrastructure. Here is what makes Stratis even more special: the platform is compatible with .NET and C#, making it appealing to people familiar with Microsoft products.
This compatibility with Microsoft also gives the project a semblance of trustworthiness and as a result, the project’s token grew astronomically.
7. Have They Been Able to Secure Notable Partnership Agreements?
Partnership agreements with established companies is another factor that determines how successful a project, and by extension, its ICO will be. Before a startup can secure a partnership agreement with an industry leader, it must have gone through a checklist that is stricter than this one, and if it convinced experts in the industry, then it should be good enough for you.
When NEO held its first ICO in 2015, it raised ~$550,000—this at a time when cryptocurrencies were new and only a handful of people knew what ICOs were. It held another ICO in September 2016 and raised $4.5 million. NEO was able to attain this level of success because, at the time, the project was backed by some established organisations, most notably Microsoft and the Chinese government.
8. How Influential is Their Community and Marketing Campaign?
Social media hype is also very important to the success of an ICO. How large is the project’s community? How influential are they? How much support will they lend the project? The thing about social media hype is that it shows how effective a project’s marketing team is.
A good marketing team grows an organic community of people that are genuinely interested in the project. Stay away from projects that built communities using the promise of bounties and airdrops. While they may have the numbers, they won’t have the influence that is needed to make an ICO successful.
By leveraging an active community and running extensive marketing campaigns, Sirin Labs was able to raise over $120 million within the first week of its ICO.
9. What is the Likelihood of Critical Mass?
Project’s that have use cases that are strong enough to attain self-sustainable growth will surely have successful ICOs. So how can you tell if a project will reach critical mass? Ask yourself these questions: does it seek to solve a problem that affects millions of people? Is the team capable of developing a platform that can cater to these people? Are they in it for the long run? In all honesty, it is quite hard to tell from the start whether a project will reach Critical Mass or not. However, when you see a project with the potential, you will know.
Among cryptocurrency-based platforms, Ethereum will likely be the first to attain critical mass. Why is this so? Simple, because they developed a network that allows other developers create their own platforms—ensuring that the Ethereum network will remain relevant for long. This is why a large percentage of the ICOs being launched nowadays are Ethereum-based. According to CoinMarketCap, there are over 320 tokens presently on the Ethereum chain, and the bigger and more successful these projects become, the better for Ethereum.
10. How Will Regulations Affect Them?
While regulations on cryptocurrency platforms and their tokens have started to ease up, it is still an important consideration. The ICO of a project that is based in a country with strict cryptocurrency laws like Russia may not be as successful as that from a friendly country like Japan or Canada.
In Conclusion, it is almost impossible to find a project that answers all the questions above favourably; even most of the projects with highly successful ICOs in the past do not. However, before investing in any ICO, make sure the project answers enough questions to satisfy you. If too many questions are left unanswered, the wise option is to move on from such an ICO, do not let sentiments get in the way of logical thinking.
Be smart and decisive, it will save you lots of money.
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