How to spot a cryptocurrency scam

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How to spot a cryptocurrency scam

Cryptocurrency is a relatively new concept, so it is still highly volatile. It means that there is a lot that people are curious about but don’t know, and the chances of getting scammed are, thus, unfortunately very high. Everyone wants to make the best ICO investment, but how can one escape traps along the way? Here’s how: 

  • Do your research on the authorities

It is absolutely essential that you know everything there is to learn about the development team. If the developers are anonymous or show any suspicion, it is best to maintain your distance. Run their names on Google, go back into their archives and past details, and leave nothing unchecked. Pay focused attention on their past work experience, especially in cryptocurrency and what ICOs they’ve been a part of, even verify their educational history if you think appropriate. 

  • Do your research on the project.

Regardless of what the developers tell you, do your independent research on the project and figure out its stage. Remember that there is no fixed rule as to what the developmental stage should be before a project is eligible for ICO. However, the usual rule of thumb states that the closer a project is to its launch date, the safer it is to invest. 

Also, check the venture capital (VC) Investments. If highly-experienced and established personalities are not investing in a project, there is probably a good reason behind it. So, take it as a sign and be extra cautious before you invest anything. Another essential thing to remember is that many scam projects falsely advertise VC Investments to persuade other people to join. It is always a better idea to double-check and make sure the developer’s claims are valid. 

  • The white paper

The white paper of a project should be genuine, transparent, and elaborate. It should have all the outlines and details of a legal framework, including terms and conditions, detailed explanations of how and when token distributions will occur, and everything relevant to it. 

Important questions that the white paper should answer include why they need a dedicated token in the first place and why they can just use the previously established cryptocurrencies such as bitcoin. An authentic white paper should have detailed answers to all possible questions, a proper breakdown of fund-raising, and how the money will be stored. The better the white paper, the more reliable a project is. 

  • Check the media

If an ICO has a good, supportive community on social media and other online platforms, it is always a good sign. In contrast, threads and bounty posts are always a source of suspicion. Specific scam projects can always ask other people to spread fake positive news about them. This trick is an excellent way to attract a target audience looking to invest in startups. 

However, remember that boundary posts do not mean scam. They are only an indication of it. This theory’s logic is that genuine projects with experienced and knowledgeable members and a good plan have good promotional campaigns and don’t usually need such tactics to succeed.

  • Evaluate the codes

A huge red flag in cryptocurrency projects is when it doesn’t have a working code before in ICO or isn’t open source. If you know anything about programming and reading codes, do it. If not, maybe get some professional or friendly help to do it for you. Besides, if you’re spending so much money on the project, what’s a few bucks spent on making sure it’s worth it, right? 

Conclusion

That being said, know that these are not set criteria to judge whether a cryptocurrency project is a scam. These are merely precautions and safety measures to avoid a trap. Some projects demand a lot of investment, and, let’s be real; no one wants to lose money to fraud. Thus, stay calm and positive but remain alert and aware. 

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