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In 2017, more than $6 billion was raised through the latest financial crisis, Initial Coin Offerings. ICOs are digital tokens that companies create and investors buy.
When the company or the project gets up and running, they become tradeable for goods and services, or they can be turned into cash.
They can end up being worth much more than the initial payment, but it is risky. A token can end up worth nothing if the project fails. And there's no regulation.
So how do you judge if an ICO might be worth putting money in?
One, start with the development team. Read their biographies. Look them up on LinkedIn. Do they have relevant experience? Have they worked with cryptocurrencies before?
Two, read the white paper. This is the document that every ICO produces that describes the technical underpinnings of the project, how the tokens will be distributed, and how they'll be used.
Three, ask yourself if this project really needs its own cryptocurrency or blockchain to function. If the answer is no, it could be that this ICO is jumping on the cryptocurrency bandwagon just to make a quick buck.
Four, look at how the tokens will be distributed. If most of the tokens are being reserved for the development team, they could be more motivated to maximise their own profits than to really build out a viable network. Similarly, if the value of each token is very high and there's a large number of them in circulation, the company is probably being unrealistic.
My rule of thumb for these really early stage investments, or gambles, is don't bet more than you're willing to lose; say, the amount you'd spend on an expensive dinner.
