How to tell a Crypto-Hero from a Crypto-Zero.
Hey Steemians,
So firstly I want to make it clear that I am not trying to sell or endorse any sort of systemized betting or voting scheme... I want to share with you the most important thing I can possible share.
That is how to tell if an ICO or Cryptocoin is actually going to succeed.
I'm not a financial analyst or even an IT professional. I am however trained to critically analyse and problem solve. Its with these two skills i made my biggest discovery regarding Crypto Currencies.
THE PRE-CURSOR TO BITCOIN
So lets start with the the basics... why are we seeing so many ICO and coins appear today... why didnt they appear previously like in the early 2000s and 90s?... The truth is they did! Only we didnt call them Crypto-coins, we called them memberships and tokens. Businesses would allow people to buy in to a finite membership with added perks in order to raise capital (sound familiar). These membership could be bought and sold on exchanges and due to their finite supply people assumed they were valuable.
The most common membership type was Time Shares! Now anyone who knows anything realized that these were not sustainable and that the only winner was the business them selves... once people were lured in and purchased these tokens the business received their capital, the perks were generally not worth the annual management and maintenance fees and so when people went to exit and sell their tokens they were considerably less valuable... in some cases people even paid to surrender the tokens for nothing!!
Now the system behind these Tokens is vastly different to many of today's big Crypto-coins... why, because today the coins are built on a system of shared ledgers we call "The BlockChain". Previously these tokens were administered and managed by investment firms who would take a big piece of the pie. The block chain helps reduce these costs because its crowd managed by individuals contributing to the network of users (also known as Miners).
THE ICO IS WORTHLESS
Now the most important part of my story is to explain that ICOs and Crypto-coins are worthless (in theory). Being built and supported on the block chain makes them sophisticated and decentralised which is also an added benifit, but apart from that there is nothing that sets them apart from traditional means of currency or tokens... what is important to take into note is what application and purpose do these coins have.... Crypto-currencies were born out of neccesity, it was during a Global Financial crisis that crypto currencies were developed. People wanted to make sure that their money was not impacted or manipulated by central governemnts, therefore the first lot of bitcoins had a definitive purppose for which people were attracted to them.
Fast forward 8 years and computer geniuses have created thousands of new currencies (useing that word loosely), that do everything from anonymity, security, playing games... to rewarding you for working out.
THE BLOCKCHAIN
Now most ICOs and Tokens are built on the block chain technology shared ledger mentioned above) which has some specific advantages to conventional capital raising. The problem is some ICO and Tokens are not! They are simply surfing this Crypt-Hype in the hope to suck in potential investors. The most important thing i look for when purchasing a new token or coin is I look at the technology its based on. Will that technology be able to support the purpose of the coin... bringing me to the second point all successful Crypto Currencies must have a purpose that purpose must be in demand... i have seen people develop Crypto-currency to help save the Malaysian rain forests, or build schools in somalia... both failed... why because although their coins had a purpose, there wasnt the demand... equally i have seen so called "Cryptocurrencies" that let you outsource your unlimited mobile plans for others to use so they dont have to pay... again amazing idea but not built on an adequate technological base so it again failed.
THE TAKE HOME
Do your homework... Check to see if the token has:
- Does the system have an adequate technological platform... e.g. blockchain or build onto the bitcoin or ethereum network... will this be powerful enough to meet the demands of the coin if it becomes popular (very important).
- Does the coin have a purpose... This is so important, because without a purpose there wont be legitimate demand and users.
- How big will this demand be... will it be a quirky COIN destined for super nerds or does its application have enough demand for the whole world.
- Does this coin jeopardize national security or circumnavigate/break laws... if so you should probably be very careful as State intervention is still possible. This doesnt mean its not going to be good, just be cautious and aware that If the government doesn't want a coin to exist they can do an awful lot to stop people trading it and making it a whole lot less accessible...
- How easy is it to acquire the coin... make sure the system for purchasing the token is developed. This can show you the coin has great potential to grow in demand even during the ICO. Look at EOS for example most people made 1000% in only a couple months because of the hype during ICO.
- Lastly and most importantly, never put more money than your willing to loose into an ICO. They are risky no matter what! For every 1 successful ICO there were 10 unsuccessful, and for that reason you should only ever invest what your willing to loose.... because you may very well loose it all.
So guys, I hope you can now go out and navigate the sea of ICOs and critically analyse them to ensure you end up with a Hero and not a Zero.
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Thanks dude! I don't usually get into ICOs myself, as even with all this research I think there is still a huge element of luck as well... but that said, no one can deny the potential profits to be made on a few great picks!
100% Agree, ICO are very High Risk.
Really well put together post @nathanial. yesterday I invested in my first lot of cryptos and while exhilarating it is also terrifying. I think the best takeaway form your post is to not put anything in that you aren’t willing to lose.
Do you have any recommendations of where to find new icos’ or places that you use to research coins?
Again, love the post. Excellent and sensible advice, thank you
Thanks @necromortis, congratulations on investing in your first lot of Cryptos... exciting times ahead! I use several different sites when looking at coins. I normally start with Crypto Compare because i like its "influence" analysis to see what coin is being mentioned the most on social media/redit etc... Great tool because it lets you see the growing demand and discussion around a coin.
After that i normally use ICO ALERT to see what is new comming out. Make sure you read the ICO's very carefully... these are the highest risk investments because they are pre-release. I also like to google different investment firms to see what they are investing in as well places like Blockchain Capital and so are good indicators... hopefully their investment fund managers know their stuff so there is less risk for you.
I wish you all the luck!
Great post and good point of view...
Icos are the big thing today.
With enough research and some luck its still risky :)