How to distinguish prospective altcoin from a shell and not lose own investments

2016-2017 have brought a lot of money to crypto investors. On the wave of universal hype, the market demonstrated simply unreal growth from the point of view of traditional economy. And absolutely all projects and coins grew. Even those that were considered dead and gone. As always, such agio and inconceivable green candles on schedules merely couldn’t help drawing attention of crooks and unfair “developers”. Fuelled by greed and wish to get easy money, people bought everything and carried their well-earned money to ICO, creators of such projects were simply required to make a more or less attractive website and voice some idea. This whole devilish kettle was fuelled by mass media and press. On TV we were shown how to buy Ripple for $2. Thousands of bloggers and participants of bounty companies around the world worked diligently before screens of their monitors, writing hundreds of lines to the glory of the next crypto idol. Chats and forums filled the crowds of schoolchildren who mined ethereum on their home game computers, and proudly called themselves crypto investors. Undoubtedly, their expert opinion also influenced the course of history )). It seemed that this “wild west” and this is how many experts called the cryptocurrency market, will exist forever. And it does not matter what to buy or advertise, everything is doomed to eternal growth and prosperity. But alas, facts of live put everything in its place.

The main reason for such turmoil and mess was unavailability of the traditional financial system to meet the world of blockchain and cryptocurrency. Analytics and experts of all levels demonstrated their complete incompetence in this regard. Recall only how many times have bitcoin been buried? And these ridiculous and contradictory statements of officials and bankers. Today, some minister or official representative tells us something that the pyramid has broken and there is no future for cryptocurrency, and tomorrow his deputy will seriously tell us about cooperation with cryptostartups and about great potential. Naturally, this could not last long.
Having got some idea of blockchain world, having come to life, government regulators together with large corporations began to follow their “direct obligation”, setting themselves two main goals. The first is to impose taxes on everyone, squeezing out as much as possible of startups and people, who have accidently grown rich in their opinion. And second is to take control over the development of blockchain technology as well as to prepare the legislative ground for entry into the market of large investors and funds. And we must give credit where credit is due, they have result. All other things, such as ICO regulation, anti money laundry, licenses and so on is only a consequence. Moreover, the beginning of regulation became one of the reasons for market disaster. If one puts something into perspective he can fall under the impression that some government institutions by their actions and adopted laws are engaged in direct manipulation, taking care not of the investors’ welfare, but of their own benefit. Blocks in China alone deserve a special note. And this whole situation is around bitcoin ETF…

The common man has more questions than answers. Meanwhile, number of scammers has not decreased. They just became more cautious, and their methods of extracting money from the citizen pockets are more graceful. Instead of screaming and “promising” ICO, for which today one can be brought to responsibility, there has grown a number of small, “shadowy” ICO on various offshore sites with anonymous teams and “denial of responsibility” posts. At the same time, the market was flooded with new forks, already-present coins with clear taste of scam.
To be sure, even legal projects, despite the work of regulators, cannot guarantee investors anything, if their idea is not competitive, and the team is lacking of professionalism. Almost anyone can obtain license to work with cryptocurrency in Estonia (or another appropriate country for that) and create own ICO. It became more difficult and expensive to raise funds legally in cryptocurrency, but it is still not a big problem.

What does one need to know and draw attention to when investing into cryptocurrency

1. You need to know the technology which You invest your money in

This is the first and the most important rule that will help to avoid scammers and reduce risks. It is not necessary to have knowledge of developer, but it is important to understand fundamental things and have clear idea about blockchain, distributed registry, decentralization, mining, bitcoin, altcoins, forks, coin algorithms, POW, POS, smart contracts, crypto exchanges, ICO, e-wallets etc. It is advisable to study history of cryptocurrency from the list of top CMC. Follow the news and be aware of trends.
Understanding of the very basis will allow to think logically and make own conclusions, rather than rely on advertising and opinion of others.

2. Learn the demand, invest in the future

The time of simple decisions has passed. It is ironic to look at regular forks that offer “decentralized anonymous payments” or “passive income” for masternodes owners. If the project is limited by the fact that it has already been in the market for several years and does not bring anything new, one can safely bypass it. Simply one more cryptocurrency will not allow to earn money anyone except its creators. At the moment, integrated solutions for mass use are appreciated. Not just coins, but platforms that build infrastructure and are able to gain as much as possible. As an example NEM, TRON, ARDOR, IOTA, ETHEREUM, EOS, Lamden (TAU), Siacoin, STORJ and others like them. The following directions are prospective: supercomputers, decentralized databases, platforms for ICO, Internet of things and others.
To create another cryptocurrency by copying the bitcoin code or DASH is really simple task for any middle-level programmer. But unfortunately, many of such clones do not live long. But it is one thing to make a copy of already existing one, and quite another to invent something new, to create product better than competitors and fill place on the market.

3. Assess the project roadmap and developers’ opportunities correctly

Most recently, while browsing the BTT forum, I stumbled upon one coin with MN, the name of which I will not speak of, in order not to advertise to these scammers. I saw a beautiful website (here we must give credit where credit is due), anonymous team and very disturbing roadmap. If one follows this map, the developers promise in a quarter after launching to place on top exchanges, to create own decentralized exchange as well as to issue plastic cards with reference to cryptocurrency. It was not difficult to understand with a probability of 99% that I had another scam.
How do I understand this? It is very simple. None of large top exchanges will place a coin with anonymous team and such a primitive idea. It was possible earlier, but not now. And expenses for listing can grew up to several million dollars, depending on exchange. The second thing alarmed me was a promise to issue own debit cards. I have seen a lot of projects that have planned similar, but the very few have succeeded in this. Companies and funds with millioned budgets and army of lawyers come under resistance from regulators. Why some startup with a closed, unknown team, without a support of major players should become an exception. It was a thin deception.

Of course, not all small startups are fraudulent. As well as anonymous team is not always a verdict. In some cases developers simply do not have an opportunity to call themselves because of the requirements of various regulators and lack of funds to obtain the necessary licenses. For example, such a cryptocurrency as Digiwage (WAGE) has an economically viable idea and very sociable and active team. The roadmap looks quite real. The opportunity to get surplus profit when investing in this project, to my mind is 50/50.

4. Before buying something, learn forums, chat rooms and social networks

Yes, it can be a very tedious, time-consuming exercise. But it must be done. From reviews on the BTT forum as well as Discord chat rooms, one can get a lot of useful information, if begins at the right end.
What information may be of interest to us? First of all, this is the latest announcements and official news. Following them, we can get oriented with the direction of development, and whether this development exists. We look at the awkward questions and answers to them. If there are no such questions, you can ask them: “How does your project differ from competitors?”, “What guarantees do investors receive?”, “What experience do team members have in this direction?” etc.
If there are obvious signs of scam, someone will certainly notice it. For example, one user could call the bluff of scammers, catching them that the site’s domain was registered to a company that at other times owned several more domains related to scam projects, the developers of which tricked investors and ran way with money. There is always a guy who will be able to dig up something)). Also pay attention to what the topic looks like as a whole. If we see a lot of short compliments like carbon-copy from users with new accounts, then probably we have the usual wrap. It is a disadvantage. However positive and informative massages from old users with a high rating will be a slight advantage.

5. Pay attention to the Whitepaper

Particular attention should be paid to the whitepaper of project. The true white paper should contain maximum of data. Idea, goals and many technical details. It can be dozens of pages. A well-written white paper demonstrates developers’ knowledge, vision of the future, and their plans. It has to give detailed answers for the most of possible questions. If the project has a white paper written very poorly and more like an article on the Internet or it doesn’t exist at all, one should pause to think.

6. ICO, good or bad?

Any project requires funding. Money is needed for everything: for developers’ salaries, marketing, placement on exchanges, lawyers’ fees etc. Actually, the meaning of any ICO is to collect this money in advance, so then to work calmly and please investors. This is an ideal version. In fact, not everything is so good. You can be deceived and scammers will run away with money, or create the appearance of work, and then declare failure. Collected money may be stolen by hackers or confiscated by the government. There are a lot of pitfalls. But successful ICO conducted legally gives the investor some guarantee that the project will develop, that the coin or token will be placed on a normal exchange and with a slight share of luckiness everything will be fine.
Another situation is with cryptocurrencies, which begin their work without prior fund raising. On the one hand this is embraced by the community, especially if in spite of the limited budget there is a progress in development. But here it is necessary to understand. How long could a project develop without capital infusion? No money means no large exchanges, no good marketing support, and perhaps lack of qualified specialists. Those who started before 2016 were able to make money on the rise of the market, made funds and found partners. However for newcomers it will be very difficult. It is even f*cked how hard and the very few will survive. This should be taken into account. If I see a project that relies only on its own resources and funds received from different decentralized exchanges, I always ask the team a question. On what money do they plan to build a bright future? And answer should be more than convincing.

7. A few words about capitalization and trading volume

Everyone just for once visited a site like CMC which collects and displays information on a huge number of altcoins and tokens in real time. By default all cryptocurrencies on CMC are sorted according to its market capitalization. For some reason, many newcomers consider this indicator decisive and base on it when choosing assets for their portfolio. In fact, the term and concept of market capitalization is complete nonsense and do not reflect real value. How many smart aleck confidently say in chat rooms that this or that cryptocurrency can not greatly increase in price, because there are too many coins and it will take a lot of money to grow. These are very naive and stupid statements. Why? Everything is simple, for example, price of coin is $100, in circulation trans there are 16 million of coins and capitalization will be $ 1,6 billion, respectively. According to the logic of majority, so as the coin costs $200 it is necessary to pour another 1,6 billion of ever-green dollars, which may seem a difficult task. In fact, if someone wants to sell 1 unit for $200, and another person buys it at this price, then the capitalization will be calculated according to the formula: the last value of 1 coin * for the number of all coins in circulation and constitutes 3,2 billion. But it needed only $200 to double the rate of capitalization. Perhaps, this example is not perfect, but it demonstrates that it is possible with a small amount to increase (or decrease) capitalization twice or more. It all depends on the buy and sell orders that are placed on exchanges.
Another thing is such an indicator as trading volume. If trading volume increase along with the price, this is undoubtedly a good sign, indicating interest from investors, and can be a sign of future growth.

8. Treat all information critically, remember, everyone wants to f*ck you

No one will take care of your welfare, except yourself! Any analysts, rating agencies or John McAfee with his penis, which he will probably have to eat after all, do not think and care about you. All these people are either trying to manipulate in someone’s interests or are themselves victims of manipulation.
Only critical mind, supported by knowledge and experience will be able to find in all this informational bullshit something good, worthy of attention and your investments.

9. Sings they are everywhere

In 2017 the Japanese Tech Bureau Corp. carried out Comsa ICO. The project has attracted a lot of attention. Totally more $95 million was raised. Comsa should be a legal platform for other ICO and much more. Even during fund raising, the developers announced a number of new ICO projects that were supposed to run on the platform almost immediately after finishing of Comsa ICO itself. But in reality, everything has happened not according to plan. The project did not receive the necessary permits from regulators at home in Japan and had to transfer its activity to another jurisdiction. It also turned out that the platform is still very far from complete functioning. After rise ordinary for any ICO, the price of tokens CMS began to go straight to hell (which according to some investors should not have happened).
From the very beginning, the team didn’t go on well. During the ICO launch, the site for several days laid under DoS attacks. Then it turned out that automatic conversion did not work correctly and after recalculation, people received a smaller number of tokens from what was expected. The system of two-factor authentication failed constantly. There were other minor issues. A superstitious person could see in this some negative signs and would be right.
Comsa is not a bad project and probably has all chances of success, but it may take much more time than expected.

As a conclusion, if something from the very beginning does not go on well, one should think twice before investing his money.

Investments in coins with masternode and a few words about masternodes.online

Masternodes have become a popular trend in recent times, especially among different shitcoins. If very simply in short. MNs provide network decentralization, dispensing with expensive ASIC or GPU cards. For the investor, the process looks like buying a particular amount of coins, blocking them in the wallet and receiving passive income. And small expenses for maintaining of VPS server. The most prominent representatives of coins with MNs are DASH and PIVX, although in fact there are many more.

In itself, the idea of masternode is good, and perhaps in somewhat predominates the classic POW. On the other hand, simplicity and cheapness of creating a cryptocurrency with MNs produced innumerable shells that offer nothing but “passive income” to their owners. MNO website has become a breeding ground for such weed coins. Probably 95% of all altcoins presented on it, is a complete slag. Just sort by price and see how many projects are abandoned.
Typical deception with MN is as follows. Coin creators hire a freelancer to copy the code of already existing coin. Often PIVX is used as a basis. Only wallet design changes. It costs about $2000-$5000. Then there is created a beautiful site (or not very beautiful) with popular idea and brief technical characteristics. White paper is either completely absent or it looks very poor. As a rule, the team is anonymous. Then such a coin is placed on small exchanges, such as Graviex and inexpensive marketing campaign starts on forums and in social networks. Shitcoin creators try to sell their coins to the maximum to inexperienced newcomers. They offer high income which can reach several tens of thousands of percent per year, they promise placement on major exchanges, and speak about non-existent partners and all that sort of things. As soon as the number of people willing to buy this coin decreases, the developers simply disappear. Usually it does not take much time. 1-2 months and the price can drop to 0. And in some cases even earlier. It is interesting that even after the scam-coin depreciates, someone can try to make money out of it. For example, mysterious persons can undertake “to reanimate” the project. Offer new, false hopes to just sell own stocks. Or may try to increase collateral for MN. It is not always bad, but it looks like extortion.

Some experienced crypto investors have a certain strategy how to make money out of such shitcoins. They are looking for new altcoins and join them at a very early stage to generate with the creators and sell their part of coins while there is demand. But this strategy is not for everyone. It is better to stay away from suspicious projects.

How to distinguish scam from not a scam is written in this article. As for coins with MN, here it is well worth to advise not to chase high ROI. Also, reduction in remuneration can be incorporated in the algorithm itself. It is always necessary to take into account. If you decide to invest in cryptocurrency from MNO website, look at what exchanges it is traded, what traded volume, what project idea and how it develops. Do not purchase new altcoins, there exists a strong possibility to lose money. Look at coins which already operate half a year and longer. For example, DASH, PIVX, Crown, BitSend (BSD), SysCoin (SYS), TransferCoin (TX) and the like. No one guarantees that they will not die tomorrow, but the risks here are quite moderate.
For MNO fans, there is a good chat room at Discord. Sometimes one can read there interesting information.

Based on above, one can make a small list of questions and consult with it if he is not sure

Based on above, one can make a small list of questions and consult with it if he is not sure.

• Is the project idea prospective?
• Is white paper well written?
• Does the roadmap look real?
• Is there development according to the roadmap?
• Is the development team public?
• Was there a legal ICO, if not, is there another source of funding?
• Do messages on forums and chat rooms instill confidence?
• Do traded volumes and price increase recently?
• Did the project start without problems?

If the answer to most of the questions is “Yes”, then you can safely assume that the risk of losing investments has decreased from 99% to 50%. Yes, yes :) The world of cryptocurrency is very harsh and does not guarantee anything to anyone.

Above there are described the minimum necessary recommendations for selecting assets to own portfolio, the next article will be about how not to lose profit after growth, and some recommendations concerning work at cryptocurrency exchange. Subscribe to my blog, vote and leave comments. Good day to all!

Disclaimer. This is not investment advice. This is the opinion of the author, published on the internet. Author is not a financial expert and does not call for purchasing any cryptocurrencies and other assets, as well as does not advertise in favor of particular projects. All cryptocurrencies, ICO or exchanges mentioned in this article are introduced for illustrative purposes as examples, but not for purposes of advertising or anti-advertising.