ICO Investing Series Part II: Elimination criteria for picking long-term token investments.

In the previous article we have looked at the ICO market in general and today we will look at criteria for choosing a project for long-term investment.

It needs to be said that no one in the industry has the best or a certain way how to judge an ICO investment opportunity because the crypto space is so new and so dynamic. Here are some criteria that we use and that we see other industry experts to use. Please always use your own judgment and do not take anything in this article as an investment recommendation. There are still too many unknowns so something that we think is the right way to judge an ICO project today might be proven wrong in the future.

Is it SCAM or not?

This is the first question, that one needs to address. There were a lot of investment opportunities during the last 12 months, but there were many SCAMs as well. A part of our mission is to alert our readers our such projects. There were so many of them lately, that we have decided to write this article about ICO SCAM characteristics. Anytime you are not sure if an ICO project is SCAM or not, read the article. Sometimes it is very easy to see it at the first glance, but sometimes the fraud is much more sophisticated.

Red flags:

  • Their community focuses mainly on the investment part promising guaranteed results
  • Lack of information about team members’ history
  • MLM scheme and referral program are involved
  • The whitepaper has very low quality or is missing
  • There is no new technology being created
  • The business model is not sustainable
  • There is no or weak roadmap


We have talked about this in the last article a little bit, but let’s expand on this topic in more depth. Today is quite easy to find a digital traces of almost anyone who is working in the blockchain space. You can check out their social profiles, youtube videos, blogs and companies they were part of. Many time you will find that those people are true technology experts with proven track of results, however, sometimes you will find that they were part of suspicious ICO projects or projects with no results. Sometimes you can not find them at all, which is a huge red flag as well. You can learn the same way about their advisors to double check whether they really advise the project or not.

Red flags:

  • Lack of information about team members’ history
  • Team members were part of suspicious ICO projects
  • There are more advisors than team members
  • The project’s nature does not match the team members’ experience and skills

Technology, whitepaper, and roadmap

Project’s whitepaper is one of the most important pieces of information that you need to read before you decide to invest. If you want to see a good example of a well-written whitepaper read Ethereum whitepaper. Its quality lays in bringing new and useful ideas that are clearly explained and sourced without being too wordy or hyped. When reading a whitepaper ask yourself following questions:

  • Do they actually create a new and useful technology?
  • How do they plan to acquire the critical mass of users and customers?
  • How do they want to solve scalability?
  • How do they solve security?
  • How well are they communicating their ideas?

The same way it is necessary to carefully read the whitepaper it is necessary to inspect their roadmap to map the claims from their whitepaper to tangible promises and timelines.

Red flags:

  • Plagiarism
  • No new technology is being created
  • Missing whitepaper
  • Untested hypotheses
  • Assumption, that mainstream user/customer cares about the underlying technology

Tokenisation model

There are great articles written about this by William Mougayar. Here is an excerpt from one of his articles:

The assumption that everything with a potential network effect is going to work with a decentralization starting point is not entirely true. The blockchain is not for everything.

The solution or product being developed needs to have a solid business model linkage that has a particular value when decentralization and/or tokenization of actions take place. The promise of a new model needs to be very compelling.

In the name of decentralization, the promises are big. You can’t just slap a token to anything, and expect magic to happen.

The token is not the business model. The value proposition or utility that is enabled by the token is the business model, and that linkage needs to be there early on. If the direction is not right, the chosen path will not lead to a good place.

Here is another valuable article on the same topic.

Red flags:

  • Unclear role, purpose, and features of the token

Product / Market fit

Many projects solve a problem that is not painful enough for people to care. This might be an example of Bancor, which happened to be one of the most successful ICO in the terms of amount of money raised. Bancor should allow investors to buy and sell any crypto assets. However lately this need has been questioned several times, because if a crypto asset is valuable, then some exchange will list it.

“Founders of ICOs most of the time have just a hypothesis about the problem that needs to be solved, but if it is a real problem will be decided by the market.”

Red flags:

  • Untested hypothesis about the problem they want to solve
  • Not existing MVP, prototype, testnet or any other proof that their idea solves a real problem

Is blockchain really necessary for the project?

Even though the team brought really well defined and painful problem that needs to be solved, there is still a question if a blockchain is necessary for that. Blockchain technology is still slow and expensive. It is necessary to ask how blockchain will help this project to be faster, more useful, more resilient and valuable? It is also necessary to ask if customers desire those characteristics in this case. Do they desire a trustless and decentralized solution for this problem? Do they want to pay extra for it? The truth is that companies want to use blockchain because it is trendy. This company increased its valuation by 394% just by adding blockchain to its name.

Red flags:

  • The role and necessity of blockchain is not clearly demonstrated


Timing is one of the most important factors. Similarly to the dot-com bubble, there will be companies who try to realize a vision that the market or the technology is not ready for. It is important that someone pursues such vision. The question is that if you want to pay for it.

Red flags:

  • Not existing MVP, prototype, testnet or any other proof that their idea can be adopted by the market


The voice of a project’s community tells a lot about the nature of the ICO. Do people follow the project, because they care about the technology, their innovation or is it just about making a quick buck? Which authorities support and talk about this project? How many followers they have in total?

Red flags:

  • The project’s community promotes the project only for investing purpose without any interest in the technology.
  • The project has many fake followers or bought likes on social media.
  • The ICO project communicates fake or misleading information.


At the end it is necessary to ask some more questions to find out if this makes sense for you:

  • What is the valuation of the project?
  • What is the market size?
  • How much of the market can they take?
  • What are my goals for this investment? What is the target price I want to sell this at?
  • Are the funds in a multi-signature wallet?
  • Is the team going to destroy or redistribute a significant part of unsold tokens?
  • Is the token distribution coming directly from a smart contract?
  • Is there a cap on funds raised?

This should be enough for this time. What are your thoughts on this topic?

Next time we will look at a strategy for short-term speculation.