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How to do due diligence on ICOs

4min Read
How to do due diligence on ICOs

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These days, everything has a digital upgrade. Initial Public Offerings or IPOs are no exception. ICOs or Initial Coin Offerings are the financial technology version of IPOs; it occurs when a private company wishes to raise its capital by offering pre-generated cryptocoins or tokens as opposed to the traditional shares of stock in the company.

Much like cryptocurrencies themselves, ICOs are currently unregulated and decentralized (although processes are being studied and proposed), which means that there is currently no single authority that oversees the administration and fulfillment of these project. While this is convenient for many, it can also be a breeding ground for security threats and scams.

Upcoming ICO List, ICO Rating Site, and other protective measures

To prevent the possible occurrence of online scams and threats, many have suggested the possibility of regulating the development of ICOs. While several governments are taking steps to protect their citizens from ICO fraud, at the moment, the industry is largely self-policing. To that end, one tool potential investors can turn to is an upcoming ICO list, which can serve as a launch pad for their own research into the respectability of the product.

A more powerful tool in preventing investors from being scammed is the creation of several ICO review sites. Much like an ongoing and upcoming ICO list, these websites list the ICO projects currently running and planned for the future, however, they also come with ratings based on certain criteria. For instance, Cointelligence uses the following factors: data integrity, team identification, project vision, product, marketing, social engagement, and legal entity & company registration. All of which provides information, which helps investors create sound decisions without getting duped or losing profit.

While these measures are provided to help investors, financial security goes far beyond updated ICO list sites and rating sites. To ensure sound financial decisions, investors must take the time to practice due diligence when looking through different ICOs. Since creating a website, whitepaper, and generating tokens require minimal technical skills, many scammers are able to attract thousands, if not, millions of dollars worth of investments in return for a very small amount of work.

To avoid falling victim to such a scam, follow these tips on how to practice due diligence:

  1. Identify the key factors in ICOs: This includes the website, project team, whitepaper, ICO goals, and code.
  2. Research ICOs on reliable websites. Look for websites that offer updated news on ICOs, cryptocurrencies, and various online exchanges for reference.
  3. Visit the project website: More often than not, legitimate companies are careful with how they present their company’s image and vision to the world which is why they invest in a beautifully designed website. Always remember that most websites that are made by scam artists are either using basic designs, ready-made templates and are rarely updated.
  4. Investigate the team: Legitimate companies rely on an experienced team to carry out their ICO project. When visiting the site, it is not enough to simply look at the list of names and profile pictures. To check for legitimacy, try to do a reverse image search on Google and check if their names are listed in LinkedIn and other social media and cryptocurrency sites. Furthermore, see if they have listed the project as a current employer.
  5. Check the whitepaper:proper whitepaper includes crucial information like project details (such as roadmap and target audience), what problems it aims to solve, why their solution is unique, and technical details such as simulations, encryption formulas, and the specifications of the product. If the whitepaper is too general or vague in either of these factors then it is most likely written by a scam artist. Be on the lookout for grammar issues or plagiarized content as well!
  6. Evaluate their goals: Are the company’s goals too vague? What problem(s)is the ICO looking to solve? Why should investors consider this company over others? These are some questions you need to ask yourself first before making a decision. Make sure to see if the company’s goals are realistic and that it avoids making outrageous claims and promises.
  7. Check the code: To practice transparency, the code used to create cryptocurrency or a blockchain should be published on sites that can be viewed by everyone, such as Make sure such codes are also updated regularly and are not just copied creations from other coins with minimal changes.

Research is Worth the Time it Takes

When it comes to investing in ICOs, it always helps to perform thorough research first. While it may be time-consuming, you can be grateful that upcoming ICO list sites, rating sites, and cryptocurrency news sites exist since they aim to help investors make financially sound decisions.

Author Bio:

On Yavin is the founder and CEO at Cointelligence, the data layer for the crypto economy. He has extensive experience as a serial entrepreneur and an angel investor, as well as more than 20 years of experience in the tech industry.  On uses his deep hands-on experience and knowledge of online marketing to create winning strategies for ICOs, crypto, and blockchain companies. Having earned the reputation of a crypto expert, On continues to contribute to this industry in ways that advance cryptocurrencies and blockchain technologies. On has a law degree (LLB) and is also a certified Advocate by the Israeli Bar Association.


Biraajmaan covers market trends of major cryptocurrencies. As a graduate in engineering, his interests lie in Blockchain technology. With over a year as a journalist, his articles focus on US and UK markets.
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