7 basic rules how to tell a scam project from a good investment in crypto

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Thousands of cryptocurrencies are floating on the market at the moment, and tens more go live every day. The vast majority of them will be worthless in a few years, when the process of “natural selection” has taken its course, killing all those cryptocurrencies that didn’t serve any purpose or were plain scams.

But how can a cryptocurrency investor, usually a private individual with limited resources and time, know where to put his money?

Smelling The Rotten

A cryptocurrency can be a bad investment for several reasons.

The coin could simply be worthless technically speaking because it doesn’t add anything that could elevate it in the competition over the current cryptocurrency ecosystem (in cryptojargon these are called shitcoins, and there are plenty). Or, the project is simply and clearly a scamcoin: a facade site with few references, an inconsistent project, or even worse, a completely worthless token.

How to identify a bad project:

A good practice each investor should follow is to examine any asset before investing, before throwing money into something unknown, but this too often doesn’t happen. So how to identify a bad project?

1 – Poor looking website

One of the most common signs to look for is a poor website. A poor website is often a proof of the inconsistency of the project. Many cryptocurrencies have amateur dedicated websites, few pages and poor text. The text may also appear in what is known as Engrish if the developers don’t know the English language very well.

2 – Meager blog

A poor looking website is often a good indicator but a deeper investigation is always due. Some websites look good but fail with a slightly deeper exam. For example, one of the first pages to check is the blog: by checking it out you can immediately spot a discontinued project. A blog with very few updates is suspect as well.

3 – Missing References

Some websites include news websites logos as references for press releases. You can find news sites logos like Wired or CNN or Telegraph laying at the bottom of the main page. But very often they don’t have any link attached.

A simple search on the news website usually spells off the trick: if you go to the CNN website and search for the coin name and nothing pops up, that’s a fake reference. Try a few more: if they are all missing, you know you are dealing with liars. If you are dealing with liars, you know their coin has no real content and no future.

4 – Fake Partnerships

In some cases, cryptocurrency websites may rely on fake partnerships to increase the feeling of importance of their project. Building a network requires more effort, but considering the huge amount of money a cryptocurrency can procure, that’s worth it. Partnerships surely make a project look important, and revealing the inconsistency of the network is somewhat more difficult and takes more time than the previously listed checks.

5 – False Statements

Some members of development teams often release interviews and statements on how their project is proceeding, expanding and finding its route through society, granting a use to their cryptocurrency or blockchain platform.

False statements can be found on the blog or in interviews released on Youtube or other websites. Spotting false statements on a blog can be quick and easy, but watching hours of interviews on Youtube is not. That’s why when looking for false statements the shortest route is usually found at point 6.

6 – People’s Complaints

Other people’s complaints can also be a good way to spot a scammy or inconsistent cryptocurrency. Simple searches like “coin xxx experience” can lead to interesting articles and examinations already undertaken by other people that were burned in their investment.

7 – Poor White Paper / Project Design

The white paper is the most important element in a project… so why is white paper only at number 7 on this list? Because reading (and understanding) a white paper is not for everyone: cryptocurrencies are a very complex topic that involves many disciplines (coding, economic, analysis, and more), and understanding the dynamics of what a cryptocurrency or a project based on blockchain technology could offer is no easy task at all.

Still, in some cases, having a look at the whitepaper of a project can quickly clear every doubt… or raise some. In some cases, it’s easy to spot a white paper full of unrealistic expectations, incompetence, or a plain scam setting.

 

Source: Coinidol.com

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